-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EAYMZ94vpyD4Tfit18WLEDnXcc8oTQtDX2OQNmjOK2l9YGX61tr0HMK+Qvtzq9ys 053DoQyI6CLRwK1PM6WXhw== 0000950152-03-006574.txt : 20030630 0000950152-03-006574.hdr.sgml : 20030630 20030630162455 ACCESSION NUMBER: 0000950152-03-006574 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20030630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN FINANCIAL CORP CENTRAL INDEX KEY: 0000005016 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 310624874 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-106659-01 FILM NUMBER: 03764699 BUSINESS ADDRESS: STREET 1: ONE E 4TH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5135792121 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN FINANCIAL GROUP INC CENTRAL INDEX KEY: 0001042046 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 311544320 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-106659 FILM NUMBER: 03764698 BUSINESS ADDRESS: STREET 1: ONE EAST FOURTH STREET STREET 2: SUITE 919 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5135792121 MAIL ADDRESS: STREET 1: ONE EAST FOURTH STREET STREET 2: SUITE 919 CITY: CINCINNATI STATE: OH ZIP: 45202 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN FINANCIAL GROUP HOLDINGS INC DATE OF NAME CHANGE: 19970709 S-3 1 l01683asv3.txt AMERICAN FINANCIAL GROUP & CORPORATION | S-3 As filed with the Securities and Exchange Commission on June 30, 2003 Registration No. 333-_______ - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- AMERICAN FINANCIAL GROUP, INC. OHIO 31-1544320 AMERICAN FINANCIAL CORPORATION OHIO 31-0624874 (Exact Name of Registrant as (State or Other Jurisdiction (I.R.S. Employer Identification Specified in Its Charter) of Incorporation or Number) Organization)
ONE EAST FOURTH STREET CINCINNATI, OHIO 45202 (513) 579-2121 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants' Principal Executive Offices) -------------- JAMES C. KENNEDY, ESQ. VICE PRESIDENT, DEPUTY GENERAL COUNSEL AND SECRETARY AMERICAN FINANCIAL GROUP, INC. AMERICAN FINANCIAL CORPORATION ONE EAST FOURTH STREET CINCINNATI, OHIO 45202 (513) 579-2538 FACSIMILE: (513) 579-0108 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) WITH COPIES TO: MARK A. WEISS, ESQ. KEATING, MUETHING & KLEKAMP, P.L.L. 1400 PROVIDENT TOWER ONE EAST FOURTH STREET CINCINNATI, OHIO 45202 (513) 579-6599 FACSIMILE: (513) 579-6956 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement as determined by market conditions and other factors. 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. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------- Title of each Class of Proposed Maximum Securities Offering Price Per Unit Proposed Maximum Amount of Registration to be Registered Amount to be Registered (2) Aggregate Offering Price Fee - -------------------------------------------------------------------------------------------------------------------------------- Senior Convertible Notes $ 511,015,000(1) $ 371.53 $ 189,857,402.70 $ 15,360 due 2033 of American Financial Group, Inc. - -------------------------------------------------------------------------------------------------------------------------------- Common stock, no par 5,877,490(3) (3) (3) (3) value per share, of American Financial Group, Inc. - -------------------------------------------------------------------------------------------------------------------------------- Guarantee of Senior (4) (4) (4) (4) Convertible Notes due 2033 by American Financial Corporation - --------------------------------------------------------------------------------------------------------------------------------
(1) Amount represents principal amount at maturity. (2) Estimated solely for the purpose of determining the registration fee based on the issue price per note of $371.53. (3) Reflects the number of shares of common stock issuable upon conversion of the notes being registered hereunder at the rate of 11.5016 shares of common stock per $1,000 principle amount at maturity of the notes. Pursuant to Rule 416 under the Securities Act of 1933 this registration statement also registers such additional number of shares of America Financial Group's common stock as may become deliverable upon conversion of the notes to prevent dilution resulting from stock splits, stock dividends and similar transactions. No additional registration fee is required pursuant to Rule 457(i) under the Securities Act. (4) Pursuant to Rule 457(h) under the Securities Act of 1933, no registration fee is required with respect to the guarantee. 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. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. PROSPECTUS [AMERICAN FINANCIAL GROUP, INC. LOGO] $511,015,000 OF SENIOR CONVERTIBLE NOTES DUE 2033 GUARANTEED BY AMERICAN FINANCIAL CORPORATION 5,877,490 SHARES OF COMMON STOCK THE OFFERING This prospectus relates to $511,015,000 aggregate principal amount at maturity of Senior Convertible Notes due 2033 of American Financial Group, Inc. which was sold by American Financial Group during June 2003. The notes may be sold from time to time by or on behalf of the selling securityholders named in this prospectus or in supplements to this prospectus. This prospectus also relates to 5,877,490 shares of American Financial Group common stock issuable upon conversion of the notes held by selling securityholders, plus such additional indeterminate number of shares as may become issuable upon conversion of the notes by reason of adjustment to the conversion price in certain circumstances. The selling securityholders may sell all or a portion of the notes in market transactions, negotiated transactions or otherwise and at prices which will be determined by the prevailing market price for the notes or in negotiated transactions. The selling securityholders also may sell all or a portion of the shares of common stock from time to time on the New York Stock Exchange, in negotiated transactions or otherwise, and at prices which will be determined by the prevailing market price for the shares or in negotiated transactions. The selling securityholders will receive all of the proceeds from the sale of the notes and the common stock. We will not receive any proceeds from the sale of notes or common stock by the selling securityholders. Interest on the notes, at the rate of 1.4861% per year on the principal amount at maturity, is payable semiannually in arrears in cash on June 2 and December 2 of each year, beginning December 2, 2003, until June 2, 2008. After that date, we will not pay cash interest on the notes prior to maturity unless contingent cash interest becomes payable. Instead, on June 2, 2033, the maturity date of the notes, a holder will receive $1,000 per note. The rate of accrual of original issue discount represents a yield to maturity of 4.00% per year, computed on a semiannual bond equivalent basis and calculated from June 2, 2008. The notes are senior unsecured obligations and will rank equally with our existing and future senior unsecured indebtedness. In addition, the notes effectively rank junior to any future secured indebtedness as to the assets securing such indebtedness and to all indebtedness and other obligations of our subsidiaries, except American Financial Corporation, which is a guarantor with respect to the notes. CONVERTIBILITY OF THE NOTES Holders may convert each $1,000 principal amount of their notes into 11.5016 shares of our common stock, subject to adjustment, as provided in this prospectus. Upon conversion, we will have the right to deliver, in lieu of our common stock, cash or a combination of cash and common stock in an amount described herein. Our common stock currently trades on the New York Stock Exchange under the symbol "AFG." On June 24, 2003, the last reported sale price of our common stock on the NYSE was $22.42 per share. CONTINGENT CASH INTEREST We will pay contingent cash interest to the holders of the notes payable as provided in this prospectus. You should read the discussion under "Description of Notes--Contingent Cash Interest" beginning on page __ for a discussion of contingent cash interest payments. For United States federal income tax purposes, the notes will constitute contingent payment debt instruments. You should read the discussion on "Material United States Federal Income Tax Consequences" relevant to the notes beginning on page 49. PURCHASE OF THE NOTES BY AFG AT THE OPTION OF THE HOLDER Holders may require us to purchase all or a portion of their notes at the following prices, plus accrued and unpaid interest, if any: - $371.53 per note on June 2, 2008; - $452.89 per note on June 2, 2013; - $552.07 per note on June 2, 2018; - $672.97 per note on June 2, 2023; and - $820.35 per note on June 2, 2028. We may choose to pay the purchase price of such notes in cash or common stock or a combination of cash and common stock. In addition, if a change in control of AFG, as defined herein, occurs before June 3, 2008, each holder may require us to purchase for cash all or a portion of such holder's notes at a price equal to the sum of the issue price plus accrued original issue discount and accrued and unpaid cash interest, if any, to the date of purchase. REDEMPTION OF THE NOTES AT OUR OPTION We may redeem for cash all or a portion of the notes at any time after June 1, 2008, at the prices set forth in the "Description of Notes -- Redemption of Notes at Our Option." INVESTING IN THE NOTES INVOLVES RISKS, SEE "RISK FACTORS" BEGINNING ON PAGE 13. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is _______________, 2003 TABLE OF CONTENTS
Page ---- WHERE YOU CAN FIND MORE INFORMATION....................................... 2 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS......................... 3 SUMMARY................................................................... 5 RISK FACTORS.............................................................. 13 USE OF PROCEEDS........................................................... 23 PRICE RANGE AND DIVIDEND HISTORY OF OUR COMMON STOCK...................... 23 CAPITALIZATION............................................................ 24 RATIO OF EARNINGS TO FIXED CHARGES........................................ 24 DESCRIPTION OF NOTES...................................................... 26 DESCRIPTION OF OUR OTHER HOLDING COMPANY INDEBTEDNESS..................... 47 DESCRIPTION OF OUR CAPITAL STOCK.......................................... 48 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.................... 49 ERISA MATTERS............................................................. 56 SELLING SECURITYHOLDERS................................................... 56 PLAN OF DISTRIBUTION...................................................... 60 LEGAL MATTERS............................................................. 62 EXPERTS................................................................... 62
You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any other documents incorporated by reference is accurate only as of the date on the front cover of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date. This prospectus is based on information provided by us and by other sources that we believe are reliable. We cannot assure that any information provided by other sources is accurate or complete. This prospectus summarizes certain documents and other information and we refer you to them for a more complete understanding of what we discuss in this prospectus. In making an investment decision, you should rely on your own examination of our company and the terms of this offering and the notes, including the merits and risks involved. We are not making any representation to any purchaser of the notes regarding the legality of an investment in the notes by such purchaser. You should not consider any information in this prospectus to be legal, business or tax advice. You should consult your own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in the notes. References in this prospectus to "AFG, " "we," "us" and "our" refer to American Financial Group, Inc., an insurance holding company incorporated in Ohio, and its subsidiaries, including AFC, unless the context otherwise requires. References in this prospectus to "AFC" refer to our subsidiary, American Financial Corporation, an insurance holding company incorporated in Ohio. Information in this prospectus regarding AFG has been provided by AFG, and information in this prospectus regarding AFC has been provided by AFC. -1- WHERE YOU CAN FIND MORE INFORMATION We and AFC are subject to the information and reporting requirements of the Securities Exchange Act of 1934, under which we and AFC file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy this information at the following location of the Securities and Exchange Commission: Public Reference Room 450 Fifth Street, N.W. Room 1024 Washington, D.C. 20549 You may also obtain copies of this information by mail from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024, Washington, DC 20549, at prescribed rates. Please call the Securities and Exchange Commission at (800) 732-0330 for further information about the Public Reference Room. The Securities and Exchange Commission also maintains an internet website that contains reports, proxy statements and other information about issuers that file electronically with the Securities and Exchange Commission. The address of that site is www.sec.gov. SEC filings may also be accessed free of charge through our Internet site at: www.amfnl.com. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE We and AFC are "incorporating by reference" into this prospectus certain information that we and AFC file with the Securities and Exchange Commission, which means that we and AFC are disclosing important information to you by referring you to those documents. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus. This prospectus incorporates by reference the documents set forth below that we and AFC have previously filed with the Securities and Exchange Commission. These documents contain important information about us and AFC and our respective finances.
AFG SEC FILINGS (FILE NO. 1-13653) PERIOD ---------------------------------- ------ Annual Report on Form 10-K, as amended Year Ended December 31, 2002 Quarterly Report on Form 10-Q, as amended Quarter Ended March 31, 2003 Current Reports on Form 8-K Dated February 19, 2003, May 1, 2003 and May 27, 2003
AFC SEC FILINGS (FILE NO. 1-07361) PERIOD ---------------------------------- ------ Annual Report on Form 10-K, as amended Year Ended December 31, 2002 Quarterly Report on Form 10-Q, as amended Quarter Ended March 31, 2003
All documents that we and AFC file with the Securities and Exchange Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act from the date of this prospectus to the end of the offering of the notes under this document shall also be deemed to be incorporated herein by reference. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any other subsequently -2- filed document that is deemed to be incorporated by reference into this prospectus modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. You may request a copy of these filings, at no cost, by writing or calling us at the following address or telephone number: James C. Kennedy Vice President, Deputy General Counsel and Secretary American Financial Group, Inc. American Financial Corporation One East Fourth Street Cincinnati, Ohio 45202 (513) 579-2538 Exhibits to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this prospectus. Information contained on our website, other than the documents filed with the SEC which are specifically incorporated by reference as listed above, is not intended to be incorporated by reference in this prospectus and you should not consider that information a part of this prospectus. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus (including the information incorporated by reference) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to numerous assumptions, risks or uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words such as "anticipates", "believes", "expects", "estimates", "intends", "plans", "seeks", "could", "may", "should", "will" or the negative version of those words or other comparable terminology. Examples of such forward-looking statements include statements relating to: expectations concerning market and other conditions and their effect on future premiums, revenues, earnings and investment activities; expected losses and the adequacy of reserves for asbestos, environmental pollution and mass tort claims, rate increases, improved loss experience and expected expense savings resulting from recent initiatives. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: - changes in economic conditions, including interest rates, performance of securities markets and the availability of capital; - regulatory actions; - changes in legal environment; - tax law changes; -3- - levels of natural catastrophes, terrorist events, incidents of war and other major losses; - the ultimate amount of liabilities associated with certain asbestos and environmental-related claims; - the unpredictability of possible future litigation if certain settlements do not become effective; - adequacy of insurance reserves; - trends in mortality and morbidity; - availability of reinsurance and ability of reinsurers to pay their obligations; - competitive pressures, including the ability to obtain rate increases; and - changes in debt and claims paying ratings. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. We and AFC believe that these factors include but are not limited to those described under "Risk Factors." Neither we nor AFC undertake any obligation to publicly update or review any forward-looking statement. We and AFC caution you that these risk factors may not be exhaustive. We and AFC operate in a continually changing business environment, and new risk factors emerge from time to time. We and AFC cannot predict such new risk factors, nor can we or AFC assess the impact, if any, of such new risk factors on our businesses or the extent to which any factor or combination of factors may cause actual results to differ materially from those expressed or implied by any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur. You should carefully read this prospectus and the documents incorporated by reference in their entirety. They contain information that you should consider when making your investment decision. -4- SUMMARY The following summary is qualified in its entirety by the more detailed information included elsewhere or incorporated by reference in this prospectus. Because this is a summary, it may not contain all the information that may be important to you. You should read the entire prospectus, as well as the information incorporated by reference, before making an investment decision. OVERVIEW We are a holding company which, through subsidiaries, is engaged primarily in property and casualty insurance, focusing on specialized commercial products for businesses, and in the sale of retirement annuities, life, and supplemental health insurance products. We were incorporated as an Ohio corporation in 1997 for the purpose of merging predecessor holding companies which had originated in 1955. Our insurance subsidiaries have been operating as far back as the 1800's. Our address is One East Fourth Street, Cincinnati, Ohio 45202; our phone number is (513) 579-2121. SEC filings, news releases and other information may be accessed free of charge through our Internet site at: www.amfnl.com. Our predecessor had been formed in 1994 for the purpose of acquiring AFC and American Premier Underwriters, Inc. in merger transactions completed in 1995. Over the years, we and our predecessors have owned, operated, and invested in businesses in a variety of industries and geographic areas, culminating in today's group of insurance companies. Generally, our interests have been in the following areas: insurance, savings and loan, leasing, banking, real estate, communications/entertainment and food distribution. A small number of opportunistic investments have been made in troubled and other undervalued assets. RECENT DEVELOPMENTS Proposed Restructuring On April 17, 2003, we announced a proposal to merge with our subsidiary, AFC. Through the merger, we expect to simplify our corporate structure and eliminate the publicly-traded preferred stock of AFC by converting it to AFG common stock. Under the proposal, the holders of the AFC preferred stock would receive a total of approximately 3,000,000 shares of common stock of AFG. The merger would eliminate the deferred tax liabilities associated with AFC's holding of AFG stock. If the proposed transaction is completed, it is expected to result in a 12% to 15% increase in our shareholders' equity. The completion of this transaction is subject to the negotiation of specific terms and final documentation; the approval of a special committee of independent directors of AFC, our board of directors and the board of directors of AFC; and the receipt of all required shareholder, stock exchange listing and regulatory approvals. Assuming the satisfaction of all conditions, we hope to complete this transaction during the third quarter of 2003. Arbitration Decision On May 21, 2003, we were notified of an adverse arbitration decision affecting our Great American Insurance Company unit. The decision concerned the unit's share of a 1995 property fire and business interruption claim. Our second quarter earnings are expected to include an after tax charge of approximately $29 million or $0.41 per share for the claim. -5- Moody's Investors Service On May 27, 2003, we were notified by Moody's Investors Service that our ratings are being placed under review for possible downgrade. We understand that after Moody's completes its review that our ratings would be either affirmed at their current level or moved down one notch. -6- THE OFFERING Notes Offered........................................ $511,015,000 aggregate principal amount at maturity of senior convertible notes due 2033. Each note has a principal amount at maturity of $1,000 and was originally issued at a price of $371.53 per note (37.153% of the principal at maturity). Maturity Date........................................ June 2, 2033 Cash Interest........................................ 1.4861% per year on the principal amount at maturity, payable semiannually in arrears in cash on June 2 and December 2 of each year, beginning December 2, 2003, until June 2, 2008. Contingent Cash Interest............................. We will pay contingent cash interest to holders of the notes during any six-month period from June 3 to December 2 and from December 3 to June 2, commencing June 3, 2008, if the average market price of a note for the Applicable Five Trading Day Period equals 120% or more of the sum of the issue price and accrued original issue discount for a note to the day immediately preceding the relevant six-month period. "Applicable Five Trading Day Period" means the five trading days ending on the third trading day immediately preceding the relevant six-month period. The contingent cash interest payable per note in respect of any six-month period will be equal to a per annum rate of 1.25% of the average market price of a note for the Applicable Five Trading Day Period. Contingent cash interest, if any, will accrue and be payable to holders of notes as of the fifteenth day preceding the last day of the relevant six-month period. Such payments will be paid on the last day of the relevant six-month period. Original issue discount will continue to accrue at the yield to maturity whether or not contingent cash interest is paid. Yield-to-Maturity of Notes........................... 4.00% per year, computed on a semiannual bond equivalent basis and calculated from June 2, 2003, excluding any contingent cash interest. Original Issue Discount.............................. We are offering our notes at an issue price significantly below the principal amount at maturity of the notes. As a result, the notes will be treated as issued with original issue discount, which for non-tax
-7- purposes will accrue daily at a rate of 4.00% per year beginning on June 2, 2008, calculated on a semiannual bond equivalent basis using a 360-day year comprised of twelve 30-day months. Tax Original Issue Discount.......................... In addition, the notes are debt instruments subject to the United States federal income tax contingent payment debt regulations. You should be aware that, even if we do not pay any contingent cash interest on the notes, you will be required to include imputed interest in your gross income for United States federal income tax purposes. For United States federal income tax purposes, interest, also referred to as tax original issue discount, accrues from June 2, 2003, at a constant rate of 9.265% per year, calculated on a semiannual bond equivalent basis, which represents the estimated yield that a comparable non-contingent, nonconvertible, fixed-rate debt instrument with terms and conditions otherwise similar to the notes would be likely to have if offered by AFG. United States Holders will be required to include tax original issue discount (including the portion of the tax original issue discount represented by cash interest payments) in their gross income as it accrues regardless of their method of tax accounting. The rate at which the tax original issue discount will accrue for United States federal income tax purposes will exceed payments of cash interest and will exceed the stated yield of 4.00% for accrued original issue discount. You also will recognize gain or loss on the sale, purchase by us at your option, exchange, conversion or redemption of a note in an amount equal to the difference between the amount realized on the sale, purchase by us at your option, exchange, conversion or redemption, including the fair market value of any common stock received upon conversion or otherwise, and your adjusted tax basis in the note. Any gain recognized by you on the sale, purchase by us at your option, exchange, conversion or redemption of a note generally will be ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and thereafter, capital loss. See "Material United States Federal Income Tax Consequences." Conversion Rights.................................... For each $1,000 principal amount of notes surrendered for conversion, if the conditions for conversion are satisfied, you will receive 11.5016
-8- shares of our common stock. In lieu of delivering shares of our common stock upon conversion of all or any portion of the notes, we may elect to pay holders surrendering notes cash or a combination of cash and shares of our common stock for the notes surrendered. If we elect to pay holders cash for their notes, the payment will be based on the average sale price of our common stock for the five consecutive trading days immediately following either: - the date of our notice of our election to deliver cash, which we must give within two business days after receiving a conversion notice, unless we have earlier given notice of redemption as described in this prospectus; or - the conversion date, if we have given notice of redemption specifying that we intend to deliver cash upon conversion thereafter. The conversion rate may be adjusted for certain reasons, but will not be adjusted for accrued original issue discount, accrued cash interest or any contingent cash interest. Upon conversion, a holder will not receive any cash payment representing accrued original issue discount, accrued cash interest or contingent cash interest. Instead, accrued original issue discount, accrued cash interest or contingent cash interest will be deemed paid by the shares of common stock received by the holder on conversion. If, as of the last day of any calendar quarter beginning with the quarter ending September 30, 2003, the closing sale price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such quarter is more than 120% of the accreted conversion price per share of common stock on the last day of such quarter, then on any business day during the following calendar quarter holders may surrender notes for conversion into shares of common stock. The accreted conversion price per share as of any day will equal the sum of the issue price of the note plus the accrued original issue discount divided by the number of shares issuable upon conversion of a note subject to any adjustments to the conversion rate through that day.
-9- Holders may also surrender notes for conversion during any period in which the credit rating assigned to the notes is Ba3 or lower by Moody's Investors Service, Inc. ("Moody's") or BB or lower by Standard & Poor's Credit Market Services, a division of the McGraw-Hill Companies ("Standard & Poor's"), the notes are no longer rated by either or both of Moody's or Standard & Poor's, or the credit rating assigned to the notes has been suspended or withdrawn by either Moody's or Standard & Poor's. Notes or portions of notes in integral multiples of $1,000 principal amount at maturity called for redemption may be surrendered for conversion until the close of business on the second business day prior to the redemption date. In addition, if we make a significant distribution to our stockholders or if we are a party to certain consolidations, mergers or binding share exchanges, notes may be surrendered for conversion, as provided in "Description of Notes -- Conversion Rights." The ability to surrender notes for conversion will expire at the close of business on June 2, 2033. Redemption of Notes at Our Option.................... We may redeem for cash all or a portion of the notes at any time after June 1, 2008, at redemption prices set forth in this prospectus. See "Description of Notes--Redemption of Notes at Our Option." Purchase of the Notes by AFG at the Option of the Holder............................................... Holders may require us to purchase all or a portion of their notes on each of the following dates at the following prices, plus accrued and unpaid cash interest, if any, to the purchase date: - on June 2, 2008 at a price of $371.53 per note; - on June 2, 2013 at a price of $452.89 per note; - on June 2, 2018 at a price of $552.07 per note; - on June 2, 2023 at a price of $672.97 per note; and - on June 2, 2028 at a price of $820.35 per note. We may pay the purchase price in cash or shares of our common stock or in a combination of cash and shares of our common stock. If we elect to pay the
-10- purchase price, in whole or in part, in shares of our common stock, the number of shares we deliver will be equal to the portion of the purchase price to be paid in common stock divided by the market price of a share of common stock. If we elect to pay all or part of the purchase price in shares of our common stock, we will notify holders not less than 20 business days before the applicable purchase date, specifying the percentages of cash and common stock. Change in Control.................................... Upon a change in control, as defined herein, of AFG before June 3, 2008, the holders may require us to purchase for cash all or a portion of their notes at a price equal to the sum of the issue price plus accrued original issue discount and accrued and unpaid cash interest, if any, to the date of purchase. Ranking.............................................. The notes are senior unsecured obligations of AFG and rank equal in right of payment to all of our other senior unsecured indebtedness. The notes are effectively subordinated to any future secured indebtedness as to the assets securing such indebtedness. In addition, we are structured as a holding company, and we conduct most of our business operations through our subsidiaries. The notes are effectively subordinated to all existing and future indebtedness and other liabilities and commitments of our subsidiaries, except as to AFC, which is a guarantor with respect to the notes. See "Description of Notes -- Notes Guarantee." As of June 30, 2003, we had an aggregate of $____ million of senior unsecured indebtedness outstanding (net of discount of $_____ million) and no secured indebtedness outstanding. As of June 30, 2003, AFC had $___ million in miscellaneous notes payable outstanding and a total of $___ million available under its multi-bank credit line. As of June 30, 2003, our subsidiaries other than AFC had an aggregate of approximately $_____ million of long term indebtedness outstanding. Our subsidiaries also have liabilities associated with insurance policies issued by the subsidiaries, reinsurance obligations and other trade payables and expenses.
-11- Use of Proceeds...................................... The selling securityholders will receive all of the net proceeds from the sale of the notes or the shares of common stock sold under this prospectus. We will not receive any of the proceeds from sales by the selling securityholders of the notes or the underlying common stock. Guarantees........................................... The notes are guaranteed by one of our subsidiaries, American Financial Corporation. See "Risk Factors-- Your ability to enforce the guarantees of the notes may be limited." As discussed under "Summary--Recent Developments," we are proposing steps to simplify our corporate structure by merging AFG and AFC, with AFG as the surviving entity. If this restructuring is consummated as proposed, the notes will continue to be obligations of AFG, and AFC's guarantee of the notes and our other debt securities will terminate. Sinking Fund......................................... None. DTC Eligibility...................................... The notes were issued in fully registered book-entry form and are represented by one or more permanent global notes without coupons. Global notes were deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company in New York, New York. Beneficial interests in global notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its direct and indirect participants, and your interest in any global note may not be exchanged for certificated notes, except in limited circumstances described herein. See "Description of Notes -- Book-Entry System." NYSE symbol for our Common Stock...................................... Our common stock is listed on the New York Stock Exchange under the symbol "AFG." Risk Factors......................................... See "Risk Factors" beginning on page 13 of this prospectus and the other information in this prospectus for a discussion of factors you should consider carefully before deciding to invest in the notes.
-12- RISK FACTORS You should carefully consider the following risks, as well as the other information contained in this prospectus, before investing in the notes. If any of the following risks actually occur, our business could be harmed. You should refer to the other information set forth in this prospectus and our consolidated financial statements and the related notes incorporated by reference herein. RISKS RELATED TO THE OFFERING Your right to receive payments on these notes will be effectively subordinated to the rights of any future secured creditors. The notes also will be effectively subordinated to any existing and future liabilities of our subsidiaries. The notes represent our unsecured obligations. Accordingly, holders of any future secured indebtedness will have claims that are superior to your claims as holders of the notes to the extent of the value of the assets securing that other indebtedness. In the event of any distribution or payment of our assets in any foreclosure, dissolution, winding-up, liquidation, reorganization, or other bankruptcy proceeding, holders of secured indebtedness will have superior claim to those of our assets that constitute their collateral. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the notes. Holders of the notes will participate ratably with all holders of our unsecured indebtedness that ranks equally in right of payment with the notes, and potentially with all of our other general creditors, based upon the respective amounts owed to each holder or creditor, in our remaining assets. As a result, holders of notes may receive less, ratably, than holders of secured indebtedness. In addition, we are a holding company and conduct substantially all our operations through our subsidiaries. As a result, holders of the notes will be effectively subordinated to the debt and other liabilities of our subsidiaries, and thus, holders of our subsidiaries' indebtedness and our subsidiaries' policyholders will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. Therefore, in the event of the insolvency or liquidation of a subsidiary, following payment by such subsidiary of its liabilities, such subsidiary may not have sufficient remaining assets to make payments to us as a shareholder or otherwise. In the event of a default by a subsidiary under any credit arrangement or other indebtedness or obligation, its creditors could accelerate such debt prior to such subsidiary distributing amounts to us that we could have used to make payments on the notes. In addition, if we caused a subsidiary to pay a dividend to us to make payment on the notes, and such dividend were determined to be a fraudulent transfer, holders of the notes would be required to return the payment to the subsidiary's creditors. AFC, the guarantor of the notes, is a holding company and conducts substantially all of its operations through its subsidiaries. As a result, the guarantee will be effectively subordinated to the debt and other liabilities of AFC's subsidiaries, and thus, holders of AFC's subsidiaries' indebtedness and AFC's subsidiaries' policyholders will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to AFC. Therefore, in the event of the insolvency or liquidation of a subsidiary of AFC, following payment by such subsidiary of its liabilities, such subsidiary may not have sufficient remaining assets to make payments to AFC as a shareholder or otherwise. In the event of a default by a subsidiary of AFC under any credit arrangement or other indebtedness or obligation, its creditors could accelerate such debt prior to such subsidiary distributing amounts to AFC that AFC could have used to make payments under the guarantee. In addition, if AFC caused a subsidiary to pay a dividend to it to make payment under the guarantee, and -13- such dividend was determined to be a fraudulent transfer, holders of the notes would be required to return the payment under the guarantee to AFC's subsidiary's creditors. We and our subsidiaries will be able to incur substantial additional indebtedness in the future. The terms of the notes do not impose any limitation on our or our subsidiaries' ability to issue additional debt, including secured debt. If we fail to deliver our common stock upon conversion of a note and thereafter become the subject of bankruptcy proceedings, a holder's claim for damages arising from our failure could be subordinated to all of our existing and future obligations. We are a holding company, and we may not have access to the cash that is needed to make payment on the notes. Substantially all of our operations and the operations of AFC are conducted through subsidiaries. Accordingly, our ability to make payments on the notes and pay dividends on the common stock that may be issued upon a conversion of the notes, as well as AFC's ability to make payments in respect of its guarantee of the notes, is dependent on the earnings and the distribution of funds from subsidiaries. Restrictions on the ability of subsidiaries to pay dividends or to make other cash payments to us may materially affect our ability to pay principal and interest on our indebtedness and dividends on the common stock we may issue upon a conversion of the notes, as well as AFC's ability to make payments in respect of its guarantee of the notes. AFC's ability to pay dividends to us may be limited by covenants relating to its net worth as contained in AFC's multi-bank credit line. Our subsidiaries are permitted under the terms of our indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by our subsidiaries to us. We cannot assure you that the agreements governing the current and future indebtedness of our subsidiaries will permit our subsidiaries to provide us with sufficient dividends, distributions or loans to fund payments on the notes when due. Our insurance subsidiaries may declare and pay dividends to us only if they are permitted to do so under the insurance regulations of their respective domiciliary state. State insurance laws limit the ability of our insurance companies to pay dividends and require our insurance companies to maintain specified levels of statutory capital and surplus. Some states require that we give notice to the relevant state insurance commissioner prior to our insurance subsidiaries declaring any dividends and distributions payable to us. During the notice period, the state insurance commissioner may disallow all or part of the proposed dividend if it determines that the insurer's surplus as regards policyholders is not reasonable in relation to the insurer's liabilities and adequate to its financial needs. In addition, for competitive reasons, our insurance companies need to maintain financial strength ratings which requires us to sustain capital levels in those subsidiaries. These restrictions affect the ability of our insurance company subsidiaries to pay dividends and use their capital in other ways. Our rights to participate in any distribution of assets of our insurance company subsidiaries are subject to prior claims of policyholders and creditors (except to the extent that our rights, if any, as a creditor are recognized). Notwithstanding the foregoing, if insurance regulators otherwise determine that payment of a dividend or any other payment to an affiliate would be detrimental to an insurance subsidiary's policyholders or creditors, because of the financial condition of the insurance subsidiary or otherwise, the regulators may block dividends or other payments to affiliates that would otherwise be permitted without prior approval. -14- We may not have the ability to purchase notes at the option of the holders or upon a change in control or to raise the funds necessary to finance the purchases. On June 2, 2008, 2013, 2018, 2023 and 2028, holders of the notes may require us to purchase their notes. However, it is possible that we would not have sufficient funds at that time to make the required purchase of notes. We may be required to pay all or a portion of the purchase price in shares of our common stock, subject to satisfying the conditions in the indenture for making such payments. If we were unable to satisfy the conditions in the indenture to use shares of our common stock to pay the purchase price, we could be in default of our obligations on the notes. In addition, if a holder requires us to purchase all or a portion of its notes and we elect to deliver shares of our common stock, and we then become the subject of bankruptcy proceedings, a holder may not be able to rescind its notice obligating us to purchase all or a portion of its notes, and a holder's claim may be subordinated to all of our existing and future obligations. In addition, upon the occurrence of certain specific kinds of change in control events occurring before June 3, 2008, holders may require us to purchase for cash all or any portion of their notes. However, it is possible that, upon a change in control, we may not have sufficient funds at that time to make the required purchase of notes, and we may be unable to raise the necessary funds. As described above, we are a holding company and our cash flow depends on distributions to us from our subsidiaries, which are restricted in the manner described above. Accordingly, our ability to purchase the notes at the option of the holder upon a change in control event will depend in part on the ability of our subsidiaries to make distributions to us. In addition, the terms of any future indebtedness we incur may also restrict our ability to purchase notes upon a change in control or if we are otherwise required to purchase notes at the option of the holder. If such indebtedness contained such a restriction, we would have to seek the consent of the lenders or repay those borrowings. If we were unable to obtain the necessary consent or unable to repay those borrowings, we would be unable to purchase the notes and, as a result, would be in default under the notes. Your ability to enforce the guarantees of the notes may be limited. Although the notes are obligations of AFG, they will be unconditionally guaranteed on an unsecured, senior basis by AFC, one of our subsidiaries. The performance by AFC of its obligations with respect to its guarantee may be subject to review under relevant federal and state fraudulent conveyance and similar statutes in a bankruptcy or reorganization lawsuit by or on behalf of unpaid creditors of AFC. If a court were to find under relevant federal or state fraudulent conveyance statutes that AFC did not receive fair consideration or reasonably equivalent value for incurring its guarantee of the notes, and that, at the time of such incurrence, AFC: (i) was insolvent, (ii) was rendered insolvent by reason of such incurrence, (iii) was engaged in a business or transaction for which the assets remaining with AFC constituted unreasonably small capital or (iv) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, then the court, subject to applicable statutes of limitation, could void AFC's obligations under its guarantee, recover payments made under the guarantee, subordinate the guarantee to other indebtedness or take other action detrimental to the holders of the notes. The measure of insolvency for these purposes will depend upon the governing law of the relevant jurisdiction. Generally, however, a company will be considered insolvent for these purposes if the sum of -15- that company's debts is greater than all of the assets of the company at a fair valuation or the company generally does not pay its debts as they become due. Moreover, regardless of solvency, a court could avoid an incurrence of indebtedness, including the guarantee, if it determined that such transaction was made with the intent to hinder, delay or defraud creditors. In addition, a court could subordinate the indebtedness, including the guarantee, to the claims of all existing and future creditors on similar grounds. The guarantee could also be subject to the claim that, since the guarantee was incurred for our benefit (and only indirectly for the benefit of AFC), the obligations of AFC under the guarantee were incurred for less than reasonably equivalent value or fair consideration. There can be no assurance as to what standard a court would apply in order to determine whether AFC was "insolvent" upon the sale of the notes or that, regardless of the method of valuation, a court would not determine that AFC was insolvent upon consummation of the sale of the notes. You should consider the United States federal income tax consequences of owning the notes. The notes will be treated as indebtedness for United States federal income tax purposes subject to the special regulations governing contingent payment debt instruments (which we refer to as the "contingent debt regulations"). Consequently, the notes will be treated as issued with original issue discount for United States federal income tax purposes. This tax original issue discount income will accrue from the original issue date of the notes, at a rate of 9.265% per year, compounded semi-annually. A United States Holder (as defined in "Material United States Federal Income Tax Consequences") will be required to accrue this original issue discount on a constant yield to maturity basis at this rate (subject to certain adjustments) with the result that a United States Holder will recognize taxable income in excess of both (x) the stated yield to maturity of the notes and (y) cash interest received while the notes are outstanding. You will recognize gain or loss on the sale, purchase by us at your option, exchange, conversion or redemption of a note in an amount equal to the difference between the amount realized on the sale, purchase by us at your option, exchange, conversion or redemption, including the fair market value of any of our common stock received upon conversion or otherwise, and your adjusted tax basis in the notes. Any gain recognized by you on the sale, purchase by us at your option, exchange, conversion or redemption of a note generally will be ordinary interest income; any loss will be ordinary loss to the extent of the interest previously included in income, and thereafter, capital loss. The tax treatment of the notes described in the preceding paragraph assumes that treating the notes as indebtedness subject to the contingent debt regulations will be upheld. Notwithstanding the recent publication by the Internal Revenue Service (the "IRS") of a Revenue Ruling regarding similar notes, the application of the contingent debt regulations to instruments such as the notes is uncertain in several respects, and, as a result, no assurance can be given that the IRS or a court will agree with the treatment described herein, and no ruling will be obtained from the IRS concerning the application of the contingent debt regulations to the notes. Any differing treatment could affect the amount, timing and character of income, gain or loss in respect of an investment in the notes. In particular, a holder might be required to accrue interest income at a higher or lower rate, might not recognize income, gain or loss upon conversion of the notes into shares of our common stock and might recognize capital gain or loss upon a taxable disposition of the notes. To understand how this may affect you, you should seek advice from your own tax advisor prior to purchasing these notes. See "Material United States Federal Income Tax Consequences" for a more -16- detailed discussion of the United States federal income tax consequences to the holders of the notes of the purchase, ownership and disposition of the notes. An active trading market for the notes may not develop. The notes comprise a new issue of securities for which there is currently no public market. The notes will not be listed on any securities exchange or included in any automated quotation system. We do not know whether an active trading market will develop for the notes. If the notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, the price of our common stock, its and our performance and other factors. We do not intend to apply for listing of the notes on any securities exchange or other stock market. We have made only limited covenants in the indenture, which may not protect your investment if we experience significant adverse changes in our financial condition or results of operations. The indenture governing the notes does not: - require us to maintain any financial ratios or specified levels of net worth, revenues, income, cash flow or liquidity, and therefore, does not protect holders of the notes in the event that we experience significant adverse changes in our financial condition or results of operations; - limit our ability or the ability of any of our subsidiaries to incur additional indebtedness; - restrict our ability or that of our subsidiaries to issue securities that would be senior to the common stock of the subsidiary held by us; or - restrict our ability to pledge our assets or those of our subsidiaries. Therefore, you should not consider the provisions of these governing instruments as a significant factor in evaluating whether we will be able to comply with our obligations under the notes. Existing shareholders exercise substantial control over our affairs. At April 30, 2003, Carl H. Lindner, S. Craig Lindner, Carl H. Lindner III, Keith E. Lindner and trusts for their benefit, which we refer to collectively as the Lindner family, were the beneficial owners of approximately 41% of our outstanding common stock. As a result, the Lindner family exercises substantial control over the election of our board of directors and significantly influences our corporate actions. In addition, the American Financial Group, Inc. Retirement and Savings Plan owned approximately 12% of our outstanding common stock at April 30, 2003. The interests of the Lindner family, as well as the interests of the Retirement and Savings Plan, may differ from those of our other stockholders and they may take actions that advance their respective interests to the detriment of our other stockholders. The price of our common stock, and therefore of the notes, may fluctuate significantly, which may make it difficult for you to resell the notes or common stock issuable upon conversion of the notes, when you want or at price you find attractive. -17- The price of our common stock as listed on the New York Stock Exchange constantly changes. We expect that market price of our common stock will continue to fluctuate. Because the notes are convertible into our common stock, volatility or depressed prices for our common stock could have a similar effect on the trading price of the notes. Holders who have received common stock upon conversion will also be subject to the risk of volatility and depressed prices. Our common stock price can fluctuate as a result of a variety of factors, many of which are beyond our control. These factors include: - actual or anticipated variations in our quarterly operating results; - actual or anticipated changes in the dividends we pay on our common stock; - recommendations by securities analysts; - significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors; - operating and stock price performance of other companies that investors deem comparable to us; - news reports relating to trends, concerns and other issues in our industry; and - geopolitical conditions such as acts or threats of terrorism or military conflicts. General market fluctuations, industry factors and general economic and political conditions and events, such as terrorist attacks, war, economic slowdowns or recessions, interest rate changes, credit loss trends or currency fluctuations, could also cause our stock price to decrease regardless of our operating results. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the market price of our common stock. RISKS RELATED TO OUR BUSINESS Intense competition could adversely affect our profitability. The specialty insurance business is highly competitive and, except for regulatory considerations, there are relatively few barriers to entry. We compete with other individual insurers, state funds and insurance groups of varying sizes, some of which are mutual insurance companies possessing competitive advantages in that all their profits inure to their policyholders. We also compete with self-insurance plans, captive programs and risk retention groups. Because of the specialty nature of these coverages, competition is based primarily on service to policyholders and agents, specific characteristics of products offered and reputation for claims handling. Price, commissions and profit sharing terms are also important factors. Some of our competitors have more capital and greater resources than we have, and may offer a broader range of products and lower prices than we offer. Our results may fluctuate as a result of cyclical changes in the specialty insurance industry. -18- The specialty insurance industry historically is cyclical in nature. The industry has been characterized by periods of price competition and excess capacity followed by periods of high premium rates and shortages of underwriting capacity. These fluctuations in the business cycle would be likely to negatively impact our revenues. We rely upon independent agents to write our insurance policies, and if we are not able to attract and retain independent agents, our revenues could be negatively affected. Our reliance on the independent agency market makes us vulnerable to a reduction in the amount of business written by agents. Many of our competitors, like us, rely significantly on the independent agency market. Accordingly, we must compete with other insurance carriers for independent agents' business. Some of our competitors offer a larger variety of products, lower price for insurance coverage or higher commissions. While we believe that the products, pricing, commissions and services we offer are competitive, we may not be able to continue to attract and retain independent agents to sell our products, in which case, our revenues could be negatively affected. We are subject to comprehensive regulation, and our ability to earn profits may be restricted by these regulations. We are subject to comprehensive regulation by government agencies in the states where our insurance company subsidiaries are domiciled and where these subsidiaries issue policies and handle claims, and we must obtain prior approval for certain corporate actions. We must comply with regulations involving: - the payment of dividends; - the acquisition or disposition of an insurance company or of any company controlling an insurance company; - approval or filing of premium rates and policy forms; - involuntary assignments of high-risk policies, participation in reinsurance facilities and underwriting associations, assessments and other governmental charges; - minimum amounts of capital and surplus that must be maintained; - limitations on types and amounts of investments; - limitation of the right to cancel or non-renew policies; - regulation of the right to withdraw from markets or terminate involvement with agencies; - licensing of insurers and agents; - reporting with respect to financial condition; and - transactions between an insurance company and any of its affiliates. -19- In addition, state insurance department examiners perform periodic financial and market conduct examinations of insurance companies. Such regulation is generally intended for the protection of policyholders rather than securityholders. There can be no assurance that existing insurance-related laws and regulations will not become more restrictive in the future or that new restrictive laws will not be enacted and, therefore, it is not possible to predict the potential effects of these laws and regulations on us. As a holding company, we are dependent on the results of operations of our insurance company subsidiaries to meet our obligations and pay future dividends. We are a holding company and a legal entity separate and distinct from our insurance company subsidiaries. As a holding company without significant operations of our own, our principal sources of funds are dividends and other distributions from our insurance company subsidiaries. State insurance laws limit the ability of our insurance companies to pay dividends and require our insurance companies to maintain specified levels of statutory capital and surplus. Some states require that we give notice to the relevant state insurance commissioner prior to our insurance subsidiaries declaring any dividends and distributions payable to us. During the notice period, the state insurance commissioner may disallow all or part of the proposed dividend if it determines that the insurer's surplus as regards policyholders is not reasonable in relation to the insurer's liabilities and adequate to its financial needs. In addition, for competitive reasons, our insurance companies need to maintain financial strength ratings which requires us to sustain capital levels in those subsidiaries. These restrictions affect the ability of our insurance company subsidiaries to pay dividends and use their capital in other ways. Our rights to participate in any distribution of assets of our insurance company subsidiaries are subject to prior claims of policyholders and creditors (except to the extent that our rights, if any, as a creditor are recognized). Consequently, our ability to pay debts, expenses and cash dividends to our shareholders may be limited. Our failure to maintain a commercially acceptable financial strength rating would significantly and negatively affect our ability to compete successfully. Financial strength ratings are an important factor in establishing the competitive position of insurance companies and may be expected to have an effect on an insurance company's sales. A.M. Best has currently assigned our insurance company subsidiaries ratings of "A (Excellent)" and "A--(Excellent)". According to A.M. Best, "A" and "A--" ratings are assigned to insurers which have, on balance, excellent balance sheet strength, operating performance and business profile when compared to the standards established by A.M. Best and, in A.M. Best's opinion, have a strong ability to meet their ongoing obligations to policyholders. A.M. Best bases its ratings on factors that concern policyholders and not upon factors concerning investor protection. Such ratings are subject to change and are not recommendations to buy, sell or hold securities. There can be no assurance that our rating or future changes to our rating will not affect our competitive position. We may be adversely impacted by a change in our Standard & Poor's or Moody's ratings. We are rated by Standard & Poor's and Moody's, both independent corporate credit rating agencies. On May 27, 2003, we were notified that our rating is being placed under review by Moody's, which may result in a downgrade of our current credit rating. An unfavorable change in either of these ratings could make it more expensive for us to access capital markets and may increase the interest rate charged to us under our current multi-bank credit line. We can give no assurance that we will maintain our current Standard & Poor's or Moody's ratings. -20- We are a party to litigation which, if decided adversely to us, could impact our financial results. We and our subsidiaries are named as defendants in a number of lawsuits. Litigation, by its very nature, is unpredictable and the outcome of these cases is uncertain. Further, we are unable to predict the precise nature of the relief that may be sought or granted in any lawsuits or the effect that pending or future cases may have on our business, operations, profitability or financial condition. Recently we were notified of an adverse arbitration decision affecting our Great American Insurance Company unit. The decision concerned the unit's share of a 1995 property fire and business interruption claim. Our second quarter earnings are expected to include an after tax charge of approximately $29 million or $0.41 per share for the claim. Legal precedents regarding potential asbestos liabilities continue to evolve, and adverse developments could impact our financial results. Our insurance company subsidiaries and American Premier Underwriters, Inc. are parties to litigation and receive claims asserting alleged injuries and damages from asbestos and other hazardous and toxic substances and workplace hazards and have established loss accruals for such potential liabilities. The ultimate loss for these claims may vary materially from amounts currently recorded as the conditions surrounding resolution of these claims continue to change. We are unable to predict the precise nature of the relief that may be granted in any lawsuits or the effect that future cases may have on our business, operations, profitability or financial condition. In 2002 and 2001, we increased reserves relating to prior year's asbestos and environmental claims by $49 million and $108 million, respectively. As of March 31, 2003, the aggregate net reserves held by our insurance company subsidiaries for asbestos claims was $295 million and for other environmental and mass tort claims was $159 million. We are subject to environmental claims that may impact our financial results. American Premier Underwriters, Inc. is a party or named as a potentially responsible party in a number of proceedings and claims by regulatory agencies and private parties under various environmental protection laws, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), seeking to impose responsibility on American Premier for hazardous waste remediation costs at certain railroad sites formerly owned by its predecessor, Penn Central Transportation Company, and at certain other sites where hazardous waste allegedly generated by Penn Central's railroad operations and American Premier's former manufacturing operations is present. It is difficult to estimate American Premier's liability for remediation costs at these sites for a number of reasons, including the number and financial resources of other potentially responsible parties involved at a given site, the varying availability of evidence by which to allocate responsibility among such parties, the wide range of costs for possible remediation alternatives, changing technology and the period of time over which these matters develop. Our reserves may be inadequate, which could significantly affect our financial results. We record reserve liabilities for the estimated payment of losses and loss adjustment expenses for both reported and unreported claims. Due to the inherent uncertainty of estimating reserves, it has been necessary in the past, and may continue to be necessary in the future, to revise estimated liabilities as reflected in our reserves for claims and related expenses. For example, in 2002 and 2001 we took charges of $171 million and $163 million, respectively, to increase reserves relating to prior accident years. To the extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to earnings in the period in which the deficiency is recognized. The historic development of -21- reserves for losses and loss adjustment expense may not necessarily reflect future trends in the development of these amounts. Accordingly, it is not appropriate to extrapolate redundancies or deficiencies based on historical information. Adverse securities market conditions can have significant and negative effects on our investment portfolio. Our results of operations depend in part on the performance of our invested assets. As of March 31, 2003, 93% of our investment portfolio was invested in fixed maturity securities and 4% in equity 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. An increase in interest rates lowers prices on fixed maturity securities, and any sales we make during a period of increasing interest rates may result in losses. Conversely, investment income earned from future investments in fixed maturity securities will decrease if interest rates decrease. The continued threat of terrorism and ongoing military and other actions may adversely affect our financial results. The continued threat of terrorism, both within the United States of America and abroad, and the ongoing military and other actions and heightened security measures in response to these types of threats, may cause significant volatility and declines in the equity markets in the United States of America, Europe and elsewhere, loss of life, property damage, additional disruptions to commerce and reduced economic activity. Actual terrorist attacks could cause losses from insurance claims related to our property and casualty and life insurance operations with adverse financial consequences. The Terrorism Risk Insurance Act of 2002 requires that some coverage for terrorist acts be offered by primary property insurers such as our insurance subsidiaries and provides Federal assistance for recovery of claims through 2005. In addition, some of the assets in our insurance subsidiaries' investment portfolios may be adversely affected by declines in the capital markets and economic activity caused by the continued threat of terrorism, ongoing military and other actions and heightened security measures. We cannot predict at this time whether and the extent to which industry sectors in which we maintain investments may suffer losses as a result of potential decreased commercial and economic activity, or how any such decrease might impact the ability of companies within the affected industry sectors to pay interest or principal on their securities, or how the value of any underlying collateral might be affected. We can offer no assurances that the threats of future terrorist-like events in the United States of America and abroad or military actions by the United States of America will not have a material adverse effect on our business, financial condition or results of operations. The inability to obtain reinsurance could adversely impact our results. We rely on the use of reinsurance to limit the amount of risk we retain. The availability and cost of reinsurance are subject to prevailing market conditions which are beyond our control and which may affect our level of business and profitability. We are also subject to credit risk with respect to our reinsurers, as the ceding of risk to reinsurers does not relieve us of our liability to insureds. -22- USE OF PROCEEDS The selling securityholders will receive all of the net proceeds from the sale of the notes or the shares of common stock sold under this prospectus. We will not receive any of the proceeds from sales by the selling securityholders of the notes or the underlying common stock. PRICE RANGE AND DIVIDEND HISTORY OF OUR COMMON STOCK Our common stock is quoted on the New York Stock Exchange under the symbol "AFG." On June 24, 2003, the last reported sale price of the common stock on the NYSE was $24.22 per share. The following table sets forth for the periods indicated below the high and low sale prices for our common stock on the NYSE, and dividends paid, for each quarterly period during the fiscal years 2001and 2002 as well as 2003 through ___ __.
HIGH LOW DIVIDEND ---------- ---------- ------------ 2001 First Quarter ........................ $ 29.00 $ 21.80 $ 0.25 Second Quarter ....................... 30.30 23.30 0.25 Third Quarter ........................ 30.75 18.35 0.25 Fourth Quarter ....................... 25.33 20.20 0.25 2002 First Quarter ........................ $ 28.81 $ 22.85 $ 0.125 Second Quarter ....................... 30.30 22.51 0.125 Third Quarter ........................ 26.30 17.90 0.125 Fourth Quarter ....................... 24.80 20.82 0.125 2003 First Quarter ........................ $ 24.21 $ 18.00 $ 0.125 Second Quarter ....................... 0.125 Third Quarter (through_______, 2003)..
As of May 31, 2003, we had 69,596,409 shares of common stock outstanding including 1,361,711 shares held by a subsidiary for distribution to certain creditors and approximately 13,000 record holders. -23- CAPITALIZATION The following table shows our capitalization at March 31, 2003, and as adjusted to give effect to the sale of the notes and the application of a portion of the proceeds to repay amounts outstanding under AFC's multi-bank credit line. You should read this table in conjunction with "Use of Proceeds" and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our annual report on Form 10-K for the fiscal year ended December 31, 2002, as amended, our quarterly report on Form 10-Q for the quarter ended March 31, 2003, as amended, and our consolidated financial statements and the related notes incorporated by reference in this prospectus.
MARCH 31, 2003 ---------------------------- ACTUAL AS ADJUSTED (b) ---------- --------------- (DOLLARS IN MILLIONS) Long-term debt: Direct Obligations of AFG, net of discount of $1.5 million and $322.7 million ....................................... $ 380.9 $ 570.8 Other Holding Company Obligations American Financial Corporation ........................... 103.2 8.2 American Premier Underwriters, including premium of $0.8 million ........................................... 11.5 11.5 Obligations of Subsidiaries Great American Financial Resources ....................... 250.2 250.2 Other Subsidiaries ....................................... 46.2 46.2 ---------- ---------- Total long-term debt ................................ 792.0 886.9 ---------- ---------- Minority Interest (a) ......................................... 472.2 472.2 ---------- ---------- Shareholders' equity Common Stock and capital surplus ............................ 997.7 997.7 Retained earnings ........................................... 426.3 426.3 Net unrealized gain on marketable securities, net of deferred income tax ...................................... 292.9 292.9 ---------- ---------- Total shareholders' equity .......................... 1,716.9 1,716.9 ---------- ---------- Total Capitalization .......................................... $ 2,981.1 $ 3,076.0 ========== ========== Ratios: Long-term debt to total capitalization ...................... 27% 29% Long-term debt and subsidiary trust preferred securities to total capitalization .................................. 35% 37%
- ---------------- (a) Minority interest represents interests of noncontrolling shareholders in subsidiaries, including AFC preferred stock and subsidiary trust preferred securities. (c) Excludes effects of proposed restructuring described under "Summary -- Recent Developments -- Proposed Restructuring." RATIO OF EARNINGS TO FIXED CHARGES Fixed charges are computed on a "total enterprise" basis. For purposes of calculating the ratios, "earnings" have been computed by adding to pretax earnings the fixed charges and the minority interest in earnings of subsidiaries having fixed charges and the undistributed equity in losses of investees. Fixed -24- charges include interest (including or excluding interest credited to annuity policyholders' accounts as indicated), amortization of debt premium/discount and expense, preferred dividend and distribution requirements of subsidiaries and a portion of rental expense deemed to be representative of the interest factor. Although the ratio of earnings to fixed charges excluding interest on annuities is not required or encouraged to be disclosed under Securities and Exchange Commission rules, some investors and lenders may not consider interest credited to annuity policyholders' accounts a borrowing cost for an insurance company, and accordingly, believe this ratio is meaningful.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, -------------------- -------------------------------------------------------- 2003 2002 2002 2001 2000 1999 1998 -------- -------- -------- -------- -------- -------- -------- Including Annuity Benefits 1.31 1.43 1.37 1.06 1.18 1.71 1.65 Excluding Annuity Benefits 2.25 2.72 2.42 1.21 1.63 3.36 3.22
-25- DESCRIPTION OF NOTES We issued the notes under an indenture, dated as of June 2, 2003, among American Financial Group, Inc., as issuer, American Financial Corporation, as guarantor, and U.S. Bank National Association, a national banking association, as trustee. The following summarizes the material provisions of the indenture and the notes and does not purport to be complete and is subject to, and qualified by reference to, all of the provisions of the indenture and the notes, which we urge you to read because they define your rights as a note holder. A copy of the indenture is available upon request to us. As used in this description of notes, the words "we," "us," "our" or "AFG" refer only to American Financial Group, Inc. and do not include any current or future subsidiary of American Financial Group, Inc. GENERAL The notes are our senior unsecured obligations and will be limited to $511,015,000 aggregate principal amount at maturity. The notes will mature on June 2, 2033. The principal amount at maturity of each note will be $1,000. The notes will be payable at the principal corporate trust office of the paying agent, which initially will be an office or agency of the trustee, or an office or agency maintained by us for such purpose, in the United States. The notes will be senior unsecured obligations and will rank equally with our existing and future senior unsecured indebtedness. In addition, the notes will effectively rank junior to any future secured indebtedness as to the assets securing such indebtedness and to all indebtedness and other obligations of our subsidiaries (except as to AFC, which is a guarantor with respect to the notes) as to the assets of those subsidiaries. See "Risk Factors -- Your ability to enforce the guarantees of the notes may be limited." The notes bear cash interest at the rate of 1.4861% per year on the principal amount at maturity from the issue date, or from the most recent date to which interest has been paid or provided for, until June 2, 2008. During such period, cash interest will be payable semiannually in arrears on June 2 and December 2 of each year, commencing on December 2, 2003, to holders of record at the close of business on the May 18 or November 17 immediately preceding such interest payment date. Each payment of cash interest on the notes will include interest accrued through the day before the applicable interest payment date (or purchase, redemption or, in certain circumstances, conversion date, as the case may be). Any payment required to be made on any day that is not a business day will be made on the next succeeding business day. The notes are being offered at a substantial discount from their $1,000 principal amount at maturity. The notes will be issued at an issue price of $371.53 per note. Beginning after June 2, 2008, for non-tax purposes the notes will accrue original issue discount while they remain outstanding at a rate of 4.00% per year. Original issue discount is the difference between the issue price and the principal amount (or stated redemption price for federal income tax purposes) at maturity of a note. The calculation of the accrual of original issue discount will be on a semiannual bond equivalent basis, using a 360-day year composed of twelve 30-day months. The notes will be debt instruments subject to the contingent payment debt regulations. The notes will be issued with original issue discount for United States federal income tax purposes. Even if we do not pay any contingent cash interest on the notes, holders will be required to include accrued tax original issue discount (including the portion of the tax original issue discount represented by cash interest payments) in their gross income for federal income tax purposes as it accrues from June 2, 2003. The rate at which the tax original issue discount will accrue will exceed the stated yield of 4.00% for accrued original issue discount. See "Material United States Federal Income Tax Consequences." -26- Original issue discount or cash interest, as the case may be, will cease to accrue on a note upon its maturity, conversion, purchase by us at the option of a holder or redemption. We may not reissue a note that has matured or been converted, purchased by us at your option, redeemed or otherwise cancelled, except for registration of transfer, exchange or replacement of such note. Notes may be presented for conversion at the office of the conversion agent and for exchange or registration of transfer at the office of the registrar. Holders may convert each of their notes into 11.5016 shares of our common stock, subject to adjustment, (1) during any calendar quarter after September 30, 2003, if the sale price of our common stock reaches specified thresholds during the preceding calendar quarter, (2) during any period in which the credit rating of the notes is below a specified level, (3) if the notes are called for redemption or (4) if specified corporate transactions have occurred. The conversion agent and the registrar shall initially be the trustee. No service charge will be made for any registration of transfer or exchange of notes. However, we may require the holder to pay any tax, assessment or other governmental charge payable as a result of such transfer or exchange. The notes are redeemable by us for cash at any time after June 1, 2008. As discussed under "Summary -- Recent Developments," we are proposing steps to simplify our corporate structure by merging AFG and AFC, with AFG as the surviving entity. If this restructuring is consummated as proposed, the notes will continue to be obligations of AFG, and AFC's guarantee of the notes and our other debt securities will terminate. RANKING OF THE NOTES The notes will be senior unsecured obligations of AFG and will rank equal in right of payment to all of our other senior unsecured indebtedness. The notes will be effectively subordinated to any future secured indebtedness to the extent of the assets securing such indebtedness. In addition, we are structured as a holding company, and we conduct most of our business operations through our subsidiaries. Other than with respect to AFC, which is guaranteeing the notes (as described below), the notes will be effectively subordinated to all existing and future indebtedness and other liabilities and obligations of our subsidiaries, which are distinct legal entities having no obligation to pay any amounts pursuant to the notes or to make funds available. AFC's guarantee of the notes (described below) will be a general unsecured obligation of AFC and will rank senior in right of payment to all future obligations of AFC that are, by their terms, expressly subordinated in right of payment to the guarantee and pari passu in right of payment with all existing and future unsecured obligations of AFC that are not so subordinated, including borrowings under our credit facility (on which AFC is the primary obligor). In addition, since our and AFC's subsidiaries are insurance companies, their ability to pay dividends to us is subject to regulatory limitations. See "Risk Factors -- Risks Related to the Offering -- We are a holding company, and we may not have access to the cash that is needed to make payment on the notes." As of June 30, 2003, AFC had $___ million in miscellaneous notes payable outstanding and a total of $___ million available under its multi-bank credit line. As of June 30, 2003, our subsidiaries other than AFC had an aggregate of approximately $_____ million of long term indebtedness outstanding. NOTE GUARANTEE Our obligations under the notes and indenture will be guaranteed by one of our subsidiaries, AFC. None of our other subsidiaries will guarantee the notes. In the event of a bankruptcy, receivership, liquidation or reorganization of any of our non-guarantor subsidiaries, such other subsidiaries will pay the -27- holders of their debts and their trade creditors before they will be able to distribute any of their assets to us or, to the extent they are also subsidiaries of AFC, to AFC. As of December 31, 2002 and March 31, 2003, our non-guarantor subsidiaries accounted for approximately 99% of our consolidated total assets. Our non-guarantor subsidiaries accounted for approximately 99% of our consolidated revenues for the year ended December 31, 2002 and the quarter ended March 31, 2003. The obligations of AFC under the guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of AFC, result in the obligations of AFC under the guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. See "Risk Factors-Your Ability to Enforce the Guarantee of the Notes May Be Limited." As discussed under "Summary -- Recent Developments," we are proposing steps to simplify our corporate structure by merging AFG and AFC, with AFG as the surviving entity. If this restructuring is consummated as proposed, the notes will continue to be obligations of AFG, and AFC's guarantee of the notes and our other debt securities will terminate. CONVERSION RIGHTS A holder may convert a note, in integral multiples of $1,000 principal amount at maturity, into common stock only if the conditions for conversion described below are satisfied. In addition, a holder may convert a note only until the close of business on the second business day prior to the redemption date if we call a note for redemption. A note for which a holder has delivered a purchase notice or a change in control purchase notice requiring us to purchase the note may be surrendered for conversion only if such notice is withdrawn in accordance with the indenture. For each $1,000 principal amount of notes surrendered for conversion, if the conditions for conversion are satisfied, a holder will receive 11.5016 shares of our common stock, subject to adjustment upon the occurrence of certain events described below. A holder of a note otherwise entitled to a fractional share will receive cash equal to the applicable portion of the then current sale price of our common stock on the trading day immediately preceding the conversion date. Upon a conversion, we will have the option to deliver cash or a combination of cash and shares of our common stock for the notes surrendered as described below. The ability to surrender notes for conversion will expire at the close of business on June 2, 2033. To convert a note into shares of common stock, a holder must: - complete and manually sign a conversion notice, a form of which is on the back of the note, and deliver the conversion notice to the conversion agent; - surrender the note to the conversion agent; - if required by the conversion agent, furnish appropriate endorsements and transfer documents; and - if required, pay all transfer or similar taxes. On conversion of a note, a holder will not receive any cash payment of interest representing accrued original issue discount or, except as described below, any accrued cash interest or contingent cash interest. Instead, accrued original issue discount or accrued cash interest or contingent cash interest will -28- be deemed paid by the shares of common stock received by the holder on conversion. Delivery to the holder of the full number of shares of common stock into which the note is convertible, together with any cash payment of such holder's fractional shares, will thus be deemed: - to satisfy our obligation to pay the principal amount at maturity of the note; - to satisfy our obligation to pay accrued original issue discount or accrued cash interest attributable to the period from the issue date through the conversion date; and - to satisfy our obligation to pay accrued contingent interest, if any, attributable to the most recent accrual date. As a result, accrued original issue discount or accrued cash interest is deemed paid in full rather than cancelled, extinguished or forfeited. Notwithstanding the foregoing, accrued cash interest, if any, will be payable upon any conversion of notes at the option of the holder made concurrently with or after acceleration of the notes following an event of default described under "-- Events of Default and Acceleration" below. Holders of notes surrendered for conversion during the period from the close of business on any regular record date next preceding any interest payment date to the opening of business of such interest payment date will receive the semiannual interest payable on such notes on the corresponding interest payment date notwithstanding the conversion, and such notes upon surrender must be accompanied by funds equal to the amount of such payment, unless such notes have been called for redemption, in which case no such payment shall be required. If contingent cash interest is payable to holders of notes during any particular six-month period, and such notes are converted after the applicable accrual date therefor and prior to the next succeeding interest payment date, holders of such notes at the close of business on the accrual date will receive the contingent cash interest payable on such notes on the corresponding interest payment date notwithstanding the conversion. Such notes, upon surrender for conversion, must be accompanied by funds equal to the amount of contingent cash interest payable on the principal amount of notes so converted, unless such notes have been called for redemption, in which case no such payment shall be required. The conversion rate will not be adjusted for accrued original issue discount, accrued cash interest or any contingent cash interest. A certificate for the number of full shares of common stock into which any note is converted, together with any cash payment for fractional shares, will be delivered through the conversion agent as soon as practicable following the conversion date. For a discussion of the tax treatment of a holder receiving shares of our common stock upon surrendering notes for conversion, see "Material United States Federal Income Tax Consequences." In lieu of delivery of shares of our common stock upon notice of conversion of any notes (for all or any portion of the notes), we may elect to pay holders surrendering notes an amount in cash per note (or a portion of a note) based on the average sale price of our common stock for the five consecutive trading days immediately following either (a) the date of our notice of our election to deliver cash, which we must give within two business days after receiving a conversion notice, unless we have earlier given notice of redemption as described in this prospectus; or (b) the conversion date, if we have given notice of redemption specifying that we intend to deliver cash upon conversion thereafter, in either case multiplied by the conversion rate in effect on that date. We will inform the holders through the trustee no later than two business days following the conversion date of our election to deliver shares of our common stock or to pay cash in lieu of delivery of the shares, unless we have already informed holders of our election in -29- connection with our optional redemption of the notes as described under "-- Redemption of Notes at Our Option." If we elect to deliver all of such payment in shares of our common stock, the shares will be delivered through the conversion agent no later than the fifth business day following the conversion date. If we elect to pay all or a portion of such payment in cash, the payment, including any delivery of our common stock, will be made to holders surrendering notes no later than the tenth business day following the applicable conversion date. If an event of default, as described under "-- Events of Default and Acceleration" below (other than a default in a cash payment upon conversion of the notes), has occurred and is continuing, we may not pay cash upon conversion of any notes or portion of a note (other than cash for fractional shares). We will adjust the conversion rate for: (1) dividends or distributions on our common stock payable in our common stock or other capital stock of AFG; (2) subdivisions, combinations or certain reclassifications of our common stock; (3) distributions to all holders of our common stock of certain rights to purchase shares of our common stock for a period expiring within 60 days of issuance of the notes at less than the then current sale price of our common stock at that time; and (4) distributions to the holders of our common stock of a portion of our assets (including shares of capital stock of, or similar equity interests in, a subsidiary or other business unit of ours) or debt securities issued by us or certain rights to purchase our securities (excluding cash dividends or other cash distributions from current or retained earnings other than extraordinary cash dividends). "Extraordinary cash dividends" means the amount of any cash dividend or distribution that, together with all other cash dividends paid during the preceding 12-month period, are on a per share basis in excess of the sum of (i) 5% of the sale price of the shares of our common stock on the day preceding the date of declaration of such dividend or distribution and (ii) the quotient of the amount of any contingent cash interest paid on a note during such 12-month period divided by the number of shares of common stock issuable upon conversion of a note at the conversion rate in effect on the payment date of such contingent cash interest. In the event that we elect to make a distribution to all holders of shares of our common stock pursuant to clause (3) or (4) of the preceding paragraph, which, in the case of clause (4), has a per share value equal to more than 10% of the sale price of our shares of common stock on the day preceding the declaration date for such distribution, we will be required to give notice to the holders of notes at least 20 days prior to the date for such distribution and, upon the giving of such notice, the notes may be surrendered for conversion at any time until the close of business on the business day prior to the date of distribution or until we announce that such distribution will not take place. In the event that we pay a dividend or make a distribution on shares of our common stock consisting of capital stock of, or similar equity interests in, a subsidiary or other business unit of ours, the conversion rate will be adjusted based on the market value of the securities so distributed relative to the market value of our common stock, in each case based on the average closing prices of those securities for the 10 trading days commencing on and including the fifth trading day after the date on which "ex-dividend trading" commences for such dividend or distribution on the principal United States securities exchange or market on which the securities are then listed or quoted. -30- No adjustment to the conversion rate need be made if holders of the notes may participate in the transaction without conversion or in certain other cases. In addition, the indenture provides that upon conversion of the notes, the holders of such notes will receive, in addition to the shares of common stock issuable upon such conversion, the rights related to such common stock pursuant to our existing and any future shareholder rights plan, whether or not such rights have separated from the common stock at the time of such conversion. However, there shall not be any adjustment to the conversion privilege or conversion rate as a result of: - the issuance of the rights; - the distribution of separate certificates representing the rights; - the exercise or redemption of such rights in accordance with any rights agreement; or - the termination or invalidation of the rights. Notwithstanding the foregoing, if a holder of notes exercising the right of conversion attaching thereto after the distribution of rights pursuant to our shareholder rights plan is not entitled to receive the rights that would otherwise be attributable (but for the date of conversion) to the shares of common stock received upon such conversion, the conversion rate will be adjusted pursuant to clause (4) of the fourth preceding paragraph. If such an adjustment is made and such rights are later redeemed, invalidated or terminated, then a corresponding reversing adjustment will be made to the conversion rate on an equitable basis. The indenture permits us to increase the conversion rate from time to time. Holders of the notes may, in certain circumstances, be deemed to have received a distribution subject to United States federal income tax as a dividend upon: - a taxable distribution to holders of common stock that results in an adjustment of the conversion rate on the notes; - an increase in the conversion rate at our discretion; or - failure to adjust the conversion rate in some instances. See "Material United States Federal Income Tax Consequences." If we are a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of our assets, the right to convert a note into common stock may be changed into a right to convert it into the kind and amount of securities, cash or other assets of AFG or another person which the holder would have received if the holder had converted the holder's note immediately prior to the transaction. The conversion agent will, on our behalf, determine if the notes are convertible and notify the trustee and us accordingly. If the conditions to the conversion of the notes have been satisfied, we will promptly notify the holders of the notes thereof and use our reasonable best efforts to post this information on our website or otherwise publicly disclose this information. -31- Conversion Based on Common Stock Price. If, as of the last day of any calendar quarter beginning with the quarter ending September 30, 2003, the closing sale price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such calendar quarter is more than 120% of the accreted conversion price per share of common stock on the last day of such quarter, then on any business day during the following calendar quarter holders may surrender notes for conversion into shares of common stock. Upon a conversion, we will have the right to deliver cash or a combination of cash and common stock, as described below. The accreted conversion price per share as of any day will equal the sum of the issue price of a note plus the accrued original issue discount divided by the number of shares of common stock issuable upon conversion of a note on that day, subject to any adjustments to the conversion rate through that day. The closing sale price of our common stock on any trading day means the closing per share sale price (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date on the principal national securities exchange on which the common stock is listed or, if our common stock is not listed on a national securities exchange, as reported by the Nasdaq system or otherwise as provided in the indenture. Conversion Rights Based on Credit Ratings Downgrade. Holders may also surrender notes for conversion during any period in which the credit rating assigned to the notes is Ba3 or lower by Moody's or BB or lower by Standard & Poor's, the notes are no longer rated by either Moody's or Standard & Poor's, or the credit rating assigned to the notes has been suspended or withdrawn by either or both of Moody's or Standard & Poor's. The notes will cease to be convertible pursuant to this paragraph during any period or periods in which all of the credit ratings are increased above such levels. Conversion Based on Redemption. A holder may surrender for conversion a note called for redemption at any time prior to the close of business on the second business day immediately preceding the redemption date, even if it is not otherwise convertible at such time. A note for which a holder has delivered a purchase notice or a change in control purchase notice, as described below, requiring us to purchase such note may be surrendered for conversion only if such notice is withdrawn in accordance with the indenture. A "business day" is any weekday that is not a day on which banking institutions in The City of New York are authorized or obligated to close. A "trading day" is any day on which the NYSE is open for trading or, if the applicable security is quoted on the Nasdaq, a day on which trades may be made on such market or, if the applicable security is not so listed, admitted for trading or quoted, any business day. Conversion Upon Occurrence of Certain Corporate Transactions. If we are party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of our assets, a note may be surrendered for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of the transaction until the date that is 15 days after the actual effective date of such transaction, and at the effective date, the right to convert a note into common stock will be changed into a right to convert it into the kind and amount of securities, cash or other assets of AFG or another person which the holder would have received if the holder had converted the holder's notes immediately prior to the transaction. If such transaction also constitutes a change in control of AFG, the holder will be able to require us to purchase all or a portion of such holder's notes as described under "-- Change in Control Permits Purchase of Notes by AFG at the Option of the Holder." The notes will also be convertible upon the occurrence of certain distributions resulting in an adjustment to the conversion price as described above. -32- CONTINGENT CASH INTEREST Subject to the accrual date provisions described below, we will pay contingent cash interest to the holders of the notes during any six-month period from June 3 to December 2 and from December 3 to June 2, commencing June 3, 2008, if the average market price of a note for the Applicable Five Trading Day Period equals 120% or more of the sum of the issue price and accrued original issue discount for a note to the day immediately preceding the first day of the applicable six-month period. "Applicable Five Trading Day Period" means the five trading days ending on the third trading day immediately preceding the first day of the relevant six-month period. The amount of contingent cash interest payable per note in respect of any such six-month period in which contingent interest is payable will be equal to a per annum rate of 1.25% of the average market price of a note for the Applicable Five Trading Day Period. For United States federal income tax purposes, the notes will constitute contingent payment debt instruments. Contingent cash interest, if any, will accrue and be payable to holders of notes as of the 15th day preceding the last day of the relevant six-month period. Such payments will be paid on the last day of the relevant six-month period. Original issue discount will continue to accrue at the yield to maturity whether or not contingent cash interest is paid. The market price of a note on any date of determination means the average of the secondary market bid quotations per note obtained by the bid solicitation agent for $15,000,000 principal amount at maturity of notes at approximately 4:00 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers we select, provided that if: - at least three such bids are not obtained by the bid solicitation agent; or - in our reasonable judgment, the bid quotations are not indicative of the secondary market value of the notes, then the market price of the note will equal (a) the then applicable conversion rate of the notes multiplied by (b) the average sale price of our common stock on the five trading days ending on such determination date, appropriately adjusted. The bid solicitation agent will initially be U.S. Bank National Association. We may change the bid solicitation agent, but the bid solicitation agent will not be our affiliate. The bid solicitation agent will solicit bids from securities dealers that are believed by us to be willing to bid for the notes. Upon determination that note holders will be entitled to receive contingent cash interest during a relevant six-month period, we will issue a press release and publish such information on our website or through such other public medium as we may use at that time. We may unilaterally increase the amount of contingent cash interest we may pay or pay interest or other amounts we are not obligated to pay, but we will have no obligation to do so. REDEMPTION OF NOTES AT OUR OPTION No sinking fund is provided for the notes. Prior to June 2, 2008, we cannot redeem the notes at our option. Beginning on June 2, 2008, we may redeem the notes for cash, as a whole at any time or from -33- time to time in part. We will give not less than 30 days' or more than 60 days' notice of redemption by mail to holders of notes. If redeemed at our option, the notes will be redeemed at a price equal to the sum of the issue price, plus accrued original issue discount and accrued and unpaid cash interest, if any, on such notes to the applicable redemption date. The table below shows the redemption prices of a note on June 2, 2008, on each June 2 thereafter prior to maturity and at maturity on June 2, 2033. In addition, the redemption price of a note that is redeemed between the dates listed below would include an additional amount reflecting the additional accrued original issue discount or cash interest, if any, that has accrued on such note since the immediately preceding date in the table below.
(2) (3) (1) ACCRUED ORIGINAL REDEMPTION REDEMPTION DATE JUNE 2: NOTE ISSUE PRICE ISSUE DISCOUNT PRICE (1)+(2) - ----------------------- ---------------- ---------------- ------------- 2008 ................................... $ 371.53 $ 0.00 $ 371.53 2009 ................................... 371.53 15.01 386.54 2010 ................................... 371.53 30.63 402.16 2011 ................................... 371.53 46.87 418.40 2012 ................................... 371.53 63.78 435.31 2013 ................................... 371.53 81.36 452.89 2014 ................................... 371.53 99.66 471.19 2015 ................................... 371.53 118.70 490.23 2016 ................................... 371.53 138.50 510.03 2017 ................................... 371.53 159.11 530.64 2018 ................................... 371.53 180.54 552.07 2019 ................................... 371.53 202.85 574.38 2020 ................................... 371.53 226.05 597.58 2021 ................................... 371.53 250.19 621.72 2022 ................................... 371.53 275.31 646.84 2023 ................................... 371.53 301.44 672.97 2024 ................................... 371.53 328.63 700.16 2025 ................................... 371.53 356.92 728.45 2026 ................................... 371.53 386.35 757.88 2027 ................................... 371.53 416.96 788.49 2028 ................................... 371.53 448.82 820.35 2029 ................................... 371.53 481.96 853.49 2030 ................................... 371.53 516.44 887.97 2031 ................................... 371.53 552.32 923.85 2032 ................................... 371.53 589.64 961.17 At stated maturity ..................... 371.53 628.47 1,000.00
If less than all of the outstanding notes are to be redeemed, the trustee will select the notes to be redeemed in principal amounts at maturity of $1,000 or integral multiples of $1,000. In this case, the trustee may select the notes by lot, pro rata or by any other method the trustee considers fair and appropriate. If a portion of a holder's notes is selected for partial redemption and the holder converts a portion of the notes, the converted portion will be deemed to be part of the portion of notes selected for redemption. PURCHASE OF NOTES BY AFG AT THE OPTION OF THE HOLDER -34- On the purchase dates of June 2, 2008, June 2, 2013, June 2, 2018, June 2, 2023, and June 2, 2028, we may, at the option of the holder, be required to purchase, at the purchase price set forth below plus accrued and unpaid cash interest, if any, to the purchase date, all or a portion of such holder's outstanding notes for which a written purchase notice has been properly delivered by the holder and not withdrawn, subject to certain additional conditions. Holders may submit their written purchase notice to the paying agent at any time from the opening of business on the date that is 20 business days prior to such purchase date until the close of business on the business day immediately preceding such purchase date. The purchase price of a note will be: - $371.53 per note on June 2, 2008; - $452.89 per note on June 2, 2013; - $552.07 per note on June 2, 2018; - $672.97 per note on June 2, 2023; and - $820.35 per note on June 2, 2028. The above purchase prices reflect a price equal to the sum of the issue price and accrued original issue discount, if any, on such notes as of the applicable purchase date. We may, at our option, elect to pay the purchase price in cash or shares of our common stock, or any combination thereof, see "Material United States Federal Income Tax Consequences -- United States Holders -- Sale, Exchange, Conversion or Redemption of Notes." We will be required to give notice on a date not less than 20 business days prior to each purchase date to all holders at their addresses shown in the register of the registrar, and to beneficial owners as required by applicable law, stating among other things: - the amount of the purchase price; - whether we will pay the purchase price of the notes in cash or common stock or any combination thereof, specifying the percentages of each; - if we elect to pay in common stock, the calculation of the market price of the common stock; and - the procedures that holders must follow to require us to purchase their notes. The purchase notice given by each holder electing to require us to purchase notes shall state: - the certificate numbers of the holder's notes to be delivered for purchase; - the portion of the principal amount at maturity of notes to be purchased, which must be $1,000 or an integral multiple of $1,000; -35- - that the notes are to be purchased by us pursuant to the applicable provisions of the notes; and - in the event we elect, pursuant to the notice that we are required to give, to pay the purchase price in common stock, in whole or in part, but the purchase price is ultimately to be paid to the holder entirely in cash because any of the conditions to payment of the purchase price or portion of the purchase price in common stock is not satisfied prior to the close of business on the purchase date, as described below, whether the holder elects: - to withdraw the purchase notice as to some or all of the notes to which it relates; or - to receive cash in respect of the entire purchase price for all notes or portions of notes subject to such purchase notice. If the purchase price for the notes subject to the purchase notice is ultimately to be paid to a holder entirely in cash because we have not satisfied one or more of the conditions to payment of the purchase price in common stock prior to the close of business on the purchase date, a holder shall be deemed to have elected to receive cash in respect of the entire purchase price for all such notes unless such holder has properly notified us of its election to withdraw the purchase notice. Any purchase notice may be withdrawn by the holder by a written notice of withdrawal delivered to the paying agent prior to the close of business on the business day prior to the purchase date. The notice of withdrawal shall state: - the principal amount at maturity being withdrawn; - the certificate numbers of the notes being withdrawn; and - the principal amount at maturity, if any, of the notes that remain subject to the purchase notice. If we elect to pay the purchase price, in whole or in part, in shares of our common stock, the number of shares we deliver will be equal to the portion of the purchase price to be paid in common stock divided by the market price of a share of common stock. We will pay cash based on the market price for all fractional shares of common stock in the event we elect to deliver common stock in payment, in whole, or in part, of the purchase price. For a discussion of the tax treatment of a holder receiving cash, common stock or any combination thereof, see "Material United States Federal Income Tax Consequences." The market price of our common stock shall be an amount equal to the average of the sale prices of our common stock for the five-trading-day period ending on the third business day prior to the applicable purchase date, or, if such business day is not a trading day, then on the last trading day prior to such business day, appropriately adjusted to take into account any occurrence that would result in an adjustment of the conversion rate with respect to the common stock. See "-- Conversion Rights" for a description of the manner in which the sale price of our common stock is determined. Because the market price of our common stock is determined prior to the applicable purchase date, holders of notes bear the market risk with respect to the value of the common stock to be received from the date such market price is determined to such purchase date. We may pay the purchase price or -36- any portion of the purchase price in common stock only if the information necessary to calculate the market price is published in a daily newspaper of national circulation. Upon determination of the actual number of shares of common stock in accordance with the foregoing provisions, we will promptly issue a press release and publish such information on our website or through such other public medium as we may use at that time. Our right to purchase notes, in whole or in part, with common stock is subject to our satisfying various conditions, including: - listing the common stock on the principal United States securities exchange on which our common stock is then listed or, if not so listed, on Nasdaq; - the registration of the common stock under the Securities Act and the Exchange Act, if required; and - any necessary qualification or registration under applicable state securities law or the availability of an exemption from such qualification and registration. If such conditions are not satisfied with respect to a holder prior to the close of business on the purchase date, we will pay the purchase price of the notes of the holder entirely in cash. See "Material United States Federal Income Tax Consequences." We may not change the form or components or percentages of components of consideration to be paid for the notes once we have given the notice that we are required to give to holders of notes, except as described in the first sentence of this paragraph. In connection with any purchase offer, we will, if required: - comply with the provisions of Rule 13e-4, Rule l4e-1 and any other tender offer rules under the Exchange Act which may then be applicable; and - file Schedule TO or any other required schedule under the Exchange Act. Payment of the purchase price for a note for which a purchase notice has been delivered and not validly withdrawn is conditioned upon delivery of the note, together with necessary endorsements, to the paying agent at any time after delivery of the purchase notice. Payment of the purchase price for the note will be made as soon as practicable but in no event more than three business days following the later of the purchase date or the time of delivery of the note. If the paying agent holds money or securities sufficient to pay the purchase price of the note on the business day following the purchase date in accordance with the terms of the indenture, then, immediately after the purchase date, the note will cease to be outstanding and cash interest or original issue discount on such note will cease to accrue, whether or not the note is delivered to the paying agent. Thereafter, all other rights of the holder shall terminate, other than the right to receive the purchase price upon delivery of the note. No notes may be purchased for cash at the option of holders if there has occurred and is continuing an event of default with respect to the notes, other than a default in the payment of the purchase price with respect to such notes. -37- PURCHASE OF NOTES BY AFG AT THE OPTION OF THE HOLDER UPON CHANGE IN CONTROL In the event of a change in control of AFG before June 3, 2008, each holder will have the right, at the holder's option, subject to the terms and conditions of the indenture, to require us to purchase for cash all or any portion of the holder's notes. However, the principal amount at maturity submitted for purchase by a holder must be $1,000 or an integral multiple of $1,000. We will be required to purchase the notes as of a date no later than 30 business days after the occurrence of such change in control at a cash price equal to the sum of the issue price plus accrued original issue discount and accrued cash interest, if any, on such note to such date of purchase. Within 15 days after the occurrence of a change in control, we are obligated to mail to the trustee and to all holders of notes at their addresses shown in the register of the registrar and to beneficial owners as required by applicable law a notice regarding the change in control, which notice shall state, among other things: - the events causing a change in control; - the date of such change in control; - the last date on which the purchase right may be exercised; - the change in control purchase price; - the change in control purchase date; - the name and address of the paying agent and the conversion agent; - the conversion rate and any adjustments to the conversion rate resulting from such change in control; - that notes with respect to which a change in control purchase notice is given by the holder may be converted only if the change in control purchase notice has been withdrawn in accordance with the terms of the indenture; and - the procedures that holders must follow to exercise these rights. To exercise this right, the holder must deliver a written notice to the paying agent prior to the close of business on the business day prior to the change in control purchase date. The required purchase notice upon a change in control shall state: - the certificate numbers of the notes to be delivered by the holder; - the portion of the principal amount at maturity of notes to be purchased, which portion must be $1,000 or an integral multiple of $1,000; and - that we are to purchase such notes pursuant to the applicable provisions of the notes. -38- Any such change in control purchase notice may be withdrawn by the holder by a written notice of withdrawal delivered to the paying agent prior to the close of business on the business day prior to the change in control purchase date. The notice of withdrawal shall state: - the principal amount at maturity being withdrawn; - the certificate numbers of the notes being withdrawn; and - the principal amount at maturity, if any, of the notes that remain subject to a change in control purchase notice. Payment of the change in control purchase price for a note for which a change in control purchase notice has been delivered and not validly withdrawn is conditioned upon delivery of the note, together with necessary endorsements, to the paying agent at any time after the delivery of such change in control purchase notice. Payment of this change in control purchase price for such note will be made promptly following the later of the change in control purchase date or the time of delivery of such note. If the paying agent holds money sufficient to pay the change in control purchase price of the note on the business day following the change in control purchase date in accordance with the terms of the indenture, then immediately after the change in control purchase date, cash interest or original issue discount on the note will cease to accrue, whether or not the note is delivered to the paying agent. Thereafter, all other rights of the holder shall terminate, other than the right to receive the change in control purchase price upon delivery of the note. Under the indenture, a "change in control" of AFG is deemed to have occurred upon the occurrence of any of the following: - the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of our and our subsidiaries' assets, taken as a whole, to any person or group; or - the adoption of a plan relating to our liquidation or dissolution; or - the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person or group becomes the beneficial owner, directly or indirectly, of more than 50% (other than the Lindner family and their heirs, lineal descendants, legatees and legal representatives of any of the foregoing and the trustee of any bona fide trust of which one or more of the foregoing are the sole beneficiaries or the grantors thereof, unless, after giving effect to such transaction (1) our common stock ceases to be listed on a United States national securities exchange or approved for quotation on the Nasdaq National Market or any similar United States system for automated dissemination of quotations of securities prices or (2) less than 20% of the outstanding shares of our common stock remain beneficially owned by persons other than the Lindner family) of the voting power of our outstanding voting stock; or - the first day on which a majority of the members of our board of directors are not continuing directors. "Continuing directors" means any member of our board of directors who: -39- - was a member of our board of directors on the date of original issuance of the notes; or - was nominated for election to our board of directors with the approval of, or whose election to our board of directors was ratified by, at least a majority of the continuing directors who were members of our board of directors at the time of such nomination or election. The indenture does not permit our board of directors to waive our obligation to purchase notes at the option of holders in the event of a change in control. In connection with any purchase offer in the event of a change in control, we will: - comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable; and - file Schedule TO or any other required schedule under the Exchange Act. The change in control purchase feature of the notes may, in certain circumstances, make more difficult or discourage a takeover of AFG. The change in control purchase feature, however, is not the result of our knowledge of any specific effort: - to accumulate shares of common stock; - to obtain control of us by means of a merger, tender offer, solicitation or otherwise; or - part of a plan by management to adopt a series of anti-takeover provisions. Instead, the change in control purchase feature is a standard term contained in securities similar to the notes that had been marketed by the initial purchasers in previous offerings. The terms of the change in control purchase feature resulted from negotiations between the initial purchasers and us. We could, in the future, enter into certain transactions, including certain recapitalizations, that would not constitute a change in control with respect to the change in control purchase feature of the notes but that would increase the amount of our or our subsidiaries' outstanding indebtedness. No notes may be purchased at the option of holders upon a change in control if there has occurred and is continuing an event of default with respect to the notes, other than a default in the payment of the change in control purchase price with respect to the notes. EVENTS OF DEFAULT AND ACCELERATION The following are events of default under the indenture: - default in the payment of any principal amount (including accrued original issue discount) at maturity, redemption price, purchase price, or change in control purchase price due with respect to the notes, when the same become due and payable; - default in payment of any interest under the notes, which default continues for 30 days; -40- - our or the guarantor's failure to comply with any of our or the guarantor's other agreements in the notes or the indenture upon our and the guarantor's receipt of notice of such default from the trustee or our, the guarantor's and the trustee's receipt of notice of such default from holders of not less than 25% in aggregate principal amount at maturity of the notes, and our failure to cure (or obtain a waiver of) such default within 60 days after we receive such notice; - default in the payment of principal when due or resulting in acceleration of other indebtedness of ours for borrowed money where the aggregate principal amount with respect to which the default or acceleration has occurred exceeds $10 million, and such acceleration has not been rescinded or annulled within a period of 10 days after written notice to us and the guarantor by the trustee or to us, the guarantor and the trustee by the holders of at least 25% in principal amount at maturity of the notes; - certain events of bankruptcy, insolvency or reorganization affecting us or the guarantor; or - except as permitted under the indenture, the guarantee is held in any final, non-appealable judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or the guarantor, or any person acting on behalf of the guarantor, denies or disaffirms its obligations under the guarantee. If an event of default shall have happened and be continuing, either the trustee or the holders of not less than 25% in aggregate principal amount at maturity of the notes then outstanding may declare the issue price of the notes plus the original issue discount on the notes accrued through the date of such declaration, and any accrued and unpaid cash interest through the date of such declaration, to be immediately due and payable. In the case of certain events of bankruptcy or insolvency involving us or the guarantor, the issue price of the notes plus the original issue discount accrued thereon, together with any accrued and unpaid cash interest through the occurrence of such event, shall automatically become and be immediately due and payable. MERGERS AND SALES OF ASSETS The indenture provides that we may not consolidate with or merge into any person or convey, transfer or lease our properties and assets substantially as an entity to another person unless: - the resulting, surviving or transferee person is a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia, and such corporation (if other than us) assumes all our obligations under the notes and the indenture; - after giving effect to the transaction no event of default, and no event that, after notice or passage of time, would become an event of default, has occurred and is continuing; and - other conditions described in the indenture are met. Upon the assumption of our obligations by such corporation in such circumstances, subject to certain exceptions, we shall be discharged from all obligations under the notes and the indenture. Although such transactions are permitted under the indenture, certain of the foregoing transactions occurring could constitute a change in control of AFG, permitting each holder to require us to purchase the notes of such holder as described above. -41- MODIFICATION The trustee, AFG and AFC may modify or amend the indenture, the notes or the guarantee with the consent of the holders of not less than a majority in aggregate principal amount at maturity of the notes then outstanding. However, the consent of the holders of each outstanding note would be required to: - alter the manner of calculation or rate of accrual of original issue discount or interest on any note or change the time of payment; - make any note payable in money or securities other than that stated in the note; - change the stated maturity of any note; - reduce the principal amount at maturity, issue price, accrued original issue discount, redemption price, purchase price or change in control purchase price with respect to any note; - make any change that adversely affects the rights of a holder to convert any note; - make any change that adversely affects the right to require us to purchase a note; - impair the right to institute suit for the enforcement of any payment with respect to the notes or the guarantee or with respect to conversion of the notes; - release the guarantor from any of its obligations under the guarantee or the indenture, except as permitted by the indenture; or - change the provisions in the indenture that relate to modifying or amending the indenture. Without the consent of any holder of notes, the trustee and we may enter into supplemental indentures for any of the following purposes: - to qualify or maintain the qualification of the Indenture under the Trust Indenture Act; - to evidence a successor to us or the guarantor and the assumption by that successor of our obligations or the obligations of the guarantor under the indenture and the notes and the guarantee, as the case may be; - to add to our covenants or the covenants of the guarantor for the benefit of the holders of the notes or to surrender any right or power conferred upon us or the guarantor; - to secure our obligations in respect of the notes or the obligations of the guarantor in respect of the guarantee; - if permitted by the indenture, to release the guarantor from its obligations under the guarantee and the indenture; -42- - to cure any ambiguity or inconsistency in the indenture; or - to make any change that does not adversely affect the rights of any holder of the notes. The holders of a majority in principal amount at maturity of the outstanding notes may, on behalf of all the holders of all notes: - waive compliance by us or the guarantor with restrictive provisions of the indenture, as detailed in the indenture; or - waive any past default under the indenture and its consequences, except a default in the payment of the principal amount at maturity, issue price, accrued and unpaid interest, accrued original issue discount, redemption price, purchase price or change in control purchase price or obligation to deliver common stock upon conversion with respect to any note or in respect of any provision which under the indenture cannot be modified or amended without the consent of the holder of each outstanding note affected. DISCHARGE OF THE INDENTURE We may satisfy and discharge our obligations under the indenture by delivering to the trustee for cancellation all outstanding notes or by depositing with the trustee, the paying agent or the conversion agent, if applicable, after the notes have become due and payable, whether at stated maturity or any redemption date, or any purchase date, or a change in control purchase date, or upon conversion or otherwise, cash or shares of common stock (as applicable under the terms of the indenture) sufficient to pay all of the outstanding notes and paying all other sums payable under the indenture. CALCULATIONS IN RESPECT OF NOTES We will be responsible for making all calculations called for under the notes. These calculations include, but are not limited to, determination of the average market prices of the notes and of our common stock and amounts of contingent cash interest payments, if any, payable on the notes. We will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on holders of notes. We will provide a schedule of our calculations to the trustee, and the trustee is entitled to rely upon the accuracy of our calculations without independent verification. LIMITATIONS OF CLAIMS IN BANKRUPTCY If a bankruptcy proceeding is commenced in respect of AFG, the claim of a holder of a note is, under title 11 of the United States Code, limited to the issue price of the note plus that portion of the original issue discount, together with any unpaid cash interest or contingent cash interest, that has accrued from the date of issue to the commencement of the proceeding. GOVERNING LAW The indenture and the notes will be governed by, and construed in accordance with, the law of the State of New York. -43- INFORMATION CONCERNING THE TRUSTEE U.S. Bank National Association, a national banking association, will be the trustee, registrar, paying agent and conversion agent under the indenture for the notes. U.S. Bank serves in the same capacities with respect to other outstanding debt of AFG and its subsidiaries. In addition, U.S. Bank is a lender under AFC's multi-bank credit line. BOOK-ENTRY SYSTEM The notes will only be issued in the form of global securities without coupons held in fully registered book-entry form. DTC or its nominee, Cede & Co., will be the sole registered holder of the notes for all purposes under the indenture. Owners of beneficial interests in the notes represented by the global securities will hold their interests pursuant to the procedures and practices of DTC. As a result, beneficial interests in any such securities will be shown on, and may only be transferred through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for certificated securities, except in limited circumstances. Owners of beneficial interests must exercise any rights in respect of their interests, including any right to convert or require purchase of their interests in the notes, in accordance with the procedures and practices of DTC. Beneficial owners will not be holders and will not be entitled to any rights under the global securities or the indenture. AFG, AFC and the trustee, and any of their respective agents, may treat DTC as the sole holder and registered owner of the global securities. EXCHANGE OF GLOBAL SECURITIES Notes represented by a global security will be exchangeable for certificated securities with the same terms only if: - DTC is unwilling or unable to continue as depositary or if DTC ceases to be a clearing agency registered under the Exchange Act and a successor depositary is not appointed by us within 90 days; - we decide to discontinue use of the system of book-entry transfer through DTC (or any successor depositary); or - a default under the indenture occurs and is continuing. DTC has advised us as follows: DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" 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 facilitates the settlement of transactions among its participants through electronic computerized book-entry changes in participants' accounts, eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers, including the initial purchasers, banks, trust companies, clearing corporations and other organizations, some of whom and/or their representatives, own DTC. Access to DTC's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. REGISTRATION RIGHTS -44- When we issued the notes, we and AFC entered into a registration rights agreement with the initial purchasers pursuant to which we will, at our expense, for the benefit of the holders, file with the SEC a shelf registration statement covering resale of the notes and the shares of our common stock issued upon conversion of the notes within 90 days after the first date of original issuance of the notes. We agreed to use reasonable best efforts to cause the shelf registration statement to become effective within 180 days of such first date of original issuance, and to keep a shelf registration statement effective until the earlier of (1) the sale pursuant to the shelf registration statement of all the notes and the shares of common stock issuable upon conversion of the notes and (2) the expiration of the holding period applicable to such securities held by persons that are not affiliates of AFG under Rule 144(k) under the Securities Act, or any successor provision, subject to certain permitted exceptions. We will be permitted to suspend the use of a prospectus that is part of a shelf registration statement under certain circumstances relating to corporate developments, public filings with the SEC and similar events for a period not to exceed 30 days in any three- month period and not to exceed an aggregate of 60 days in any 12-month period. In the registration rights agreement, we and AFC have agreed to pay predetermined liquidated damages as described herein ("liquidated damages") to holders of the notes and holders of shares of common stock issuable upon conversion of the notes if a shelf registration statement is not timely filed or made effective or if the prospectus is unavailable for the periods in excess of those permitted above. Such liquidated damages shall accrue until such failure to file or become effective or unavailability is cured, (i) in respect of any notes, at a rate per year equal to 0.25% for the first 90 day period after the occurrence of such event and 0.5% thereafter of the applicable principal amount (as defined below) thereof and, (ii) in respect of any shares of common stock issued upon conversion at a rate per year equal to 0.25% for the first 90 day period and 0.5% thereafter of the then applicable conversion price (as defined below). So long as the failure to file or become effective or unavailability continues, we and AFC will pay liquidated damages in cash on June 2 and December 2 of each year to the holders of record of the notes or shares of common stock on the immediately preceding May 18 or November 17. When such registration default is cured, accrued and unpaid liquidated damages will be paid in cash to the record holder as of the date of such cure. A holder who sells notes and shares of common stock issued upon conversion of the notes pursuant to the shelf registration statement generally will be required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers and be bound by certain provisions of the registration rights agreement that are applicable to such holder, including certain indemnification provisions. We will pay all expenses of a shelf registration statement, provide to each registered holder copies of such prospectus, notify each registered holder when the shelf registration statement has become effective and take certain other actions as are required to permit, subject to the foregoing, unrestricted resales of the notes and the shares of common stock issued upon conversion of the notes. The term "applicable principal amount" means, as of any date of determination, with respect to each $1,000 principal amount at maturity of notes, the sum of the initial issue price of such notes plus accrued original issue discount and any accrued cash interest with respect to such notes through such date of determination or, if no notes are then outstanding, such sum calculated as if such notes were then outstanding. The term "applicable conversion price" means, as of any date of determination, the applicable principal amount per $1,000 principal amount at maturity of notes as of such date of determination -45- divided by the conversion rate in effect as of such date of determination or, if no notes are then outstanding, the conversion rate that would be in effect were notes then outstanding. We agreed in the registration rights agreement to give notice to all holders of the filing and effectiveness of a shelf registration statement by release made to Reuters Economic Services and Bloomberg Business News or other reasonable means of distribution. We have sent holders a notice and questionnaire (the "questionnaire") to be completed and delivered by a holder to us at least five business days prior to any intended distribution of notes and our shares of common stock issuable in respect of the notes pursuant to a shelf registration statement. Holders are required to complete and deliver the questionnaire prior to the effectiveness of a shelf registration statement so that such holder may be named as a selling security holder in the related prospectus. Upon receipt of such a completed questionnaire, together with such other information as may be reasonably requested by us or AFC, from a holder following the tenth business day prior to effectiveness of the shelf registration statement, we and AFC will, as promptly as reasonably practicable, but in any event, no later than five Business Days after receipt of such completed questionnaire and any other information reasonably requested by us or AFC, file such amendments to a shelf registration statement, additional registration statements or supplements to a related prospectus as are necessary to permit such holder to deliver such prospectus to purchasers of notes and our shares of common stock issuable upon conversion of the notes, subject to our right to suspend the use of the prospectus as described above. In addition, we and AFC shall use our reasonable best efforts to cause any post-effective amendments to a shelf registration statement or additional registration statements, as the case may be, to be declared effective under the Securities Act as promptly as is reasonably practicable, but in any event by the date that is thirty days after the date such post-effective amendment or additional registration statement, as the case may be, is required by the registration rights agreement to be filed. Notwithstanding the foregoing, if a post-effective amendment or an additional registration statement is required to be filed by the rules and regulations of the SEC in order to permit resales by holders submitting questionnaires after the last date pursuant to which notes and shares of common stock issuable in respect of the notes may be included in the initial registration statement, neither we nor AFC shall be required to file more than one post-effective amendment or additional registration statement for such purpose in any thirty day period. As a result, a holder submitting a questionnaire after such date may experience additional delay prior to being able to effect resales of notes or common stock pursuant to a shelf registration statement. Any holder that does not complete and deliver a questionnaire or provide such other information as may be reasonably requested will not be named as a selling security holder in the prospectus and therefore will not be permitted to sell the notes or our shares of common stock issuable upon conversion of the notes pursuant to any shelf registration statement. To the extent that any holder of registrable securities is deemed to be an "underwriter" within the meaning of the Securities Act, such holder may be subject to certain liabilities under the federal securities laws for misstatements and omissions contained in a registration statement and any related prospectus. To the extent that any holder of registrable securities identified in any shelf registration statement is a broker-dealer, or is an affiliate of a broker-dealer that did not acquire its registrable securities in the ordinary course of its business or that at the time of its purchase of registrable securities had an agreement or understanding, directly or indirectly, with any person to distribute the registrable securities, we understand that the SEC may take the view that such holder is, under the SEC's interpretations, an "underwriter" within the meaning of the Securities Act. THIS SUMMARY OF CERTAIN PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT IS SUBJECT TO, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, ALL THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, A COPY OF WHICH IS AVAILABLE UPON REQUEST TO US. -46- DESCRIPTION OF OUR OTHER HOLDING COMPANY INDEBTEDNESS AFG 7.125% NOTES DUE 2007 AND 2009 In December 1997 and April 1999, we issued 10-year 7.125% notes. Interest is payable semi-annually with principal due at maturity. There were $79.6 million in such debentures due December 2007 and $302.9 million (face amount) due April 2009 outstanding at March 31, 2003. The notes are guaranteed by AFC. The guarantee of AFC in respect of the notes offered hereby will rank pari passu with AFC's guarantee of the 7.125% notes. See "Description of Notes - -- Notes Guarantee." AFC REVOLVING LINE OF CREDIT We may borrow up to $280 million under AFC's unsecured, multi-bank credit line. The bank line consists of two facilities: a 364-day revolving facility, extendable annually, for one-third of the total line and a three-year revolving facility for the remaining two-thirds. Amounts borrowed bear interest at rates ranging from 1.25% to 2.25% over LIBOR based on AFG's credit rating. The facilities mature November 25, 2005. Both AFG and AFC Holding Co. are guarantors under the bank line. The bank line was repaid in June 2003 from the proceeds from sale of the notes. OTHER HOLDING COMPANY INDEBTEDNESS At March 31, 2003, there were $10.7 million face amount of American Premier Underwriters' 10.875% Subordinated Notes Due 2011 outstanding. These notes pay interest semi-annually with principal due at maturity. AFC had $8.2 million in miscellaneous notes payable outstanding at March 31, 2003. Interest charges on these notes currently range from 6.5% to 9%. -47- DESCRIPTION OF OUR CAPITAL STOCK The following is a summary of the provisions of Ohio General Corporation Law and our Articles of Incorporation and Regulations which govern the terms of our common stock. COMMON STOCK We are incorporated under the laws of the State of Ohio. The total number of authorized shares of common stock is 200,000,000. Holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of common stock have the right to cumulate their votes in the election of directors but are not entitled to any preemptive rights. Subject to restrictions under agreements related to our indebtedness and to preferences which may be granted to holders of preferred stock, holders of common stock are entitled to the share of such dividends as board of directors, in its discretion, may validly declare from funds legally available. In the event of liquidation, each outstanding share of common stock entitles its holder to participate ratably in the assets remaining after the payment of liabilities and any preferred stock liquidation preferences. As of May 31, 2003, there were 69,596,409 shares of common stock issued and outstanding, including 1,361,711 shares held by a subsidiary for distribution to certain creditors. Shares of common stock carry no conversion subscription rights and are not subject to redemption. All outstanding shares of common stock are, and any shares of common stock issued upon conversion of any convertible securities will be, fully paid and nonassessable. The affirmative vote of the holders of a majority of the outstanding shares of common stock is required to amend the Articles of Incorporation and to approve mergers, reorganizations, share exchanges and similar transactions. We act as our own transfer agent and registrar. PREFERRED STOCK Our Articles of Incorporation authorize 12,500,000 shares of voting preferred stock and 12,500,000 of nonvoting preferred stock which may be issued from time to time in series that have been designated preferences, rights, qualifications and limitations that the board of directors, in its sole discretion, may determine no shares hereby issued. The board of directors can give preferred stock both voting and conversion rights which would affect the voting power and equity of holders of common stock. Preferred stock could also have preference to common stock with respect to dividend and liquidation rights. The preferred stock could have the effect of acting as an anti-takeover device to prevent a change of control of AFG. No shares of preferred stock have been issued. -48- MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES GENERAL The following is a summary of certain material United States federal income tax consequences relevant to holders of the notes and, where noted, common stock issuable upon conversion or repurchase of the notes. Our special tax counsel, Akin Gump Strauss Hauer & Feld LLP has delivered an opinion to us regarding many of these issues and has also rendered an opinion that this discussion of "Material United States Federal Income Tax Consequences" is true, correct and complete in all material respects. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), administrative pronouncements, judicial decisions and existing and proposed Treasury regulations now in effect, all of which are subject to change (possibly with retroactive effect) or differing interpretations. The discussion below deals only with notes and common stock held as capital assets and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, regulated investment companies, dealers in securities or currencies, traders in securities that elect to use a mark to market system of tax accounting for their securities holdings, partnerships or other entities classified as partnerships for United States federal income tax purposes, tax-exempt entities, persons holding notes in a tax-deferred or tax-advantaged account, persons who hold the notes whose functional currency is not the United States dollar or persons holding notes as a hedge against currency risks, as a position in a "straddle" or as part of a "hedge," "conversion" or other risk-reduction transaction for tax purposes. It also is primarily concerned with original purchasers of notes who acquire the notes at the issue price (as defined below). Persons considering the purchase of the notes should consult their own tax advisors concerning the application of the United States federal income tax laws to their particular situations as well as any consequences of the purchase, ownership and disposition of the notes or common stock arising under the laws of any state, local, foreign or other taxing jurisdiction. We do not address all of the tax consequences that may be relevant to a holder of notes. In particular, we do not address: - the United States federal income tax consequences to shareholders in, or partners or beneficiaries of, an entity that is a holder of notes or common stock; - the United States federal estate, gift or alternative minimum tax consequences of the purchase, ownership or disposition of notes or common stock; and - any state, local or foreign tax consequences of the purchase, ownership or disposition of notes or common stock. No statutory or judicial authority directly addresses the treatment of all aspects of the notes for United States federal income tax purposes. The IRS has recently published a Revenue Ruling with respect to instruments similar to the notes. This Revenue Ruling supports certain aspects of the treatment described below. No ruling has been or is expected to be sought from the IRS with respect to the United States federal income tax consequences of the issues that are not addressed in the published Revenue Ruling. The IRS would not be precluded from taking contrary positions as to such issues. As a result, no assurance can be given that the IRS or a court will agree with all of the tax characterizations and the tax consequences described below. -49- WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND COMMON STOCK IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES, 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. CLASSIFICATION OF THE NOTES The notes will be treated as indebtedness for United States federal income tax purposes subject to the contingent debt regulations. Pursuant to the terms of the indenture, we and every holder agree (in the absence of administrative pronouncement or judicial ruling to the contrary), for United States federal income tax purposes, to treat the notes as debt instruments that are subject to the contingent debt regulations and to be bound by our application of the contingent debt regulations to the notes, including generally our determination of the rate at which interest will be deemed to accrue on the notes and the related "projected payment schedule" determined by us as described below. Notwithstanding the issuance of the previously referenced Revenue Ruling, the proper application of the contingent debt regulations to the notes is not entirely certain, and no assurance can be given that the IRS will not assert that the notes should be treated differently. A different treatment from that described below could affect the amount, timing, source and character of income, gain or loss with respect to an investment in the notes. In particular, a holder might be required to accrue interest income at a higher or lower rate, might not recognize income, gain or loss upon conversion of a note into common stock, and might recognize capital gain or loss upon a taxable disposition of a note. Holders should consult their tax advisors concerning the tax treatment of holding a note. The remainder of this discussion assumes that the notes are treated as indebtedness subject to the contingent debt regulations. UNITED STATES HOLDERS For purposes of this discussion, a United States Holder is a beneficial owner of the notes or common stock who or which is: - a citizen or individual resident of the United States for United States federal income tax purposes; - a corporation, including any entity treated as a corporation for United States federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; - an estate if its income is subject to United States federal income taxation regardless of its source; or - a trust if (1) a United States court can exercise primary supervision over its administration and (2) one or more United States persons have the authority to control all of its substantial decisions. Notwithstanding the preceding sentence, certain trusts in existence on August 20, 1996 and treated as United States persons prior to such date that elect to be treated as domestic trusts under the applicable -50- Treasury regulations will also be treated as United States Holders if they are beneficial owners of the notes or common stock. Accrual of Interest on the Notes Pursuant to the contingent debt regulations, United States Holders of the notes will be required to accrue interest income on the notes on a constant-yield basis, as described below, regardless of whether such holders use the cash or accrual method of tax accounting. Accordingly, United States Holders will be required to include interest in income each year in excess of the accruals on the notes for non-tax purposes and in excess of any interest payments actually received in that year. The contingent debt regulations provide that a United States Holder must accrue an amount of ordinary interest income, as original issue discount for United States federal income tax purposes, for each accrual period prior to and including the maturity date of the notes that equals: 1. the product of (i) the adjusted issue price (as defined below) of the notes as of the beginning of the accrual period and (ii) the comparable yield to maturity (as defined below) of the notes, adjusted for the length of the accrual period; 2. divided by the number of days in the accrual period; and 3. multiplied by the number of days during the accrual period that the United States Holder held the notes. A note's issue price is the first price at which a substantial amount of the notes is sold to the public, excluding sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. The adjusted issue price of a note is its issue price increased by any interest income previously accrued, determined without regard to any adjustments to interest accruals described below, and decreased by the projected amount of any payments previously made with respect to the notes. The term "comparable yield" means the annual yield we would pay, as of the initial issue date of the notes, on a fixed-rate, nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the notes. We intend to take the position that the comparable yield for the notes is 9.265%, compounded semiannually. The precise manner of calculating the comparable yield is not entirely clear and is more susceptible to challenge if the notes are marketed or sold in substantial part to persons for whom the inclusion of interest is not expected to have substantial effect on their United States federal tax liability. The contingent debt regulations require that we provide to United States Holders, solely for United States federal income tax purposes, a schedule of the projected amounts of payments (to which we refer as "projected payments") on the notes. This schedule must produce a yield to maturity that equals the comparable yield. The projected payment schedule includes estimates for certain contingent interest payments and an estimate for a payment at maturity taking into account the conversion feature. In this connection, the fair market value of any common stock (and cash, if any) received by a holder upon conversion will be treated as a contingent payment. The comparable yield and the projected payment schedule will be set forth in the indenture. United States Holders also may obtain the projected payment schedule by submitting a written request for such information to us at: American Financial Group, Inc., One East Fourth Street, Cincinnati, Ohio, 45202. -51- For United States federal income tax purposes, a United States Holder must use the comparable yield and the projected payment schedule in the indenture in determining its interest accruals and the adjustments thereto (described below) in respect of the notes unless such United States Holder timely discloses and justifies the use of other estimates to the IRS on its federal income tax return for the year including its acquisition date of the note. A United States Holder that determines its own comparable yield or projected payment schedule also must establish that our comparable yield or projected payment schedule is unreasonable. The comparable yield and the projected payment schedule are not used for any purpose other than to determine a holder's interest accruals and adjustments thereto in respect of the notes for United States federal income tax purposes. They do not constitute a projection or representation regarding the actual amounts payable on the notes or the value at any time of the common stock into which the notes may be converted. Adjustments to Interest Accruals on the Notes If, during any taxable year, a United States Holder of notes receives actual payments with respect to such notes that, in the aggregate, exceed the total amount of projected payments for that taxable year, the United States Holder will incur a "net positive adjustment" under the contingent debt regulations equal to the amount of such excess. The United States Holder will treat a "net positive adjustment" as additional interest income. For this purpose, the payments in a taxable year include the fair market value of property (including common stock received upon conversion or repurchase of the notes) received in that year. If a United States Holder receives in a taxable year actual payments with respect to the notes that, in the aggregate, are less than the amount of projected payments for that taxable year, the United States Holder will incur a "net negative adjustment" under the contingent debt regulations equal to the amount of such deficit. This negative adjustment will (a) reduce the United States Holder's interest income on the notes for that taxable year, and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of the United States Holder's interest income on the notes during prior taxable years, reduced to the extent such interest was offset by prior net negative adjustments. Any negative -52- adjustment in excess of the amounts described in (a) and (b) will be carried forward to offset future interest income with respect to the notes or to reduce the amount realized on a sale, exchange, conversion or retirement of the notes. A net negative adjustment is not subject to the two percent floor limitation imposed on miscellaneous deductions under Section 67 of the Code. If a United States holder purchases the notes at a discount or premium to the adjusted issue price from an existing holder of the notes, the discount will be treated as a positive adjustment and the premium will be treated as a negative adjustment. The United States holder must reasonably allocate the adjustment to daily portions of interest or projected payments over the remaining term of the notes. Holders should consult their tax advisors regarding those allocations. Sale, Exchange, Conversion or Redemption of Notes Generally, the sale or exchange of a note or the redemption of a note for cash will result in taxable gain or loss to a United States Holder. As described above, our calculation of the projected payment schedule for the notes, which generally is binding on holders of notes, includes the receipt of stock upon conversion as a contingent payment with respect to the notes. Accordingly, we will treat the receipt of common stock by a United States Holder upon (a) the conversion of a note or (b) a United States Holder's exercise of a put right that we elect to pay in common stock as a payment under the contingent debt regulations. So viewed, a conversion of a note into common stock, or a repurchase where we elect to pay in common stock, also will result in taxable gain or loss to a United States Holder. The amount of gain or loss on a sale, exchange, conversion or redemption will be equal to the difference between (a) the amount of cash plus the fair market value of any other property received by the United States Holder, including the fair market value of any common stock received, and (b) the United States Holder's adjusted tax basis in the note. A United States Holder's adjusted tax basis in a note generally will be equal to the United States Holder's original purchase price for the note, increased by any interest income previously accrued by the United States Holder (determined without regard to any adjustments to interest accruals described above) and decreased by the amount of any projected payments that previously have been scheduled to be made in respect of the notes (without regard to the actual amount paid). Gain recognized upon a sale, exchange, conversion or redemption of a note generally will be treated as ordinary interest income; any loss will be ordinary loss to the extent of interest previously included in income, and thereafter capital loss (which will be long-term if the note is held for more than one year). The deductibility of capital losses is subject to limitations. A United States Holder's tax basis in common stock received upon a conversion of a note, or upon a United States Holder's exercise of a put right that we elect to pay in common stock, will equal the then current fair market value of such common stock. The United States Holder's holding period for the common stock received will commence on the day immediately following the date of conversion or repurchase. Constructive Dividends to Holders of Notes If at any time we were to make a distribution of property to our stockholders that would be taxable to the stockholders as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution provisions of the notes, the conversion rate of the notes were increased, such increase might be deemed to be the payment of a taxable dividend to holders of the notes to the extent of current or accumulated earnings and profits as of the year of distribution of the property. For example, an increase in the conversion rate in the event of distributions of our evidences of indebtedness or our assets or an increase in the event of an extraordinary cash dividend generally would result in deemed dividend treatment to holders of the notes, but an increase in the event of stock dividends or the distribution of rights to subscribe for common stock generally would not. -53- Dividends on Common Stock If we make distributions on our common stock, the distributions generally will be treated as dividends to a United States Holder of our common stock to the extent of our current or accumulated earnings and profits as of the year of distribution, then as tax-free return of capital to the extent of the United States Holder's adjusted tax basis in the common stock and thereafter as gain from the sale or exchange of that stock. Under the Jobs and Growth Tax Reconciliation Act of 2003, dividends may be taxable to United States Holders who are individuals at a reduced rate of 15 percent (or, in some cases, a lower rate) through 2008, if holding period requirements are satisfied. Disposition of Common Stock Upon the disposition of common stock received on conversion or repurchase of a note, a United States Holder generally will recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale or exchange and (ii) the United States Holder's adjusted tax basis in the common stock. That capital gain or loss will be long-term if the United States Holder's holding period is more than one year. The deductibility of capital losses is subject to limitations. NON-UNITED STATES HOLDERS As used herein, the term "Non-United States Holder" means a beneficial holder of a note or common stock that is, for United States federal income tax purposes: - an individual who is classified as a nonresident alien for United States federal income tax purposes; - a foreign corporation; or - an estate or trust that is not a United States estate or trust, as described above. Notes Payments of interest on the notes made to a Non-United States Holder, including a payment in common stock pursuant to a conversion, and any gain realized on a sale or exchange of the notes, will be exempt from United States income or withholding tax, provided that: (i) such Non-United States Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of our stock entitled to vote, is not a controlled foreign corporation related, directly or indirectly, to us through stock ownership, and is not a bank receiving certain types of interest; (ii) the statement requirement set forth in section 871(b) or section 881(c) of the Code has been fulfilled with respect to the beneficial owner, as discussed below; (iii) such payments and gain are not effectively connected with the conduct by such Non-United States Holder of a trade or business in the United States; (iv) our common stock continues to be actively traded within the meaning of section 871(h)(4)(C)(v)(I) of the Code (which, for these purposes and subject to certain exceptions, includes trading on the New York Stock Exchange); and (v) we are not and have not been a United States real property holding corporation ("USRPHC"). We believe that we are not and have never been, nor do we anticipate becoming, a USRPHC. However, if a Non-United States Holder of a note were deemed to have received a constructive dividend (see "United -54- States Holders -- Constructive Dividends to Holders of Notes" above), the Non-United States Holder generally would be subject to United States withholding tax at a 30% rate, subject to reduction by an applicable treaty, on the taxable amount of such dividend. Moreover, absent additional guidance from the IRS, we intend to treat the receipt by a Non-United States Holder of liquidated damages as described under "Description of Notes -- Registration Rights" and "Material United States Federal Income Tax Consequences -- Accrual of Interest on the Notes" as subject to United States withholding tax, subject to reduction by an applicable treaty. The statement requirement referred to in the preceding paragraph will be fulfilled if the beneficial owner of a note certifies on IRS Form W-8BEN, under penalties of perjury, that it is not a United States person and provides its name and address or otherwise satisfies applicable documentation requirements. Common Stock Dividends paid to a Non-United States Holder of common stock generally will be subject to withholding tax at a 30% rate subject to reduction (a) by an applicable treaty if the Non-United States Holder provides an IRS Form W-8BEN certifying that it is entitled to such treaty benefits or (b) upon the receipt of a Form W-8ECI from a Non-United States Holder claiming that the payments are effectively connected with the conduct of a United States trade or business. A Non-United States Holder generally will not be subject to United States federal income tax on gain realized on the sale or exchange of common stock unless (a) the gain is effectively connected with the conduct of a trade or business of the Non-United States Holder, (b) in the case of a Non-United States Holder who is a nonresident alien individual, the individual is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (c) we are or have been a USRPHC. We believe that we are not and have never been, nor do we anticipate becoming, a USRPHC. Income Effectively Connected with a United States Trade or Business If a Non-United States Holder of notes or common stock is engaged in a trade or business in the United States, and if interest on the notes, dividends on the stock, or gain realized on the sale or exchange of the notes or common stock is effectively connected with the conduct of such trade or business, the Non-United States Holder, although exempt from the withholding tax discussed in the preceding paragraphs, will generally be subject to regular United States federal income tax on interest, dividends and any gain realized on the sale or exchange (and, with respect to the notes, conversion of the notes into common stock) of the notes or common stock in the same manner as if it were a United States Holder. Such a Non-United States Holder would be required to provide to the withholding agent a properly executed IRS Form W-8ECI (or successor form) in order to claim an exemption from withholding tax. In addition, if such a Non-United States Holder is a foreign corporation, such holder may be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. BACKUP WITHHOLDING TAX AND INFORMATION REPORTING Payments of principal, premium, if any, and interest (including original issue discount and a payment in common stock pursuant to a conversion of a note) on the notes, payments on the common stock, and the proceeds of dispositions of the notes or common stock may be subject to information reporting and United States federal backup withholding tax if the United States Holder thereof fails to -55- supply an accurate taxpayer identification number or otherwise fails to comply with applicable United States information reporting or certification requirements. A Non-United States Holder may be subject to United States backup withholding tax on payments on the notes or common stock and the proceeds from a sale or other disposition of the notes or common stock unless the Non-United States Holder complies with certification procedures to establish that it is not a United States person. Any amounts so withheld will be allowed as a credit against a United States Holder's United States federal income tax liability and may entitle a holder to a refund, provided the required information is timely furnished to the IRS. ERISA MATTERS We have insurance company subsidiaries that provide services to many employee benefit plans. We and any of our direct or indirect subsidiaries may each be considered a "party in interest" within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), and a "disqualified person" under corresponding provisions of the Internal Revenue Code of 1986 (the "Code"), relating to many employee benefit plans. "Prohibited Transactions" within the meaning of ERISA and the Code may result if any offered securities are acquired by an employee benefit plan as to which we or any of our direct or indirect subsidiaries is a party in interest, unless such offered securities are acquired pursuant to an applicable exemption. Accordingly, each purchaser and each transferee using the assets of a plan subject to ERISA or Section 4975 of the Code to acquire the offered securities will be deemed to have represented that the acquisition and continued holding of the offered securities will be covered by a Department of Labor prohibited transaction class exemption. Any employee benefit plan or other entity to which such provisions of ERISA or the Code apply proposing to acquire the offered securities should consult with its legal counsel. SELLING SECURITYHOLDERS The notes originally were issued by us and sold by Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC and Credit Suisse First Boston LLC, as the initial purchasers, in transactions exempt from the registration requirements of the Securities Act of 1933 to persons reasonably believed by the initial purchasers to be qualified institutional buyers. Selling securityholders, including their transferees, pledges or donees or their successors, may from time to time offer and sell any or all of the notes and the common stock into which the notes are convertible pursuant to this prospectus. The selling securityholders may offer all, some or none of the notes and the common stock. The table below sets forth the name of each selling securityholder, the principal amounts of notes that may be offered by each selling securityholder under this prospectus and the number of shares of common stock into which the notes are convertible. The information is based on information provided to us by or on behalf of the selling securityholders on or prior to ________ __, 2003. The selling securityholders identified below may have sold, transferred or otherwise disposed of all or a portion of their notes or common stock since the date on which they provided this information in transactions exempt from the registration requirements of the Securities Act. Information about the selling securityholders may change from time to time. Any changed information will be set forth in prospectus supplements or post-effective amendments, as required. Because the selling securityholders may offer all or some portion of the notes or the common stock into which the notes are convertible, we cannot estimate the amount of notes or common stock that may be held by the selling securityholders upon the completion of any sales. For information on the procedure for sales by selling securityholders, read the disclosure under the heading "Plan of Distribution" below. -56-
Principal Amount Number of Percentage of Notes Shares of Number of Shares of Common Beneficially Percentage of Common Stock of Common Stock Stock Name of Selling Owned That May Be Notes Beneficially That May Be Outstanding Securityholder Sold Outstanding Owned(2) Sold(3)(4) (5) - ------------------- ----------------- ------------- ------------ ---------------- ----------- Bear, Stearns & $ 5,000,000 *% 0 57,508 *% Co. Inc. B.G.I. Global 296,000 * 0 3,404 * Investors Boston Safe 6,000,000 * 0 69,009 * Deposit and Trust Company Forest Fulcrum 728,000 * 0 8,373 * Fund L.L.P. Forest Global 3,600,000 * 0 41,405 * Convertible Fund Series A-5 Forest 432,000 * 0 4,968 * Multi-Strategy Master Fund SPC, on behalf of Series F Multi-Strategy Segregated Portfolio Gasner Investors 2,800,000 * 0 32,204 * Holdings Ltd. KBC Convertible 15,831,200 3.1 0 182,084 * Arbitrage Fund KBC Convertible 1,439,200 * 0 16,553 * Mac 28 Ltd. Lyxor Master Fund 1,584,000 * 0 18,218 * Melody IAM Ltd. 719,000 * 0 8,269 * Nomura Securities 12,000,000 2.3 0 138,019 * International Inc. Peoples Benefit 10,500,000 * 0 120,766 * Life Insurance Company RBC Alternative 280,000 * 0 3,220 * Assets LP Relay 11 Holdings 144,000 * 0 1,656 *
-57- Holdings SAC Capital 1,300,000 * 100 14,952 * Associates, LLC St. Albans 10,500,000 * 0 120,766 * Partners Ltd. Sphinx 72,000 * 0 828 * Convertible Arbitrage White River 5,000,000 * 0 57,508 * Securities LLC Xavex-Convertible 120,000 * 0 1,380 * Arbitrage 4 Fund Zurich Master 464,000 * 0 5,336 * Hedge Fund Total ========= ============= ============ ================ ===========
- ------------------- * Less than 1% (1) Also includes any sale of the notes and the underlying common stock by pledgees, donees, transferees or other successors in interest that receive such securities by pledge, gift, distribution or other non-sale related transfer from the named selling securityholders. Information about other selling securityholders will be set forth in future prospectus supplements or in other documents that we file from time to time with the Securities and Exchange Commission that are incorporated by reference in the prospectus, if required. See "Where You Can Find More Information" in this prospectus. (2) Excludes common stock issuable upon conversion of the selling securityholder's notes. (3) Assumes conversion of all of the selling securityholder's notes at a conversion rate of 11.5016 shares of common stock per $1,000 aggregate principal amount of notes and a cash payment in lieu of the issuance of any fractional share interest. However, this conversion rate is subject to adjustment as described under "Description of the Notes--Conversion Rights" in the prospectus. As a result, the number of shares of common stock issuable upon conversion of the notes may increase or decrease in the future. (4) Reflects rounding down of fractional shares of common stock issuable to each selling securityholder upon conversion of the notes. -58- (5) Does not include shares of common stock issuable upon conversion of notes. None of the selling securityholders listed above has, or within the past three years had, any position, office or any material relationship with us or any of our affiliates. To the extent that any of the selling securityholders identified above are broker-dealers, they are deemed to be, under interpretations of the Securities and Exchange Commission, "underwriters" within the meaning of the Securities Act. With respect to selling securityholders that are affiliates of broker-dealers, we believe that such entities acquired their notes or underlying common stock in the ordinary course of business and, at the time of the purchase of the notes or the underlying common stock, such selling securityholders had no agreements or understandings, directly or indirectly, with any person to distribute the notes or underlying common stock. To the extent that we become aware that such entities did not acquire their notes or underlying common stock in the ordinary course of business or did have such an agreement or understanding, we will file a post-effective amendment to the registration statement of which this prospectus forms a part to designate such affiliate as an "underwriter" within the meaning of the Securities Act. Only selling securityholders identified above who beneficially own the notes set forth opposite each such selling securityholder's name in the foregoing table on the effective date of the registration statement, of which this prospectus forms a part, may sell such securities pursuant to the registration statement. Prior to any use of this prospectus in connection with an offering of the notes or the underlying common stock by any holder not identified above, this prospectus will be supplemented to set forth the name and aggregate amount of notes beneficially owned by the selling securityholder intending to sell such notes or the underlying common stock and the aggregate amount of notes or the number of shares of the underlying common stock to be offered. The prospectus, as supplemented, will also disclose whether any selling securityholder selling in connection with such prospectus has held any position or office with, has been employed by or otherwise has had a material relationship with us during the three years prior to the date of the prospectus if such information has not been disclosed herein. -59- PLAN OF DISTRIBUTION The notes and the underlying common stock are being registered to permit the resale of such securities by the holders of them from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling securityholders of the notes and common stock. We will bear the fees and expenses incurred in connection with our obligation to register the notes and the underlying common stock. These fees and expenses include registration and filing fees, printing and duplications expenses, fees and disbursements of our counsel, reasonable fees and disbursements of the trustee and its counsel and of the registrar and transfer agent for the common stock, and fees and disbursements of one firm of legal counsel for the securityholders. However, the selling securityholders will pay all underwriting discounts, commissions and agent's commissions, if any. The selling securityholders may offer and sell the notes and the common stock into which the notes are convertible from time to time in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such sales may be effected by a variety of methods, including the following: - in market transactions; - in privately negotiated transactions; - through the writing of options; - in a block trade in which a broker-dealer will attempt to sell a block of securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; - if we agree to it prior to the distribution, through one or more underwriters on a firm commitment or best-efforts basis; - through broker-dealers, which may act as agents or principals; - directly to one or more purchasers; - on the NYSE, with respect to common stock acquired upon the conversion of notes; - through agents; or - in any combination of the above or by any other legally available means. In connection with the sales of the notes and the common stock into which the notes are convertible or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the offered securities, short and deliver the notes and the common stock into which the notes are convertible to close out such short positions, or loan or pledge the notes and the common stock into which the notes are convertible to broker-dealers that in turn may sell such securities. If a material arrangement with any underwriter, broker, dealer or other agent is entered into for the sale of any notes and the common stock into which the notes are convertible through a secondary distribution or a purchase by a broker or dealer, or if other material changes are made in the plan of -60- distribution of the notes and the common stock into which the notes are convertible, a prospectus supplement will be filed, if necessary, under the Securities Act disclosing the material terms and conditions of such arrangement. The underwriter or underwriters with respect to an underwritten offering of notes and the common stock into which the notes are convertible and the other material terms and conditions of the underwriting will be set forth in a prospectus supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover of the prospectus supplement. In connection with the sale of the notes and the common stock into which the notes are convertible, underwriters will receive compensation in the form of underwriting discounts or commissions and may also receive commissions from purchasers of notes and underlying common stock for whom they may act as agent. Underwriters may sell to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters or commissions from the purchasers for whom they may act as agent. To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the notes or the underlying common stock by the selling securityholders. Selling securityholders may decide to sell only a portion of the notes or the underlying common stock offered by them pursuant to this prospectus or may decide not to sell any notes or any of the underlying common stock under this prospectus. In addition, any selling securityholder may transfer, devise or give the notes or the underlying common stock by other means not described in this prospects. Any notes or underlying common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus. The selling securityholders and any underwriters, broker-dealers or agents participating in the distribution of the notes and the common stock into which the notes are convertible may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the notes or common stock by the selling securityholders and any commissions received by any such underwriters, broker-dealers or agents may be deemed to be underwriting commissions under the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders may be subject to statutory liabilities including, but not limited to, those of Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. The selling securityholders and any other person participating in the distribution will be subject to the applicable provisions of the Exchange Act and the rules and regulations under the Exchange Act, including, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the notes and the common stock into which the notes are convertible by the selling securityholders and any other relevant person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the notes and the common stock into which the notes are convertible to engage in market-making activities with respect to the particular notes and the common stock into which the notes are convertible being distributed. All of the above may affect the marketability of the notes and the common stock into which the notes are convertible and the ability of any person or entity to engage in market-making activities with respect to the notes and the common stock into which the notes are convertible. Under the securities laws of certain states, the notes and the common stock into which the notes are convertible may be sold in those states only through registered or licensed brokers or dealers. In addition, in certain states the notes and the common stock into which the notes are convertible may not be -61- sold unless the notes and the common stock into which the notes are convertible have been registered or qualified for sale in the state or an exemption from registration or qualification is available and complied with. Each selling securityholder should consult its counsel regarding the application of the states' Blue Sky or securities and insurance securities laws in connection with sales of the notes and common stock into which the notes are convertible. We have agreed to indemnify the selling securityholders against certain civil liabilities, including certain liabilities arising under the Securities Act, and the selling securityholders will be entitled to contribution from us in connection with those liabilities. The selling securityholders will indemnify us against certain civil liabilities, including liabilities arising under the Securities Act, and will be entitled to contribution from the selling securityholders in connection with those liabilities. We will be permitted to suspend the use of a prospectus that is part of a shelf registration statement under certain circumstances relating to corporate developments, public filings with the SEC and similar events for a period not to exceed 30 days in any three- month period and not to exceed an aggregate of 60 days in any 12-month period. If the duration of such suspension exceeds any of the periods above-mentioned, we have agreed to pay liquidated damages. Please refer to the section entitled "Description of Notes--Registration Rights." LEGAL MATTERS Certain legal matters regarding the notes, the common stock into which the notes are convertible and the guarantee will be passed upon for us by Keating, Muething & Klekamp, P.L.L., Cincinnati, Ohio. Certain United States federal income taxation matters also will be passed upon for us by Akin Gump Strauss Hauer & Feld LLP, Washington, D.C. EXPERTS Ernst & Young LLP, independent auditors, have audited American Financial Corporation's and our consolidated financial statements and schedules included in the respective Annual Reports on Form 10-K for the year ended December 31, 2002, as set forth in their reports, which are incorporated by reference in this prospectus and elsewhere in the registration statement. American Financial Corporation's and our financial statements and schedules are incorporated by reference in reliance on Ernst & Young LLP's reports, given on their authority as experts in accounting and auditing. -62- 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: Securities and Exchange Commission registration fee* $ 15,360 New York Stock Exchange listing fee 2,500 Legal fees and expenses 25,000 Accounting fees and expenses 25,000 Printing and engraving expenses 50,000 Miscellaneous 132,140 ---------- TOTAL $ 250,000 ==========
- ------------------ *Actual; other expenses are estimated ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. American Financial Group, Inc. ("AFG") Ohio Revised Code, Section 1701.13(E), allows indemnification by AFG to any person made or threatened to be made a party to any proceedings, other than a proceeding by or in the right of AFG, by reason of the fact that he is or was a director, officer, employee or agent of AFG, 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 AFG 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 AFG, 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 AFG 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. AFG's Code of Regulations extends such indemnification. AFG 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 AFG and of the companies which are, directly or indirectly, more than 50% owned by AFG. 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 October 24, 1978. The insurer limit of liability under the policy is $175,000,000 in the aggregate for all losses II-1 each year subject to certain individual and aggregate deductibles. The policy contains various exclusions and reporting requirements. AFG also has entered into indemnification agreements with its executive officers and directors providing for indemnification against certain liabilities to the fullest extent permitted under Ohio law. American Financial Corporation ("AFC") Ohio Revised Code, Section 1701.13(E), allows indemnification by AFC to any person made or threatened to be made a party to any proceedings, other than a proceeding by or in the right of AFC, by reason of the fact that he is or was a director, officer, employee or agent of AFC, 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 AFC 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 AFC, 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 AFC 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. AFC's Code of Regulations extends such indemnification. Directors and officers of AFC are covered under the Directors and Officers Liability insurance discussed above that is maintained by AFG for the benefit of AFG's directors and officers and the directors and officers of the companies, including AFC, which are, directly or indirectly, more than 50% owned by AFG. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit Number Description of Document - ------- ----------------------------------------------------------------------- 3.1 Amended and Restated Articles of Incorporation of AFG (incorporated by reference to Exhibit 3(a) of AFG's Annual Report on Form 10-K for the year ended December 31, 1997) 3.2 Code of Regulations of AFG (incorporated by reference to Exhibit 3(b) to AFG's Annual Report on Form 10-K for the year ended December 31, 1997) 4.1 Indenture dated June 2, 2003, among AFG, as issuer, AFC, as guarantor, and U.S. Bank National Association, as trustee, relating to the Senior Convertible Notes due 2033 (including the form of the Senior Convertible Notes) 4.2 Registration Rights Agreement dated June 2, 2003, among AFG, AFC and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Warburg LLC and Credit Suisse First Boston LLC 5 Opinion of Keating, Muething & Klekamp, P.L.L. 8 Opinion of Akin Gump Strauss Hauer & Feld LLP as to tax matters 12 Computation of ratios of earnings to fixed charges 23.1 Consent of Keating, Muething & Klekamp, P.L.L. (contained in Exhibit 5) 23.2 Consent of Akin Gump Strauss Hauer & Feld LLP (contained in Exhibit 8) 23.3 Consent of Ernst & Young LLP 24 Powers of Attorney (contained on the signature page) 25 Form T-1 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939 of U.S. Bank National Association
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Exhibit Number Description of Document - ------- -----------------------------------------------------------------------
ITEM 17. UNDERTAKINGS. (a) Each of the undersigned Registrants hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrants' annual reports 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. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Cincinnati, State of Ohio, as of the 27th day of June, 2003. AMERICAN FINANCIAL GROUP, INC. By: Carl H. Lindner ------------------------------- Carl H. Lindner Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below preceded by an "*" hereby constitutes and appoints James C. Kennedy and Karl J. Grafe, and each of them acting individually, his or her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and to sign any and all registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and any other regulatory authority, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 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.
SIGNATURE CAPACITY DATE Carl H. Lindner Chairman of the Board of June 27, 2003 - ---------------------- Directors (Principal Executive *Carl H. Lindner Officer) Carl H. Lindner III Director June 27, 2003 - ---------------------- *Carl H. Lindner III S. Craig Lindner Director June 27, 2003 - ---------------------- *S. Craig Lindner
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SIGNATURE CAPACITY DATE James E. Evans Director June 27, 2003 - ---------------------- *James E. Evans Theodore H. Emmerich Director June 27, 2003 - ---------------------- *Theodore H. Emmerich Terry S. Jacobs Director June 27, 2003 - ---------------------- *Terry S. Jacobs William R. Martin Director June 27, 2003 - ---------------------- *William R. Martin William A. Shuzer Director June 27, 2003 - ---------------------- *William A. Shuzer William W. Verity Director June 27, 2003 - ---------------------- *William W. Verity Fred J. Runk Senior Vice President and June 27, 2003 - ---------------------- Treasurer (Principal Financial Fred J. Runk and Accounting Officer)
II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Cincinnati, State of Ohio, as of the 27th day of June, 2003. AMERICAN FINANCIAL CORPORATION By: Carl H. Lindner ------------------------ Carl H. Lindner Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below preceded by an "*"hereby constitutes and appoints James C. Kennedy and Karl J. Grafe, and each of them acting individually, his or her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and to sign any and all registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and any other regulatory authority, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 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.
SIGNATURE CAPACITY DATE Carl H. Lindner Chairman of the Board of June 27, 2003 - ---------------------- Directors (Principal Executive *Carl H. Lindner Officer) Carl H. Lindner III Director June 27, 2003 - ---------------------- *Carl H. Lindner III S. Craig Lindner Director June 27, 2003 - ---------------------- *S. Craig Lindner
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SIGNATURE CAPACITY DATE James E. Evans Director June 27, 2003 - ---------------------- *James E. Evans Fred J. Runk Senior Vice President and June 27, 2003 - ---------------------- Treasurer (Principal Financial Fred J. Runk and Accounting Officer)
II-7 EX-4.1 3 l01683aexv4w1.txt EX-4.1 INDENTURE EXHIBIT 4.1 ---------------------------------------------------------- AMERICAN FINANCIAL GROUP, INC., ISSUER, AMERICAN FINANCIAL CORPORATION, GUARANTOR AND U.S. BANK NATIONAL ASSOCIATION, TRUSTEE Senior Convertible Notes due 2033 ---------------------------------------------------------- INDENTURE Dated as of June 2, 2003 ---------------------------------------------------------- CROSS REFERENCE TABLE* TIA Section................................................ Indenture Section 310(a)(1).................................................. 7.10 (a)(2).................................................. 7.10 (a)(3).................................................. N.A. (a)(4).................................................. N.A. (b)..................................................... 7.8; 7.10 (c)..................................................... N.A. 311(a)..................................................... 7.11 (b)..................................................... 7.11 (c)..................................................... N.A. 312(a)..................................................... 2.5 (b)..................................................... 16.3 (c)..................................................... 16.3 313(a)..................................................... 7.6 (b)(1).................................................. N.A. (b)(2).................................................. 7.6 (c)..................................................... 16.2 (d)..................................................... 7.6 314(a)..................................................... 4.2; 4.3; 16.2 (b)..................................................... N.A. (c)(1).................................................. 16.4 (c)(2).................................................. 16.4 (c)(3).................................................. N.A. (d)..................................................... N.A. (e)..................................................... 16.5 (f)..................................................... N.A. 315(a)..................................................... 7.1 (b)..................................................... 7.5; 16.2 (c)..................................................... 7.1 (d)..................................................... 7.1 (e)..................................................... 6.11 316(a) (last sentence)..................................... 2.8 (a)(1)(A)............................................... 6.5 (a)(1)(B)............................................... 6.4 (a)(2).................................................. N.A. (b)..................................................... 6.7 317(a)(1).................................................. 6.8 (a)(2).................................................. 6.9 (b)..................................................... 2.4 318(a)..................................................... 16.1
N.A. means Not Applicable. - ------------------- * Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture. TABLE OF CONTENTS*
Page Article 1. DEFINITIONS AND INCORPORATION BY REFERENCE.......................................... 5 Section 1.1 Definitions...................................................................... 5 Section 1.2 Other Definitions................................................................ 10 Section 1.3 Incorporation by Reference of the TIA............................................ 11 Section 1.4 Rules of Construction............................................................ 12 Section 1.5 Acts of Holders.................................................................. 12 Article 2. THE SECURITIES...................................................................... 13 Section 2.1 Form and Dating.................................................................. 13 Section 2.2 Execution and Authentication..................................................... 14 Section 2.3 Registrar, Paying Agent, Conversion Agent and Bid Solicitation Agent............. 16 Section 2.4 Paying Agent to Hold Money and Securities in Trust............................... 16 Section 2.5 Securityholder Lists............................................................. 16 Section 2.6 Transfer and Exchange............................................................ 17 Section 2.7 Replacement Securities........................................................... 18 Section 2.8 Outstanding Securities; Determinations of Holders' Action........................ 19 Section 2.9 Temporary Securities............................................................. 20 Section 2.10 Cancellation..................................................................... 20 Section 2.11 Persons Deemed Owners............................................................ 20 Section 2.12 Global Securities................................................................ 21 Section 2.13 CUSIP Numbers.................................................................... 25 Article 3. REDEMPTION AND PURCHASES............................................................ 25 Section 3.1 Right to Redeem; Notices to Trustee.............................................. 25 Section 3.2 Selection of Securities to Be Redeemed........................................... 26 Section 3.3 Notice of Redemption............................................................. 26 Section 3.4 Effect of Notice of Redemption................................................... 27 Section 3.5 Deposit of Redemption Price...................................................... 27 Section 3.6 Securities Redeemed in Part...................................................... 28 Section 3.7 Conversion Arrangement on Call for Redemption.................................... 28 Section 3.8 Purchase of Securities at Option of the Holder................................... 28 Section 3.9 Purchase of Securities at Option of the Holder upon Change in Control............ 35 Section 3.10 Effect of Purchase Notice or Change in Control Purchase Notice................... 38 Section 3.11 Deposit of Purchase Price or Change in Control Purchase Price.................... 39 Section 3.12 Securities Purchased in Part..................................................... 39 Section 3.13 Repayment to the Company......................................................... 40
- ------------------- * Note: This Table of Content shall not, for any purpose, be deemed to be part of the Indenture. i Article 4. COVENANTS........................................................................... 40 Section 4.1 Payment of Securities............................................................ 40 Section 4.2 SEC and Other Reports............................................................ 40 Section 4.3 Compliance Certificate........................................................... 41 Section 4.4 Further Instruments and Acts..................................................... 41 Section 4.5 Maintenance of Office or Agency.................................................. 41 Section 4.6 Delivery of Certain Information.................................................. 42 Section 4.7 Covenant to Comply With Securities Laws Upon Purchase of Securities.............. 42 Section 4.8 Waiver of Compliance............................................................. 42 Article 5. SUCCESSOR CORPORATION............................................................... 42 Section 5.1 When Company May Merge or Transfer Assets....................................... 42 Article 6. DEFAULTS AND REMEDIES............................................................... 43 Section 6.1 Events of Default................................................................ 43 Section 6.2 Acceleration..................................................................... 45 Section 6.3 Other Remedies................................................................... 45 Section 6.4 Waiver of Past Defaults.......................................................... 46 Section 6.5 Control by Majority.............................................................. 46 Section 6.6 Limitation on Suits.............................................................. 46 Section 6.7 Rights of Holders to Receive Payment............................................. 47 Section 6.8 Collection Suit by Trustee....................................................... 47 Section 6.9 Trustee May File Proofs of Claim................................................. 47 Section 6.10 Priorities....................................................................... 48 Section 6.11 Undertaking for Costs............................................................ 48 Section 6.12 Waiver of Stay, Extension or Usury Laws.......................................... 48 Article 7. TRUSTEE............................................................................. 49 Section 7.1 Duties of Trustee................................................................ 49 Section 7.2 Rights of Trustee................................................................ 50 Section 7.3 Individual Rights of Trustee..................................................... 51 Section 7.4 Trustee's Disclaimer............................................................. 51 Section 7.5 Notice of Defaults............................................................... 52 Section 7.6 Reports by Trustee to Holders.................................................... 52 Section 7.7 Compensation and Indemnity....................................................... 52 Section 7.8 Replacement of Trustee........................................................... 53 Section 7.9 Successor Trustee by Merger...................................................... 54 Section 7.10 Eligibility; Disqualification.................................................... 54 Section 7.11 Preferential Collection of Claims Against Company................................ 54 Article 8. DISCHARGE OF INDENTURE.............................................................. 54 Section 8.1 Discharge of Liability on Securities.............................................. 54 Section 8.2 Repayment to the Company.......................................................... 54
ii Article 9. AMENDMENTS.......................................................................... 54 Section 9.1 Without Consent of Holders....................................................... 55 Section 9.2 With Consent of Holders.......................................................... 55 Section 9.3 Compliance with TIA.............................................................. 56 Section 9.4 Revocation and Effect of Consents, Waivers and Actions........................... 56 Section 9.5 Notation on or Exchange of Securities............................................ 56 Section 9.6 Trustee to Sign Supplemental Indentures.......................................... 57 Section 9.7 Effect of Supplemental Indentures................................................ 57 Article 10. GUARANTEE........................................................................... 57 Section 10.1 Guarantee........................................................................ 57 Section 10.2 No Subrogation................................................................... 58 Section 10.3 Consideration.................................................................... 59 Article 11. RESERVED............................................................................ 59 Section 11.1 Reserved........................................................................ 59 Article 12. CONVERSION.......................................................................... 59 Section 12.1 Conversion Privilege............................................................. 59 Section 12.2 Conversion Procedure............................................................. 60 Section 12.3 Fractional Shares................................................................ 61 Section 12.4 Taxes on Conversion.............................................................. 62 Section 12.5 Company to Provide Stock......................................................... 62 Section 12.6 Adjustment for Change in Capital Stock........................................... 62 Section 12.7 Adjustment for Rights Issue...................................................... 63 Section 12.8 Adjustment for Other Distributions............................................... 64 Section 12.9 When Adjustment May Be Deferred.................................................. 67 Section 12.10 When No Adjustment Required...................................................... 67 Section 12.11 Notice of Adjustment............................................................. 67 Section 12.12 Voluntary Increase............................................................... 67 Section 12.13 Notice of Certain Transactions................................................... 68 Section 12.14 Reorganization of Company; Special Distributions................................. 68 Section 12.15 Company Determination Final...................................................... 69 Section 12.16 Trustee's Adjustment Disclaimer.................................................. 69 Section 12.17 Simultaneous Adjustments......................................................... 69 Section 12.18 Successive Adjustments........................................................... 69 Section 12.19 Rights Issued in Respect of Common Stock Issued Upon Conversion.................. 69 Article 13. PAYMENT OF INTEREST................................................................. 70 Section 13.1 Interest Payments................................................................ 70 Section 13.2 Defaulted Interest............................................................... 70 Section 13.3 Interest Rights Preserved........................................................ 71
iii Article 14. CONTINGENT CASH INTEREST............................................................ 71 Section 14.1 Contingent Cash Interest......................................................... 71 Section 14.2 Payment of Contingent Cash Interest; Contingent Cash Interest Rights Preserved... 72 Section 14.3 Bid Solicitation Agent........................................................... 72 Article 15. TAX MATTERS......................................................................... 72 Section 15.1 Tax Treatment.................................................................... 73 Section 15.2 Comparable Yield and Projected Payment Schedule.................................. 73 Article 16. MISCELLANEOUS....................................................................... 73 Section 16.1 TIA Controls..................................................................... 74 Section 16.2 Notices.......................................................................... 74 Section 16.3 Communication by Holders with Other Holders...................................... 75 Section 16.4 Certificate and Opinion as to Conditions Precedent............................... 75 Section 16.5 Statements Required in Certificate or Opinion.................................... 76 Section 16.6 Separability Clause.............................................................. 76 Section 16.7 Rules by Trustee, Paying Agent, Conversion Agent and Registrar................... 76 Section 16.8 Calculations..................................................................... 76 Section 16.9 Legal Holidays................................................................... 76 Section 16.10 GOVERNING LAW.................................................................... 76 Section 16.11 No Recourse Against Others....................................................... 76 Section 16.12 Successors....................................................................... 77 Section 16.13 Multiple Originals............................................................... 77 Annex 1 Projected Payment Schedule Exhibit A-1 Form of Face of Global Security Exhibit A-2 Form of Certificated Security Exhibit B-1 Transfer Certificate
iv INDENTURE dated as of June 2, 2003 by and among AMERICAN FINANCIAL GROUP, INC., an Ohio corporation (the "Company"), AMERICAN FINANCIAL CORPORATION, an Ohio corporation (the "Guarantor"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the creation of an issue of Senior Convertible Notes due 2033 (collectively, the "Securities" and each, individually, a "Security") having the terms, tenor, amount and other provisions hereinafter set forth, and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when the Securities are duly executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company, in accordance with their and its terms, have been done. For value received, the Guarantor has duly authorized the execution and delivery of this Indenture to provide for the issuance of the Guarantee provided for herein. All things necessary to make this Indenture a valid agreement of, and the Guarantee of a valid obligation of, the Guarantor, in accordance with their terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1 Definitions. "144A Global Security" means a permanent Global Security in the form of the Security attached hereto as Exhibit A-1, and that is deposited with and registered in the name of the Depositary, representing Securities sold in reliance on Rule 144A under the Securities Act. "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 or cause the direction of 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. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such 5 Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Average Sale Price" means the average of the Sale Prices of the Common Stock for the shorter of: (a) 30 consecutive Trading Days ending on the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated, or (b) the period (x) commencing on the date next succeeding the first public announcement of (i) the issuance of rights, warrants or options or (ii) the distribution, in each case, in respect of which the Average Sale Price is being calculated and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not Trading Days), or (c) the period, if any, (x) commencing on the date next succeeding the Ex-Dividend Time with respect to the next preceding (i) issuance of rights, warrants or options or (ii) distribution, in each case, for which an adjustment is required by the provisions of Section 12.6, Section 12.7 or Section 12.8 hereof and (y) proceeding through the last full Trading Day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not Trading Days). In the event that the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 12.6(a), (b), (d) or (e) hereof applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the definition in the preceding sentence, "Average Sale Price" shall be calculated for such period in a manner determined by the Board of Directors of the Company to reflect the impact of such dividend, subdivision, combination or reclassification on the Sale Price of the Common Stock during such period. "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. "Board of Directors" means, with respect to any Person, the board of directors of such Person or any duly authorized committee of such board. "Business Day" means each day of the year other than a Saturday or a Sunday or other day on which banking institutions in The City of New York are required or authorized to close. "Capital Stock" for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock or other equity issued by that corporation. 6 "Certificated Securities" means any of the Securities that are in the form of the Securities attached hereto as Exhibit A-2. "Common Stock" shall mean the shares of Common Stock, no par value per share, of the Company as it exists on the date of this Indenture or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed. "Company" means the party named as the "Company" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any two Company Officers. "Contingent Cash Interest" shall mean such cash interest payable, as described in Article 14 hereof. "Corporate Trust Office" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at Corporate Trust Department, 425 Walnut Street, 6th floor, Cincinnati, Ohio, 45202, or such other address as the Trustee may designate from time to time by notice to the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Company). "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. "Debt" means with respect to the Company or the Guarantor, at any date, without duplication, obligations (other than nonrecourse obligations) for borrowed money or evidenced by bonds, debentures, notes or similar instruments. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Ex-Dividend Time" means with respect to stockholders of the Company entitled to receive rights, warrants or options or a distribution, the time immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on NYSE or such other national or regional exchange, market or automated quotation system on which the Common Stock is then listed or quoted. "Global Securities" means any of the Securities that are in the form of the Securities attached hereto as Exhibit A-1, and to the extent that such Securities are required to bear the Legend required by Section 2.6 hereof, such Securities will be in the form of a 144A Global Security. "Guarantor" means American Financial Corporation, an Ohio corporation. 7 "Holder" or "Securityholder" means a person in whose name a Security is registered on the Registrar's books. "Indenture" means this instrument, as amended or supplemented from time to time in accordance with the terms hereof, including, if applicable, the provisions of the TIA that are deemed to be a part hereof. "Issue Date" of any Security means the date on which the Security was originally issued or deemed issued as set forth on the face of the Security. "Issue Price" of any Security means, in connection with the original issuance of such Security, the initial issue price at which the Security is sold as set forth on the face of the Security. "NYSE" means the New York Stock Exchange. "Officer" means the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, any Co-President, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of the Company or the Guarantor, as applicable. "Officers' Certificate" means a certificate signed by two Officers of the Company or the Guarantor, as applicable. "Opinion of Counsel" means a written opinion of counsel, who may be an employee of or counsel for the Company or other counsel who shall be reasonably acceptable to the Trustee, that, if required by the TIA, complies with the requirements of Section 314(e) of the TIA. "Original Issue Discount" of any Security means the difference between the Issue Price and the Principal Amount at Maturity of the Security as set forth on the face of the Security, which shall accrue as set forth in the form of Security. "Person" or "person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. "Principal Amount at Maturity" of a Security means the principal amount at maturity as set forth on the face of the Security. "Record Date" means either a Regular Record Date or a Contingent Cash Interest Record Date. "Redemption Date" or "redemption date" means the date specified for redemption of the Securities in accordance with the terms of the Securities and this Indenture. "Redemption Price" or "redemption price" shall have the meaning set forth in paragraph 6 of the Securities. 8 "Responsible Officer" means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, with direct responsibility for the administration of this Indenture and also means, any other officer to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject. "Restricted Security" means a Security required to bear the restrictive legend set forth in the form of Security set forth in Exhibits A-1 and A-2 of this Indenture. "Rule 144" means Rule 144 under the Securities Act (or any successor rule having substantially similar provisions), as it may be amended from time to time. "Rule 144A" means Rule 144A under the Securities Act (or any successor rule having substantially similar provisions), as it may be amended from time to time. "Sale Price" of Capital Stock on any date means (a) the closing per share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in the composite transactions for the principal United States securities exchange on which the Capital Stock is traded or, if the Capital Stock is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated or (b) in the absence of such quotation, such price as the Company shall reasonably determine on the basis of such quotations as most accurately reflecting the price that a fully-informed buyer, acting on his own accord, would pay to a fully-informed seller, acting on his own accord in an arms-length transaction, for a share of such Capital Stock. "SEC" means the United States Securities and Exchange Commission. "Security" or "Securities" means any of the Company's Senior Convertible Notes due 2033, as amended or supplemented from time to time, issued under this Indenture. "Securityholder" or "Holder" means a person in whose name a Security is registered on the Registrar's books. "Stated Maturity", when used with respect to any Security, means the date specified in such Security as the fixed date on which an amount equal to the Principal Amount at Maturity of such Security is due and payable. "Subsidiary" means (a) a corporation, a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is, at the date of determination, directly or indirectly owned by the Company, by one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company, (b) a partnership in which the Company or a Subsidiary of the Company holds a majority interest in the equity capital or profits of such partnership, or (c) any other person (other than a corporation or a partnership) in which the Company, a Subsidiary of the Company or the Company and one or more Subsidiaries of the Company, directly or indirectly, at the date of determination, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of a majority of the directors or other governing body of such person. 9 "TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended. "Time of Determination" means the time and date of the earlier of (a) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case, to which Section 12.7 or Section 12.8 hereof applies and (b) the Ex-Dividend Time. "Trading Day" means a day during which trading in securities generally occurs on the NYSE or, if the Common Stock is not listed on the NYSE, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the National Association of Securities Dealers Automated Quotation System or, if the Common Stock is not quoted on the National Association of Securities Dealers Automated Quotation System, on the principal other market on which the Common Stock is then traded. "Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors. Section 1.2 Other Definitions.
Defined in Term Section - ---- ---------- "Applicable Five Trading Day Period" .................................. 14.1 "Act" ................................................................. 1.5(a) "beneficial owner" .................................................... 3.9(a) "Bid Solicitation Agent" .............................................. 2.3 "cash" ................................................................ 3.8(b) "Change in Control" ................................................... 3.9(a) "Change in Control Purchase Date" ..................................... 3.9(a) "Change in Control Purchase Notice" ................................... 3.9(c) "Change in Control Purchase Price" .................................... 3.9(a) "Common Stock Record Date" ............................................ 14.1 "Company Notice" ...................................................... 3.8(e) "Company Notice Date" ................................................. 3.8(c) "Contingent Cash Interest Payment Date" ............................... 14.2 "Contingent Cash Interest Record Date" ................................ 14.2 "Continuing Directors" ................................................ 3.9(a) "Conversion Agent" .................................................... 2.3 "Conversion Date" ..................................................... 12.2 "Conversion Rate" ..................................................... 12.1 "Defaulted Interest" .................................................. 13.2 "Depositary" .......................................................... 2.1(a) "DTC" ................................................................. 2.1(a)
10 "Event of Default" .................................................... 6.1 "Ex-Dividend Measurement Period" ...................................... 12.8 "Exchange Act" ........................................................ 3.8(d)) "Extraordinary Cash Dividend" ......................................... 12.8 "Guarantee" ........................................................... 10.1 "Legal Holiday" ....................................................... 16.9 "Legend" .............................................................. 2.6(f) "Market Price" ........................................................ 3.8(d)) "Notice of Default" ................................................... 6.1 "Paying Agent" ........................................................ 2.3 "Protected Purchaser" ................................................. 2.7 "Purchase Date" ....................................................... 3.8(a) "Purchase Notice" ..................................................... 3.8(a) "Purchase Price" ...................................................... 3.8(a) "QIBs" ................................................................ 2.1(a) "Registrar" ........................................................... 2.3 "Relevant Cash Dividends" ............................................. 12.8 "Relevant Value" ...................................................... 14.1 "Rights" .............................................................. 12.19 "Rights Agreement" .................................................... 12.19 "Rule 144A Information" ............................................... 4.6 "Securities Act" ...................................................... 3.8(d) "Security Market Price" ............................................... 14.1 "Semiannual Period" ................................................... 14.1 "Special Record Date" ................................................. 13.2 "Tax Original Issue Discount" ......................................... 15.2
Section 1.3 Incorporation by Reference of the TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or, as applicable, the Guarantor. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. 11 Section 1.4 Rules of Construction. Unless the context otherwise requires: (a) a defined term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with United States generally accepted accounting principles as in effect from time to time; (c) "or" is not exclusive; (d) "including" means including, without limitation; and (e) words in the singular include the plural, and words in the plural include the singular. Section 1.5 Acts of Holders. (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 (which may take the form of an electronic writing or messaging or otherwise be in accordance with customary procedures of the Depositary or the Trustee) of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing (which may be in electronic form); and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when it is hereby expressly required, to the Company and the Guarantor. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent (either of which may be in electronic form) shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company and the Guarantor, 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 electronic delivery) or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing or delivering such instrument or writing acknowledged to such officer the execution (or electronic delivery) thereof. When such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing (electronic or otherwise), or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the register maintained by the Registrar. (d) 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 12 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 or the Guarantor in reliance thereon, whether or not notation of such action is made upon such Security. (e) If the Company or the Guarantor shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company or the Guarantor, as the case may be, may, at its option, by or pursuant to a resolution of the Board of Directors of the Company or the Guarantor, as the case may be, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but neither the Company nor the Guarantor shall have any obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided, that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture within six months after the record date. ARTICLE 2. THE SECURITIES Section 2.1 Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibits A-1 and A-2 attached hereto, which are a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage (provided, that any such notation, legend or endorsement required by usage is in a form acceptable to the Company). The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication. (a) 144A Global Securities. Securities offered and sold within the United States to "qualified institutional buyers" as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued initially in the form of a 144A Global Security, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for the Depositary and registered in the name of The Depository Trust Company ("DTC") or the nominee thereof (such depositary, or any successor thereto, and any such nominee being hereinafter referred to as the "Depositary") duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate Principal Amount at Maturity of the 144A Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary as hereinafter provided. (b) Global Securities in General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate Principal Amount at Maturity of outstanding Securities from time to time endorsed thereon and that the aggregate Principal Amount at Maturity of outstanding Securities 13 represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and conversions. Any adjustment of the aggregate Principal Amount at Maturity of a Global Security to reflect the amount of any increase or decrease in the Principal Amount at Maturity of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 hereof and shall be made on the records of the Trustee and the Depositary. (c) Book-Entry Provisions. This Section 2.1(c) shall apply only to Global Securities deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c), authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depositary, (ii) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions or held by the Trustee as custodian for such Depositary and (iii) shall bear legends substantially to the following effect: "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER 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 THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), 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. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS, IN WHOLE BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF." (d) Certificated Securities. Securities not issued as interests in the Global Securities will be issued in certificated form substantially in the form of Exhibit A-2 attached hereto. (e) U.S. Tax Legend. All Securities shall bear the following legend: FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER'S "COMPARABLE 14 YIELD" FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO ARTICLE 15 OF THE INDENTURE, THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE SECURITY, EACH BENEFICIAL HOLDER OF THE SECURITIES WILL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, (i) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO THE CONTINGENT PAYMENT DEBT INSTRUMENT REGULATIONS UNDER SECTION 1.1275-4 OF THE UNITED STATES TREASURY REGULATIONS AND, FOR PURPOSES OF THE REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF COMMON STOCK RECEIVED BY A BENEFICIAL HOLDER UPON ANY CONVERSION OF THE SECURITIES AS A CONTINGENT PAYMENT AND (ii) TO BE BOUND BY THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE," WITHIN THE MEANING OF THE REGULATIONS, WITH RESPECT TO THE SECURITIES AND TO ACCRUE ORIGINAL ISSUE DISCOUNT AT THE COMPARABLE YIELD AS DETERMINED BY THE COMPANY. THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" IS 9.265% PER ANNUM, COMPOUNDED SEMIANNUALLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS ATTACHED TO THE INDENTURE AS ANNEX 1. YOU MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, YIELD TO MATURITY, COMPARABLE YIELD, AND PROJECTED PAYMENT SCHEDULE FOR THE SECURITY BY TELEPHONING THE COMPANY AT (513) 579-2121 OR SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: AMERICAN FINANCIAL GROUP, INC., ONE EAST FOURTH STREET, CINCINNATI, OHIO 45202. Section 2.2 Execution and Authentication. The Securities shall be executed on behalf of the Company by any Officer of the Company. The signature of the Company Officer on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of an individual who was at the time of the execution of the Securities the proper Officer of the Company shall bind the Company, notwithstanding that any such individual has ceased to hold such office prior to the authentication and delivery of such Securities or did not hold such office at the date of authentication of such Securities. 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 duly executed by the Trustee by manual signature of an authorized officer of the Trustee and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. The Trustee shall authenticate and deliver Securities for original issue in an aggregate Principal Amount at Maturity of up to $538,315,000 upon a Company Order without any further action by the Company. The aggregate Principal Amount at Maturity of Securities outstanding at any time may not exceed the amount set forth in the foregoing sentence, except as provided in Section 2.7 hereof. 15 The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of Principal Amount at Maturity and any integral multiple thereof. Section 2.3 Registrar, Paying Agent, Conversion Agent and Bid Solicitation Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for purchase or payment ("Paying Agent") and an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Company shall also appoint a bid solicitation agent (the "Bid Solicitation Agent") to act pursuant to Article 14. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent, including any named pursuant to Section 4.5 hereof. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 4.5 hereof. The Company shall enter into an appropriate agency agreement with any Registrar or co-registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent (other than the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent, Conversion Agent or Bid Solicitation Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7 hereof. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co-registrar. None of the Company or any Subsidiary or any Affiliate of the Company or any Subsidiary may act as Bid Solicitation Agent. The Company initially appoints the Trustee as Registrar, Conversion Agent, Paying Agent and Bid Solicitation Agent in connection with the Securities. Section 2.4 Paying Agent to Hold Money and Securities in Trust. Except as otherwise provided herein, not later than 10:00 a.m., New York City time, on each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) or Common Stock sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money and Common Stock held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee in writing of any default by the Company or the Guarantor in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money and Common Stock so held in trust. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money and Common Stock held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money and Common Stock held by it to the Trustee and to account for any funds and Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money or Common Stock. Section 2.5 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of 16 Securityholders. If the Trustee is not the Registrar, the Company, on its own behalf and on behalf of the Guarantor, shall cause to be furnished to the Trustee at least semiannually on May 18 and November 17 a listing of Securityholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.6 Transfer and Exchange. Subject to Section 2.12 hereof, (a) Upon surrender for registration of transfer of any Security, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at the office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.3 hereof, the Company shall execute, and the Trustee upon receipt of a Company Order shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denomination or denominations, of a like aggregate Principal Amount at Maturity. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company or the Trustee may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the registration of transfer or exchange of the Securities from the Securityholder requesting such registration of transfer or exchange. At the option of the Holder, Certificated Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate Principal Amount at Maturity, upon surrender of the Securities to be exchanged, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee upon receipt of a Company Order shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be purchased in part, the portion thereof not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. (b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.12 hereof and this Section 2.6(b). Transfers of a Global Security shall be limited to transfers of such Global Security in whole, or in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. 17 (c) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities. (d) Any Registrar appointed pursuant to Section 2.3 hereof shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon registration of transfer or exchange of Securities. (e) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made. (f) If Securities are issued upon the registration of transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legends set forth on the form of Security attached hereto as Exhibits A-1 and A-2 setting forth such restrictions (collectively, the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company and the Registrar such satisfactory evidence, which may include an Opinion of Counsel, as may be reasonably required by the Company and the Registrar, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 or that such Securities are not "restricted" within the meaning of Rule 144. Upon (i) provision of such satisfactory evidence, or (ii) notification by the Company to the Trustee and Registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, upon receipt of a Company Order, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face of a Security and the Security is subsequently held by an Affiliate of the Company, the Company shall use reasonable efforts to reinstate the Legend. The Trustee and the Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Section 2.7 Replacement Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company, the Guarantor and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company, the Guarantor and the Trustee such security or indemnity as may be reasonably required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a protected purchaser within the meaning of Article 8 of the Uniform Commercial Code (a "Protected Purchaser"), the Company and the Guarantor shall execute and upon receipt of a Company Order, the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, 18 a new Security of like tenor and Principal Amount at Maturity, 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, or is about to be purchased by the Company pursuant to Article 3 hereof, the Company in its discretion may, instead of issuing a new Security, pay or purchase such Security, as the case may be. Upon the issuance of any new Securities 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 mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company and the Guarantor, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all 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 2.8 Outstanding Securities; Determinations of Holders' Action. Securities outstanding at any time are all the Securities authenticated by the Trustee, except for those cancelled by it, those paid pursuant to Section 2.10 hereof and delivered to it for cancellation and those described in this Section 2.8 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite Principal Amount at Maturity of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company, the Guarantor or any other obligor upon the Securities or any Affiliate of the Company, the Guarantor or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Article 6 and Article 9). If a Security is replaced pursuant to Section 2.7 hereof, the replaced Security ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to each of them that the replaced Security is held by a Protected Purchaser unaware that such Security has been replaced, in which case the replacement security shall be deemed not to be outstanding. If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following the Purchase Date or a Change in Control Purchase Date, or on Stated Maturity, money or securities, if permitted hereunder, sufficient to pay Securities payable 19 on that date, then immediately after such Redemption Date, Purchase Date, Change in Control Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding and Original Issue Discount and interest (including Contingent Cash Interest), if any, or cash interest on such Securities shall cease to accrue; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture. If a Security is converted in accordance with Article 12, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding and Original Issue Discount and interest (including Contingent Cash Interest), if any, or cash interest shall cease to accrue on such Security. Section 2.9 Temporary Securities. Pending the preparation of definitive Securities, the Company and the Guarantor may execute, and upon receipt a 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 conclusively evidenced by their execution of such Securities. If temporary Securities are issued, the Company and the Guarantor 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 the office or agency of the Company designated for such purpose pursuant to Section 2.3, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company and the Guarantor shall execute and upon Company Order the Trustee shall authenticate and deliver in exchange therefor a like Principal Amount at Maturity 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 2.10 Cancellation. All Securities surrendered for payment, purchase by the Company pursuant to Article 3 hereof, conversion, redemption or 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 or the Guarantor may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company or the Guarantor may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article 12 hereof. 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 by the Trustee in accordance with the Trustee's customary procedures. Section 2.11 Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may 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 the Security or 20 the payment of any Redemption Price, Purchase Price or Change in Control Purchase Price in respect thereof and interest (including Contingent Cash Interest), if any, or cash interest thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Guarantor, the Trustee nor any agent of the Company, the Guarantor or the Trustee shall be affected by notice to the contrary. Section 2.12 Global Securities. Notwithstanding any other provisions of this Indenture or the Securities, (i) transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.6 and Section 2.12(a)(i) hereof, (ii) transfer of a beneficial interest in a Global Security for a Certificated Security shall comply with Section 2.6 and Section 2.12(a)(i) hereof, and (iii) transfers of a Certificated Security shall comply with Section 2.6 and Section 2.12(a)(ii) hereof and transfer of a Certificated Security for a Beneficial Interest in a Global Security shall comply with Section 2.6 and Section 2.12(a)(iii) hereof. (a) Transfer of Global Security. A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other Person may be registered; provided, that this Section 2.12(a) shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Nothing in this Section 2.12(a) shall prohibit or render ineffective any transfer of a beneficial interest in a Global Security effected in accordance with the other provisions of this Section 2.12(a). (i) Restrictions on Transfer of a Beneficial Interest in a Global Security for a Certificated Security. A beneficial interest in a Global Security may not be exchanged for a Certificated Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a request for transfer of a beneficial interest in a Global Security in accordance with Applicable Procedures for a Certificated Security in the form satisfactory to the Trustee, together with: (A) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B-1 attached hereto; (B) written instructions to the Trustee to make, or direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect a decrease in the aggregate Principal Amount at Maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such decrease; and (C) if the Company or Registrar so requests, an Opinion of Counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the Legend, then the Trustee shall cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, 21 the aggregate Principal Amount at Maturity of Securities represented by the Global Security to be decreased by the aggregate Principal Amount at Maturity of the Certificated Security to be issued, shall authenticate and deliver such Certificated Security and shall debit or cause to be debited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the Principal Amount at Maturity of the Certificated Security so issued. (ii) Transfer and Exchange of Certificated Securities. When Certificated Securities are presented to the Registrar with a request: (x) to register the transfer of such Certificated Securities; or (y) to exchange such Certificated Securities for an equal Principal Amount at Maturity of Certificated Securities of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Securities surrendered for registration of transfer or exchange: (A) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (B) so long as such Securities are Restricted Securities, such Securities are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or, if being transferred pursuant to clause (1), (2) or (3) of this Section 2.12(a)(ii)(B), are accompanied by the additional information and documents specified in each such clause, as applicable: (1) if such Certificated Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (2) if such Certificated Securities are being transferred to the Company, a certification to that effect; or (3) if such Certificated Securities are being transferred pursuant to an exemption from registration (1) a certification to that effect (in the form set forth in Exhibit B-1 and B-2 attached hereto, if applicable) and (2) if the Company or Registrar so requests, an Opinion of Counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the Legend. (iii) Restrictions on Transfer of a Certificated Security for a Beneficial Interest in a Global Security. A Certificated Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. 22 Upon receipt by the Trustee of a Certificated Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (A) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B-1 attached hereto, that such Certificated Security is being transferred to a QIB in accordance with Rule 144A; and (B) written instructions directing the Trustee to make, or to direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate Principal Amount at Maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase; and then the Trustee shall cancel such Certificated Security and cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate Principal Amount at Maturity of Securities represented by the Global Security to be increased by the aggregate Principal Amount at Maturity of the Certificated Security to be exchanged, and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the Principal Amount at Maturity of the Certificated Security so cancelled. If no Global Securities are then outstanding, the Company shall issue and the Trustee, upon receipt of a Company Order, shall authenticate a new Global Security in the appropriate Principal Amount at Maturity. (b) Subject to the succeeding paragraph, every Security shall be subject to the restrictions on transfer provided in the Legend including the requirement of the delivery of an Opinion of Counsel, if so provided. Whenever any Restricted Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Security must be accompanied by a certificate in substantially the form set forth in Exhibit B-1 attached hereto, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate. (c) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 or, if earlier, upon the expiration of the holding period applicable to sales thereof under paragraph (k) of Rule 144. Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.12 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144, by an opinion of counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Company, addressed to the Company, the Trustee and the Registrar and in form acceptable to the Company, to the effect that 23 the transfer of such Security has been made in compliance with Rule 144), be exchanged for a new Security, of like tenor and aggregate Principal Amount at Maturity, which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. The Trustee and the Registrar shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned opinion of counsel or registration statement. (d) As used in the preceding two paragraphs of this Section 2.12, the term "transfer" encompasses any sale, pledge, transfer, hypothecation or other disposition of any Security. (e) The provisions of clauses (i), (ii), (iii), (iv) and (v) of this Section 2.12(e) shall apply only to Global Securities: (i) Notwithstanding any other provisions of this Indenture or the Securities, except as provided in Section 2.12(a)(i) hereof, a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any Person other than the Depositary or one or more nominees thereof; provided, that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (A) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days; (B) the Company elects to discontinue use of the system of book-entry transfer through DTC (or any successor depositary); or (C) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clause (A) of this sub-section shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (B) or (C) of this sub-section may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided, that any such Security so issued that is registered in the name of a person other than the Depositary or a nominee thereof shall not be a Global Security. (ii) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate Principal Amount at Maturity equal to that of such Global Security or portion thereof to be so exchanged, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Registrar. With regard to any Global Security to be exchanged in part, to give effect to any conversion, redemption or other disposition of such part or otherwise, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the Principal Amount at Maturity thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee 24 shall authenticate and deliver the Security issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof. (iii) Subject to the provisions of clause (v) of this Section 2.12(e), the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members (as defined below) and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities. (iv) In the event of the occurrence of any of the events specified in clause (i) above, the Company and the Guarantor will promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons. (v) Neither any members of, or participants in, the Depositary (collectively, the "Agent Members") nor any other Persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Guarantor, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Guarantor, the Trustee or any agent of the Company, the Guarantor or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a holder of any Security. Section 2.13 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. The Company will promptly notify the Trustee of any change in the CUSIP numbers. ARTICLE 3. REDEMPTION AND PURCHASES Section 3.1 Right to Redeem; Notices to Trustee. The Company, at its option, may redeem the Securities in accordance with the provisions of paragraphs 6 and 8 of the Securities. Prior to June 2, 2008, the Company may not redeem the Securities. Beginning on June 2, 2008, the Company may redeem the Securities for cash in whole at any time, or in part from time to time. If the Company elects to redeem Securities pursuant to paragraph 6 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Principal Amount at Maturity of 25 Securities to be redeemed, the Redemption Price and the amount of accrued and unpaid cash interest, if any, payable on the Redemption Date. The Company shall give the notice to the Trustee provided for in this Section 3.1 by a Company Order, at least 45 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee). If fewer than all the Securities are to be redeemed, the record date relating to such redemption shall be selected by the Company and given to the Trustee, which record date shall not be less than ten days after the date of notice to the Trustee. Section 3.2 Selection of Securities to Be Redeemed. If less than all the outstanding Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by any other method the Trustee considers fair and appropriate (so long as such method is not prohibited by the rules of any stock exchange on which the Securities are then listed). The Trustee shall make the selection at least 30 days but not more than 60 days before the Redemption Date from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the Principal Amount at Maturity of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in Principal Amounts at Maturity of $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall promptly notify the Company in writing of the Securities or portions of Securities to be redeemed. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection. Section 3.3 Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (a) the Redemption Date; (b) the Redemption Price, or if then not ascertainable, the manner of calculation thereof, and accrued and unpaid cash interest, if any, or the amount of Contingent Cash Interest, if any, payable on the Redemption Date; (c) the Conversion Rate; (d) the name and address of the Paying Agent and Conversion Agent; 26 (e) that Securities called for redemption may be converted at any time before the close of business on the second Business Day immediately preceding the Redemption Date, even if not otherwise convertible at such time; (f) that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 9 of the Securities; (g) if applicable, the election of the Company (which, subject to the provisions of Article 12 of the Indenture, shall be irrevocable) to deliver shares of Common Stock or to pay cash in lieu of delivery of such shares with respect to any Security that may be converted after mailing of such notice prior to the Redemption Date; (h) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and accrued and unpaid cash interest, if any, or the Redemption Price and Contingent Cash Interest, if any; (i) if fewer than all the outstanding Securities are to be redeemed, the certificate number and Principal Amounts at Maturity of the particular Securities to be redeemed; (j) that, unless the Company defaults in making payment of such Redemption Price and any cash interest which is due and payable, Original Issue Discount or cash interest, including Contingent Cash Interest and semiannual interest, will cease to accrue on and after the Redemption Date; (k) the CUSIP number of the Securities; and (l) any other information the Company desires, in its own discretion, to present. At the Company's request, the Trustee shall give the notice of redemption to Holders in the Company's name and at the Company's expense; provided, that the Company makes such request at least five Business Days (unless a shorter period shall be satisfactory to the Trustee) prior to the date such notice of redemption must be mailed. Section 3.4 Effect of Notice of Redemption. Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price (together with accrued and unpaid cash interest, if any, or together with any Contingent Cash Interest, if any, to but not including the date of redemption) stated in the notice except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid at the Redemption Price (together with accrued and unpaid cash interest, if any, or together with any Contingent Cash Interest, if any, to but not including the date of redemption) stated in the notice. Section 3.5 Deposit of Redemption Price. Prior to 10:00 a.m. New York City time, on any Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or the Guarantor or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of, and any accrued and unpaid interest (either cash interest or Contingent Cash Interest, if any) to but not including 27 the date of redemption with respect to, all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of conversion of Securities pursuant to Article 12 hereof. If such money is then held by the Company in trust and is not required for such purpose it shall be discharged from such trust. Section 3.6 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in Principal Amount at Maturity to the unredeemed portion of the Security surrendered. Section 3.7 Conversion Arrangement on Call for Redemption. In connection with any redemption of Securities, the Company may arrange for the purchase and conversion of any Securities called for redemption by an agreement with one or more investment banks or other purchasers to purchase such Securities by paying to the Trustee in trust for the Securityholders, on or prior to 10:00 a.m. New York City time on the Redemption Date, an amount that, together with any amounts deposited with the Trustee by the Company for the redemption of such Securities, is not less than the Redemption Price of, and any accrued and unpaid interest (either cash interest or Contingent Cash Interest) with respect to, such Securities. Notwithstanding anything to the contrary contained in this Article 3, the obligation of the Company to pay the Redemption Prices of such Securities shall be deemed to be satisfied and discharged to the extent such amount is so paid by such purchasers. If such an agreement is entered into, any Securities not duly surrendered for conversion by the Holders thereof may, at the option of the Company, be deemed, to the fullest extent permitted by law, acquired by such purchasers from such Holders and (notwithstanding anything to the contrary contained in Article 12) surrendered by such purchasers for conversion, all as of immediately prior to the close of business on the second Business Day prior to the Redemption Date, subject to payment of the above amount as aforesaid. The Trustee shall hold and pay to the Holders whose Securities are selected for redemption any such amount paid to it for purchase and conversion in the same manner as it would moneys deposited with it by the Company for the redemption of Securities. Without the Trustee's prior written consent, no arrangement between the Company and such purchasers for the purchase and conversion of any Securities shall increase or otherwise affect any of the powers, duties, responsibilities or obligations of the Trustee as set forth in this Indenture, and the Company agrees to indemnify the Trustee from, and hold it harmless against, any loss, liability or expense arising out of or in connection with any such arrangement for the purchase and conversion of any Securities between the Company and such purchasers, including the costs and expenses incurred by the Trustee in the defense of any claim or liability arising out of or in connection with the exercise or performance of any of its powers, duties, responsibilities or obligations under this Indenture. Section 3.8 Purchase of Securities at Option of the Holder. (a) General. Securities shall be purchased by the Company pursuant to paragraph 7 of the Securities as of June 2, 2008, 2013, 2018, 2023 and 2028 (each, a "Purchase Date"), at the purchase price of $371.53 per $1,000 of Principal Amount at Maturity as of June 2, 28 2008, of $452.89 per $1,000 of Principal Amount at Maturity as of June 2, 2013, of $552.07 per $1,000 of Principal Amount at Maturity as of June 2, 2018, of $672.97 per $1,000 Principal Amount at Maturity as of June 2, 2023, and of $820.35 per $1,000 Principal Amount at Maturity as of June 2, 2028, in each case plus accrued and unpaid cash interest, if any, to the Purchase Date (each, a "Purchase Price", as applicable), at the option of the Holder thereof, upon: (i) delivery to the Paying Agent, by the Holder, of a written notice of purchase (a "Purchase Notice") at any time from the opening of business on the date that is 20 Business Days prior to a Purchase Date until the close of business on the Business Day immediately preceding such Purchase Date stating: (A) the certificate number of the Security which the Holder will deliver to be purchased, (B) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be a Principal Amount at Maturity of $1,000 or an integral multiple thereof, (C) that such Security shall be purchased as of the Purchase Date pursuant to the terms and conditions specified in paragraph 7 of the Securities and in this Indenture, and (D) in the event the Company elects, pursuant to Section 3.8(b) hereof, to pay the Purchase Price to be paid as of such Purchase Date, in whole or in part, in shares of Common Stock but such portion of the Purchase Price shall ultimately be payable to such Holder entirely in cash because any of the conditions to payment of the Purchase Price in Common Stock is not satisfied prior to the close of business on such Purchase Date, as set forth in Section 3.8(d) hereof, whether such Holder elects (1) to withdraw such Purchase Notice as to some or all of the Securities to which such Purchase Notice relates (stating the Principal Amount at Maturity and certificate numbers of the Securities as to which such withdrawal shall relate), or (2) to receive cash in respect of the entire Purchase Price for all Securities (or portions thereof) to which such Purchase Notice relates; and (ii) delivery of such Security to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 3.8 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice, as determined by the Company. If a Holder, in such Holder's Purchase Notice and in any written notice of withdrawal delivered by such Holder pursuant to the terms of Section 3.10 hereof, fails to indicate such Holder's choice with respect to the election set forth in Section 3.8(a)(i)(D) hereof, such Holder 29 shall be deemed to have elected to receive cash in respect of the Purchase Price for all Securities subject to such Purchase Notice in the circumstances set forth in such clause (D). The Company shall purchase from the Holder thereof, pursuant to this Section 3.8, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.8 shall be consummated by the delivery of the consideration to be received by the Holder (together with accrued and unpaid cash interest, if any, or together with any Contingent Cash Interest, if any,) as promptly as practicable following the later of the Purchase Date and the time of delivery of the Security, but in no event more than three Business Days following the later of the Purchase Date or the time of delivery of the Security. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.8(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the Business Day prior to the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10 hereof. The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof. (b) Company's Right to Elect Manner of Payment of Purchase Price. The Securities to be purchased pursuant to Section 3.8(a) hereof may be paid for, at the election of the Company, in U.S. legal tender ("cash") or Common Stock, or in any combination of cash and Common Stock, subject to the conditions set forth in Section 3.8(c) and (d) hereof. The Company shall designate, in the Company Notice delivered pursuant to Section 3.8(e) hereof, whether the Company will purchase the Securities for cash or Common Stock, or, if a combination thereof, the percentages or amounts of the Purchase Price of Securities in respect of which it will pay in cash or Common Stock; provided, that the Company will pay cash for fractional interests in Common Stock. For purposes of determining the existence of potential fractional interests, all Securities subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Securities are purchased pursuant to this Section 3.8 shall receive the same percentage of cash or Common Stock in payment of the Purchase Price for such Securities, except (i) as provided in Section 3.8(d) hereof with regard to the payment of cash in lieu of fractional shares of Common Stock and (ii) in the event that the Company is unable to purchase the Securities of a Holder or Holders for Common Stock because any necessary qualifications or registrations of the Common Stock under applicable state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Company Notice to Securityholders except pursuant to this Section 3.8(b) or pursuant to Section 3.8(d) hereof in the event of a failure to satisfy, prior to the close of business on the Purchase Date, any condition to the payment of the Purchase Price, in whole or in part, in Common Stock. 30 At least three Business Days before the Company Notice Date, the Company shall deliver an Officers' Certificate to the Trustee specifying: (i) the manner of payment selected by the Company, (ii) the information required by Section 3.8(e) hereof, (iii) if the Company elects to pay the Purchase Price, or a specified percentage thereof, in Common Stock, that the conditions to such manner of payment set forth in Section 3.8(d) have been or will be complied with, and (iv) whether the Company desires the Trustee to give the Company Notice required by Section 3.8(e) hereof. (c) Purchase with Cash. On each Purchase Date, at the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.8(a) hereof has been given, or a specified percentage thereof, may be paid by the Company with cash equal to the aggregate Purchase Price of such Securities. If the Company elects to purchase Securities with cash, the Company Notice, as provided in Section 3.08(e) hereof, shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to such Purchase Date (the "Company Notice Date"). (d) Payment by Issuance of Common Stock. On each Purchase Date, at the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.8(a) hereof has been given, or a specified percentage thereof, may be paid by the Company by the issuance of a number of shares of Common Stock equal to the quotient obtained by dividing (i) the amount of cash to which the Securityholders would have been entitled had the Company elected to pay all or such specified percentage, as the case may be, of the Purchase Price of such Securities in cash by (ii) the Market Price of a share of Common Stock, subject to the next succeeding paragraph. The Company will not issue a fractional share of Common Stock in payment of the Purchase Price. Instead the Company will pay cash for the current market value of the fractional share. The current market value of a fraction of a share shall be determined by multiplying the Market Price by such fraction and rounding the product to the nearest whole cent. It is understood that if a Holder elects to have more than one Security purchased, the number of shares of Common Stock shall be based on the aggregate amount of Securities to be purchased. Upon a payment by Common Stock pursuant to the terms hereof, that portion of accrued Original Issue Discount, cash interest or Contingent Cash Interest, if any, attributable to the period from the Issue Date to the Purchase Date with respect to the purchased Security shall not be cancelled, extinguished or forfeited but rather shall be deemed paid in full to the Holder through the delivery of the Common Stock in exchange for the Security being purchased pursuant to the terms hereof, and the fair market value of such Common Stock (together with any cash payments in lieu of fractional shares of Common Stock) shall be treated as issued, to the extent thereof, first in exchange for the accrued Original Issue Discount, cash interest or Contingent Cash Interest, if any, through the Purchase Date, and the balance, if any, of the fair market value of such shares of Common Stock shall be treated as issued in exchange for the 31 Issue Price of the Security being purchased pursuant to the provisions hereof. If the Company elects to purchase the Securities by the issuance of shares of Common Stock, the Company Notice, as provided in Section 3.8(e) hereof, shall be sent to the Holders (and to beneficial owners as required by applicable law) not later than the Company Notice Date. The Company's right to exercise its election to purchase the Securities pursuant to this Section 3.8 through the issuance of shares of Common Stock shall be conditioned upon: (i) the Company's not having given its Company Notice of an election to pay entirely in cash and its giving of timely Company Notice of election to purchase all or a specified percentage of the Securities with Common Stock as provided herein; (ii) the shares of Common Stock having been admitted for listing or admitted for listing subject to notice of issuance on the principal United States securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on a national or regional securities exchange, as quoted on the National Association of Securities Dealers Automated Quotation System; (iii) the registration of the shares of Common Stock to be issued in respect of the payment of the Purchase Price under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case, if required; (iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and (v) the receipt by the Trustee of an Officers' Certificate from the Company and an Opinion of Counsel each stating that (A) the terms of the issuance of the Common Stock are in conformity with this Indenture and (B) the shares of Common Stock to be issued by the Company in payment of the Purchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Purchase Price in respect of the Securities, will be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights under law or material contracts, and, in the case of such Officers' Certificate, stating that conditions (i), (ii), (iii) and (iv) above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that conditions (ii) and (iii) above have been satisfied. Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 Principal Amount at Maturity of Securities and the Sale Price of a share of Common Stock on each Trading Day during the period for which the Market Price is calculated. The Company may pay the Purchase Price (or any portion thereof) in Common Stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation. If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the Purchase Date and the Company has elected to purchase the Securities pursuant to this Section 3.8 through the issuance of shares of 32 Common Stock, the Company shall pay the entire Purchase Price of the Securities of such Holder or Holders in cash. The "Market Price" of the Common Stock means the average of the Sale Prices of the Common Stock for the five Trading Day period ending on the third Business Day (if the third Business Day prior to the applicable Purchase Date is a Trading Day or, if not, then on the last Trading Day prior to such Business Day) prior to the applicable Purchase Date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such five Trading Day period and ending on such Purchase Date, of any event described in Section 12.6, Section 12.7 or Section 12.8 hereof; subject, however, to the conditions set forth in Section 12.9 and Section 12.10 hereof. (e) Notice of Election. The Company's notice of election to purchase with cash or Common Stock or any combination thereof shall be sent to the Holders (and to beneficial owners as required by applicable law) in the manner provided in Section 16.2 hereof at the time specified in Section 3.8(c) or Section 3.8(d) hereof, as applicable (the "Company Notice"). Such Company Notice shall state the manner of payment elected and shall contain the following information: In the event the Company has elected to pay the Purchase Price (or a specified percentage thereof) with Common Stock, the Company Notice shall: (i) state that each Holder will receive Common Stock with a Market Price determined as of a specified date prior to the Purchase Date equal to such specified percentage of the Purchase Price of the Securities held by such Holder (except any cash amount to be paid in lieu of fractional shares); (ii) set forth the method of calculating the Market Price of the Common Stock; and (iii) state that because the Market Price of Common Stock will be determined prior to the Purchase Date, Holders will bear the market risk with respect to the value of the Common Stock to be received from the date such Market Price is determined to the Purchase Date. In any case, each Company Notice shall include a form of Purchase Notice to be completed by a Securityholder and shall state: (i) the Purchase Price, the Conversion Rate and accrued and unpaid cash interest, including Contingent Cash Interest, if any, that will be accrued and payable with respect to the Securities as of the Purchase Date; (ii) whether the Company will pay the Purchase Price in cash or in Common Stock or any combination thereof, specifying the percentage of each; (iii) the name and address of the Paying Agent and the Conversion Agent; 33 (iv) that Securities as to which a Purchase Notice has been given may be converted pursuant to Article 12 hereof only if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (v) that Securities must be surrendered to the Paying Agent to collect payment of the Purchase Price and accrued and unpaid cash interest (or accrued and unpaid Contingent Cash Interest), if any; (vi) that the Purchase Price for any Security as to which a Purchase Notice has been given and not withdrawn, together with any cash interest payable or any Contingent Cash Interest payable with respect thereto, will be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in (v); (vii) the procedures the Holder must follow to exercise rights under this Section 3.8 and a brief description of those rights; (viii) briefly, the conversion rights of the Securities and that Holders who want to convert Securities must satisfy the requirements set forth in paragraph 9 of the Securities; (ix) the procedures for withdrawing a Purchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 3.8(a)(i)(D) or Section 3.10 hereof); (x) that, unless the Company defaults in making payment of such Purchase Price and cash interest, if any, Original Issue Discount and cash interest, including Contingent Cash Interest, if any, on Securities surrendered for purchase will cease to accrue on and after the Purchase Date; and (xi) the CUSIP number of the Securities. At the Company's request, the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of such Company Notice shall be prepared by the Company. Upon determination of the actual number of shares of Common Stock to be issued for each $1,000 Principal Amount at Maturity of Securities, the Company will issue a press release and publish such determination on the Company's web site on the World Wide Web or through such other public medium as the Company may use from time to time. (f) Covenants of the Company. All shares of Common Stock delivered upon purchase of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim created by the Company. The Company shall use its reasonable best efforts to list or cause to have quoted any shares of Common Stock to be issued to purchase Securities on the principal United States securities exchange or over-the-counter or other domestic market on which any other shares of 34 the Common Stock are then listed or quoted. The Company will promptly inform the Trustee in writing of any such listing. (g) Procedure upon Purchase. The Company shall deposit cash (in respect of a cash purchase under Section 3.8(c) hereof or for fractional interests as applicable) or shares of Common Stock, or a combination thereof, as applicable, at the time and in the manner as provided in Section 3.11 hereof, sufficient to pay the aggregate Purchase Price of, and any accrued and unpaid interest or any Contingent Cash Interest, if any, with respect to all Securities to be purchased pursuant to this Section 3.8. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive Common Stock through the Paying Agent, a certificate for the number of full shares of Common Stock issuable in payment of the Purchase Price and cash in lieu of any fractional interests. The person in whose name the certificate for Common Stock is registered shall be treated as a holder of record of shares of Common Stock on the Business Day following the Purchase Date. Subject to Section 3.8(d) hereof, no payment or adjustment will be made for dividends on the Common Stock the record date for which occurred on or prior to the Purchase Date. (h) Taxes. If a Holder of a Security is paid in Common Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on such issue of shares of Common Stock. However, the Holder shall pay any such tax which is due because the Holder requests the shares of Common Stock to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations. Section 3.9 Purchase of Securities at Option of the Holder upon Change in Control. (a) If there shall have occurred a Change in Control on or before June 2, 2008, Securities shall be purchased by the Company, at the option of the Holder thereof, at a purchase price specified in paragraph 7 of the Securities (the "Change in Control Purchase Price"), as of the date that is no later than 30 Business Days after the occurrence of the Change in Control but in no event prior to the date on which such Change in Control occurs (the "Change in Control Purchase Date"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.9(c) hereof. A "Change in Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to any "person" or "group" (as such terms are used in Section 13(d) of the Exchange Act), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company, (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" or "group" (as such terms are used in Section 13(d) of the Exchange Act) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly through one or more intermediaries, of more than 50% (other than Carl H. Lindner, S. Craig Lindner, 35 Carl H. Lindner III, Keith E. Lindner, their respective spouses, trusts for their benefit and heirs, lineal descendants, legatees and legal representatives of any of the foregoing and the trustee of any bona fide trust of which one or more of the foregoing are the sole beneficiaries or the grantors thereof, unless, after giving effect to such transaction, (1) our common stock ceases to be listed on a United States national securities exchange or approved for quotation on the Nasdaq National Market or any similar United States system for automated dissemination of quotations of securities prices or (2) less than 20% of the outstanding shares of our common stock remain beneficially owned by persons other than the Lindner family) of the voting power of the outstanding voting stock of the Company, or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of the Board of Directors of the Company on June 2, 2003 or (ii) was nominated for election to the Board of Directors of the Company with the approval of, or whose election to such Board of Directors was ratified by, at least a majority of the Continuing Directors who were members of the Board of Directors of the Company at the time of such nomination or election. (b) Within 15 days after the occurrence of a Change in Control, the Company shall mail a written notice of Change in Control by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The notice shall include a form of Change in Control Purchase Notice to be completed by the Securityholder and shall state: (i) briefly, the events causing a Change in Control and the date of such Change in Control; (ii) the date by which the Change in Control Purchase Notice pursuant to this Section 3.9 must be given; (iii) the Change in Control Purchase Date; (iv) the Change in Control Purchase Price and any accrued and unpaid cash interest payable with respect to the Securities as of the Change in Control Purchase Date; (v) the name and address of the Paying Agent and the Conversion Agent; (vi) the Conversion Rate and any adjustments thereto resulting from the Change in Control; (vii) that Securities as to which a Change in Control Purchase Notice has been given may be converted pursuant to Article 12 hereof only if the Change in Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (viii) that Securities must be surrendered to the Paying Agent to collect payment of the Change in Control Purchase Price and accrued and unpaid cash interest, if any; (ix) that the Change in Control Purchase Price for any Security as to which a Change in Control Purchase Notice has been duly given and not withdrawn, together with 36 any accrued and unpaid cash interest payable with respect thereto, will be paid promptly following the later of the Change in Control Purchase Date and the time of surrender of such Security as described in Section 3.9(b)(viii) hereof; (x) briefly, the procedures the Holder must follow to exercise rights under this Section 3.9; (xi) briefly, the conversion rights of the Securities; (xii) the procedures for withdrawing a Change in Control Purchase Notice; (xiii) that, unless the Company defaults in making payment of such Change in Control Purchase Price and cash interest, if any on Securities surrendered for purchase, Original Issue Discount and any cash interest on Securities surrendered for purchase will cease to accrue on and after the Change in Control Purchase Date; and (xiv) the CUSIP number of the Securities. (c) A Holder may exercise its rights specified in Section 3.9(a) hereof upon delivery of a written notice of purchase (a "Change in Control Purchase Notice") to the Paying Agent at any time prior to the close of business on the Business Day prior to the Change in Control Purchase Date, stating: (i) the certificate number or numbers of the Security or Securities which the Holder will deliver to be purchased; (ii) the portion of the Principal Amount at Maturity of the Security which the Holder will deliver to be purchased, which portion must be $1,000 or an integral multiple thereof; and (iii) that such Security shall be purchased pursuant to the terms and conditions specified in paragraph 7 of the Securities. The delivery of such Security to the Paying Agent at any time after the delivery of the Change in Control Purchase Notice (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition to the receipt by the Holder of the Change in Control Purchase Price therefor; provided, however, that such Change in Control Purchase Price shall be so paid pursuant to this Section 3.9 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change in Control Purchase Notice. The Company shall purchase from the Holder thereof, pursuant to this Section 3.9, a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security. Any purchase by the Company contemplated pursuant to the provisions of this Section 3.9 shall be consummated by the delivery of the consideration to be received by the Holder 37 (together with accrued and unpaid cash interest, if any) promptly following the later of the Change in Control Purchase Date and the time of delivery of the Security to the Paying Agent in accordance with this Section 3.9. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change in Control Purchase Notice contemplated by this Section 3.9(c) shall have the right to withdraw such Change in Control Purchase Notice at any time prior to the close of business on the Business Day prior to the Change in Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.10 hereof. The Paying Agent shall promptly notify the Company of the receipt by it of any Change in Control Purchase Notice or written withdrawal thereof. The Company shall not be required to comply with this Section 3.9 if a third party mails a written notice of Change in Control in the manner, at the times and otherwise in compliance with this Section 3.9 and repurchases all Securities for which a Change in Control Purchase Notice shall be delivered and not withdrawn. Section 3.10 Effect of Purchase Notice or Change in Control Purchase Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in Control Purchase Notice specified in Section 3.8(a) or Section 3.9(c) hereof, as applicable, the Holder of the Security in respect of which such Purchase Notice or Change in Control Purchase Notice, as the case may be, was given shall (unless such Purchase Notice or Change in Control Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid cash interest, with respect to such Security. Such Purchase Price or Change in Control Purchase Price which price reflects the Issue Price plus accrued Original Issue Discount and accrued and unpaid cash interest, including Contingent Cash Interest, if any, shall be paid to such Holder, subject to receipt of funds and/or securities by the Paying Agent, promptly following the later of (x) the Purchase Date or the Change in Control Purchase Date, as the case may be, with respect to such Security (provided that the conditions in Section 3.8(a) or Section 3.9(c) hereof, as applicable, have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.8(a) or Section 3.9(c) hereof, as applicable. Securities in respect of which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been given by the Holder thereof may not be converted pursuant to Article 12 hereof on or after the date of the delivery of such Purchase Notice or Change in Control Purchase Notice, as the case may be, unless such Purchase Notice or Change in Control Purchase Notice, as the case may be, has first been validly withdrawn as specified in the following two paragraphs. A Purchase Notice or Change in Control Purchase Notice, as the case may be, may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Purchase Notice or Change in Control Purchase Notice, as the case may be, at any time prior to the close of business on the Business Day prior to the Purchase Date or the Change in Control Purchase Date, as the case may be, specifying: 38 (a) the certificate number or numbers of the Security or Securities in respect of which such notice of withdrawal is being submitted, (b) the Principal Amount at Maturity of the Security or Securities with respect to which such notice of withdrawal is being submitted, and (c) the Principal Amount at Maturity, if any, of such Security which remains subject to the original Purchase Notice or Change in Control Purchase Notice, as the case may be, and which has been or will be delivered for purchase by the Company. A written notice of withdrawal of a Purchase Notice may be in the form set forth in the preceding paragraph or may be in the form of a conditional withdrawal contained in a Purchase Notice pursuant to the terms of Section 3.8(a)(i)(D) hereof. There shall be no purchase of any Securities pursuant to Section 3.8 hereof (other than through the issuance of Common Stock in payment of the Purchase Price, including cash in lieu of fractional shares) or 3.9 hereof if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Securities, of the required Purchase Notice or Change in Control Purchase Notice, as the case may be) and is continuing an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid cash interest or Contingent Cash Interest with respect to such Securities). The Paying Agent will promptly return to the respective Holders thereof any Securities (x) with respect to which a Purchase Notice or Change in Control Purchase Notice, as the case may be, has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default (other than a default in the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, and any accrued and unpaid cash interest or Contingent Cash Interest with respect to such Securities) in which case, upon such return, the Purchase Notice or Change in Control Purchase Notice with respect thereto shall be deemed to have been withdrawn. Section 3.11 Deposit of Purchase Price or Change in Control Purchase Price. Prior to 10:00 a.m., New York City time, on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or the Guarantor or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.4 hereof) an amount of money (in immediately available funds if deposited on such Business Day) or Common Stock, if permitted hereunder, sufficient to pay the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and any accrued and unpaid cash interest and Contingent Cash Interest, if any, with respect to all the Securities or portions thereof which are to be purchased as of the Purchase Date or Change in Control Purchase Date, as the case may be. Section 3.12 Securities Purchased in Part. Any Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Guarantor and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee 39 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 at Maturity equal to, and in exchange for, the portion of the Principal Amount at Maturity of the Security so surrendered which is not purchased. Section 3.13 Repayment to the Company. The Trustee and the Paying Agent shall promptly return to the Company any cash or shares of Common Stock that remain unclaimed as provided in paragraph 15 of the Securities, together with interest or dividends, if any, thereon (subject to the provisions of Section 7.1(f) hereof), held by them for the payment of the Purchase Price or Change in Control Purchase Price, as the case may be, or contingent interest, if any; provided, however, that to the extent that the aggregate amount of cash or shares of Common Stock deposited by the Company pursuant to Section 3.11 hereof exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the case may be, of, and the accrued and unpaid contingent interest with respect to, the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change in Control Purchase Date, as the case may be, whether as a result of withdrawal or otherwise, then promptly after the second Business Day following the Purchase Date or Change in Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon (subject to the provisions of Section 7.1(f) hereof). ARTICLE 4. COVENANTS Section 4.1 Payment of Securities. The Company shall promptly make all payments in respect of the Securities, and the Guarantor shall promptly make all payments in respect of the Guarantee, on the dates and in the manner provided in the Securities or pursuant to this Indenture. Any amounts to be given to the Trustee or Paying Agent, shall be deposited with the Trustee or Paying Agent by 10:00 a.m., New York City time. Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, cash interest and Contingent Cash Interest, if any, shall be considered paid on the applicable date due if on such date (or, in the case of a Purchase Price or Change in Control Purchase Price, on the Business Day following the applicable Purchase Date or Change in Control Purchase Date, as the case may be) the Trustee or the Paying Agent holds, in accordance with this Indenture, money or securities, if permitted hereunder, sufficient to pay all such amounts then due. The Company and, as applicable, the Guarantor shall, to the extent permitted by law, pay cash interest on overdue amounts at the rate per annum set forth in paragraph 1 of the Securities, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount. Section 4.2 SEC and Other Reports. If requested by the Trustee, each of the Company and the Guarantor shall deliver to the Trustee, within 30 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual 40 report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which each of the Company and the Guarantor is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. Each of the Company and the Guarantor also shall comply with the provisions of TIA Section 314(a); provided, that no report required thereby to be filed with the SEC need be so filed unless this Indenture is qualified under the TIA. Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of the same shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates of the Company). Section 4.3 Compliance Certificate. The Company and the Guarantor shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2003) an Officers' Certificate, stating whether or not, to the knowledge of the signers thereof, the Company or the Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the Company or the Guarantor shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. Section 4.4 Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out the purposes of this Indenture. Section 4.5 Maintenance of Office or Agency. The Company will maintain in the United States, an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Corporate Trust Office shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office of the Trustee). 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 address of the Trustee set forth in Section 16.2 hereof. The Company may also from time to time designate one or more other offices or agencies 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 maintain in the United States an office or agency of the Bid Solicitation Agent. The Corporate Trust Office shall initially be such office or agency. The 41 Company shall give prompt written notice to the Trustee of the location, and of any change of the location, of such office or agency. Section 4.6 Delivery of Certain Information. At any time when the Company or the Guarantor is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder or any beneficial holder of Securities or shares of Common Stock which are restricted securities issued upon conversion thereof, the Company or the Guarantor will promptly furnish or cause to be furnished Rule 144A Information (as defined below) to such Holder or any beneficial holder of Securities or holder of shares of Common Stock issued upon conversion of Securities, or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A under the Securities Act in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.7 Covenant to Comply With Securities Laws Upon Purchase of Securities. In connection with any offer to purchase or purchase of Securities under Section 3.8 or Section 3.9 hereof (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall to the extent applicable (a) comply with Rule 13e-4 and Rule 14e-1 under the Exchange Act, (b) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (c) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Section 3.8 and Section 3.9 hereof to be exercised in the time and in the manner specified in Section 3.8 and Section 3.9 hereof. Section 4.8 Waiver of Compliance. The Company and the Guarantor may omit in any particular instance to comply with any covenant or condition set forth in Section 4.1 to Section 4.7, inclusive, if before the time for such compliance the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding shall notify the Company and the Guarantor that they elect to either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the Guarantor and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. ARTICLE 5. SUCCESSOR CORPORATION Section 5.1 When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into any other person or convey, transfer or lease all or substantially all of its properties and assets to any person, nor will the Company permit any Subsidiary to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, transfer, lease or other disposition of all or substantially all of the properties and assets of the Company and its Subsidiaries on a consolidated basis to any other person or persons, unless: 42 (a) either (i) the Company or such Subsidiary shall be the surviving corporation or (ii) the person (if other than the Company) formed by such consolidation or into which the Company or such Subsidiary is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company or such Subsidiary substantially as an entirety (A) shall be organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (B) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Company or such Subsidiary under the Securities and this Indenture; (b) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and (c) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article 5 and that all conditions precedent herein provided for relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of the properties and assets of one or more Subsidiaries (other than to the Company or another Subsidiary), which, if such assets were owned by the Company, would constitute all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. The successor person formed by such consolidation or into which the Company or the applicable Subsidiary is merged or the successor person 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 or the applicable Subsidiary under this Indenture with the same effect as if such successor had been named as the Company or the applicable Subsidiary herein; and thereafter, except in the case of a lease and any obligations the Company or the applicable Subsidiary may have under a supplemental indenture pursuant to Section 12.14 hereof, the Company or the applicable Subsidiary shall be discharged from all obligations and covenants under this Indenture and the Securities. Subject to Section 9.6 hereof, the Company, the applicable Subsidiary, the Trustee and the successor person shall enter into a supplemental indenture to evidence the succession and substitution of such successor person and such discharge and release of the Company and the applicable Subsidiary. ARTICLE 6. DEFAULTS AND REMEDIES Section 6.1 Events of Default. An "Event of Default" occurs if: (a) the Company defaults in payment of any cash interest or any Contingent Cash Interest and such default continues for 30 days; (b) the Company defaults in the payment of the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount and any cash interest, including any Contingent 43 Cash Interest, Redemption Price, Purchase Price or Change in Control Purchase Price on any Security when the same becomes due and payable at its Stated Maturity, upon redemption, upon declaration, when due for purchase by the Company or otherwise; (c) the Company or the Guarantor fails to comply with any of their respective agreements in the Security or this Indenture (other than those referred to in clauses (a) and (b) above) and such failure continues for 60 days after receipt by the Company and the Guarantor of a Notice of Default; (d) default under any Debt, whether such Debt now exists or is created later, which default results in the acceleration of such Debt and the principal amount of all Debt so accelerated, together with all Debt due and payable but not paid prior to the end of any grace period, is $10,000,000 or more, and such acceleration has not been rescinded or annulled within a period of 10 days after receipt by the Company and the Guarantor of a Notice of Default from the Trustee; provided, however, that if any such default shall be cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; (e) the Company or the Guarantor pursuant to or under or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding or the commencement of any case against it; (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; (iv) makes a general assignment for the benefit of its creditors; (v) files a petition in bankruptcy or answer or consent seeking reorganization or relief; or (vi) consents to the filing of such petition or the appointment of or taking possession by a Custodian; or (f) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or the Guarantor in an involuntary case or proceeding, or adjudicates the Company or the Guarantor insolvent or bankrupt; (ii) appoints a Custodian of the Company or the Guarantor or for any substantial part of the property of the Company or the Guarantor; or (iii) orders the winding up or liquidation of the Company or the Guarantor; and such order or decree remains unstayed and in effect for 60 days. 44 (g) except as permitted by this Indenture, the Guarantee is held in any final, non-appealable judicial proceeding to be unenforceable or invalid or shall cease for any reason (other than as provided in Section 16.12 to be in full force and effect on the Guarantor, or any Person acting on behalf of the Guarantor, shall deny or disaffirm its obligations under the Guarantee. A Default under clause (c) or clause (d) above is not an Event of Default until the Trustee notifies the Company and the Guarantor, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding notify the Company, the Guarantor and the Trustee, of the Default and the Company does not cure such Default (and such Default is not waived) within the time specified in clause (c) or clause (d) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after it becomes aware of the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time, or both, would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. Section 6.2 Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.1(e) or (f) in respect of the Company) occurs and is continuing, the Trustee by written Notice to the Company and the Guarantor, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding by notice to the Company, the Guarantor and the Trustee, may declare the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest, through the date of declaration on all the Securities to be immediately due and payable. Upon such a declaration, such Issue Price plus accrued Original Issue Discount, and such accrued and unpaid cash interest, if any, or any Contingent Cash Interest shall be due and payable immediately. If an Event of Default specified in Section 6.1(e) or (f) occurs in respect of the Company and is continuing, the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest, on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest, that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.7 hereof have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto. Section 6.3 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the Issue Price plus accrued Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest, on the Securities or to enforce the performance of any provision of the Securities or this Indenture. 45 The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. Except as set forth in Section 2.7 hereof, no remedy is exclusive of any other remedy. All available remedies are cumulative. Section 6.4 Waiver of Past Defaults. Subject to Section 6.2, the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder), may waive an existing Default and its consequences except (a) an Event of Default described in Section 6.1(a) or (b), (b) a Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Securityholder affected or (c) a Default which constitutes a failure to convert any Security in accordance with the terms of Article 12. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. This Section 6.4 shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.5 Control by Majority. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it. This Section 6.5 shall be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.6 Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (b) the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and (e) the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period. 46 A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder. Section 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, or cash interest, including Contingent Cash Interest, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities or any Redemption Date, and to convert the Securities in accordance with Article 12 hereof, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of such Holder. Section 6.8 Collection Suit by Trustee. If an Event of Default described in Section 6.1(a) or (b) hereof occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.7 hereof. Section 6.9 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company, the Guarantor or any other obligor upon the Securities or the property of the Company, the Guarantor or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, Redemption Price, Purchase Price, Change in Control Purchase Price shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, if any, Redemption Price, Purchase Price or Change in Control Purchase Price, as the case may be, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 7.7 hereof) and of the Holders allowed in such judicial proceeding, and (b) 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 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 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 7.7 hereof. 47 Nothing herein contained 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 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: FIRST: to the Trustee for amounts due under Section 7.7 hereof; SECOND: to Securityholders for amounts due and unpaid on the Securities for the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, if any, or Redemption Price, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and THIRD: the balance, if any, to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and the amount to be paid. Section 6.11 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 or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in aggregate Principal Amount at Maturity of the Securities at the time outstanding. This Section 6.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA. Section 6.12 Waiver of Stay, Extension or Usury Laws. The Company and the Guarantor each 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 or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company or the Guarantor from paying all or any portion of the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount, cash interest, including Contingent Cash Interest, if any, Redemption Price, Purchase Price or Change in Control Purchase Price, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and the Company and the Guarantor each (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 48 the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 7. TRUSTEE Section 7.1 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. This Section 7.1(b) shall be in lieu of Section 315(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5 hereof. Subparagraphs (c)(i), (ii) and (iii) of this Section 7.1 shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA. 49 (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1. (e) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity reasonably satisfactory to it against any loss, liability or expense. (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company. Section 7.2 Rights of Trustee. Subject to its duties and responsibilities under the provisions of Section 7.1 hereof, and, except as expressly excluded from this Indenture pursuant to said Section 7.1 hereof, subject also to its duties and responsibilities under the TIA: (a) the Trustee may conclusively 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) 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, conclusively rely upon an Officers' Certificate of the Company; (c) 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; (d) the Trustee shall not be liable for any action taken, suffered or omitted to be taken by it in good faith which it believes to be authorized or within its rights or powers conferred under this Indenture; (e) the Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (f) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby; 50 (g) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and may be sufficiently evidenced by a resolution of the Board of Directors of the Company; (h) 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 at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; (i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by a Responsible Officer of the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture; (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder; (k) the Trustee may request that the Company or the Guarantor deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign a Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded; and (l) the permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. Section 7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Section 7.10 and Section 7.11 hereof. Section 7.4 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use or application of the proceeds from the Securities, it shall not be responsible for any statement in the registration statement for the Securities under the Securities Act or in the Indenture or the Securities (other than its certificate of authentication), or the determination as to which beneficial owners are entitled to receive any notices hereunder. 51 Section 7.5 Notice of Defaults. If a Default occurs and if it is known to a Responsible Officer of the Trustee, the Trustee shall give to each Securityholder notice of the Default within 90 days after such Responsible Officer obtains knowledge of such Default unless such Default shall have been cured or waived before the giving of such notice. Except in the case of a Default described in Section 6.1(a) or (b) hereof, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Securityholders. The second sentence of this Section 7.5 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as permitted by the TIA. The Trustee shall not be deemed to have knowledge of a Default unless a Responsible Officer of the Trustee has received written notice of such Default. Section 7.6 Reports by Trustee to Holders. Within 60 days after each June 15 beginning with the June 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such June 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC (but only if this Indenture is then qualified under the TIA) and with each securities exchange, if any, on which the Securities are listed. The Company agrees to promptly notify the Trustee whenever the Securities become listed on any securities exchange and of any delisting thereof. Section 7.7 Compensation and Indemnity. The Company agrees: (a) 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 (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust); (b) 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, advances 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 (c) to indemnify the Trustee and its agents for, and to hold them harmless against, any loss, liability or expense (including reasonable attorney's fees and expenses and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without negligence or bad faith on their part, arising out of or in connection with the acceptance or administration of this trust, including the reasonable costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder. To secure the Company's payment obligations in this Section 7.7, the Holders shall have been deemed to have granted to the Trustee a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the Principal Amount at 52 Maturity, Issue Price plus accrued Original Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase Price, cash interest or Contingent Cash Interest, if any, as the case may be, on particular Securities. The Company's payment obligations pursuant to this Section 7.7 shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.1(e) or (f) hereof, the expenses, including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any Bankruptcy Law. Section 7.8 Replacement of Trustee. The Trustee may resign by so notifying the Company; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.8. The Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged bankrupt or insolvent; (c) a receiver or public officer takes charge of the Trustee or its property; or (d) the Trustee otherwise becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7 hereof. If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10 hereof, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 53 Section 7.9 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Nothing herein contained shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of TIA Section 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8. DISCHARGE OF INDENTURE Section 8.1 Discharge of Liability on Securities. When (a) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.7 hereof) for cancellation or (b) all outstanding Securities have become due and payable and the Company irrevocably deposits with the Trustee, the Paying Agent (if the Paying Agent is not the Company or any of its Affiliates) or the Conversion Agent cash or, if expressly permitted by the terms of the Securities or the Indenture, Common Stock sufficient to pay all amounts due and owing on all outstanding Securities (other than Securities replaced pursuant to Section 2.7 hereof), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 7.7 hereof, cease to be of further effect. The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate of the Company and Opinion of Counsel and at the cost and expense of the Company. Section 8.2 Repayment to the Company. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property law. After return to the Company, Holders entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person and the Trustee and the Paying Agent shall have no further liability to the Securityholders with respect to such money or securities for that period commencing after the return thereof. 54 ARTICLE 9. AMENDMENTS Section 9.1 Without Consent of Holders. The Company, the Guarantor and the Trustee may amend this Indenture or the Securities without the consent of any Securityholder: (a) to cure any ambiguity, omission, defect or inconsistency; (b) to comply with Article 5 or Section 12.14 hereof; (c) to evidence a successor to the Company or, subject to Section 16.12, the Guarantor and the assumption of such successor to the obligation under this Indenture and the Securities; (d) to secure the obligations of the Company or the Guarantor under the Securities and this Indenture; (e) if permitted by this Indenture, to release the Guarantor from its obligations under this Indenture; (f) to add to the Company's or the Guarantor's covenants for the benefit of the Securityholders or to surrender any right or power conferred upon the Company or the Guarantor; (g) to make any change to comply with the TIA, or any amendment thereto, or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA, or as necessary in connection with the registration of the Securities under the Securities Act; or (h) to make any change that does not adversely affect the rights of any Holders. Section 9.2 With Consent of Holders. With the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding, the Company, the Guarantor and the Trustee may amend this Indenture or the Securities. However, without the consent of each Securityholder affected, an amendment to this Indenture or the Securities may not: (a) reduce the percentage in Principal Amount at Maturity of Securities whose Holders must consent to an amendment; (b) make any change in the manner or rate of accrual of Original Issue Discount or cash interest, including Contingent Cash Interest, reduce the rate of cash interest, including Contingent Cash Interest, referred to in paragraph 1 of the Securities, or extend the time for payment of Original Issue Discount or cash interest, including Contingent Cash Interest, if any, on any Security; (c) reduce the Principal Amount at Maturity, Issue Price, accrued Original Issue Discount or cash interest, with respect to any Security, or extend the Stated Maturity of any Security; 55 (d) reduce the Redemption Price, Purchase Price or Change in Control Purchase Price of any Security; (e) make any Security payable in money or securities other than that stated in the Security; (f) make any change in this Section 9.2, except to increase any percentage set forth therein; (g) make any change that adversely affects the right to convert any Security; (h) make any change that adversely affects the right to require the Company to purchase the Securities in accordance with the terms thereof and this Indenture; (i) release the Guarantor of any obligation under this Indenture, except as permitted by or provided in this Indenture; (j) change the provisions of this Indenture that relate to modifying or annexing this Indenture; or (k) impair the right to institute suit for the enforcement of any payment with respect to the Securities or the Guarantee, or conversion of, the Securities. It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section 9.2 becomes effective, the Company shall mail to each Holder a notice briefly describing the amendment. Section 9.3 Compliance with TIA. Every supplemental indenture executed pursuant to this Article 9 shall comply with the TIA. Section 9.4 Revocation and Effect of Consents, Waivers and Actions. Until an amendment, consent, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the amendment, consent, waiver or other action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date as of which the amendment, consent, waiver or action is made effective. After an amendment, consent, waiver or action becomes effective, it shall bind every Securityholder. Section 9.5 Notation on or Exchange of Securities. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 9 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 56 so modified as to conform, in the opinion of the Board of Directors of 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. Section 9.6 Trustee to Sign Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article 9 if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall receive, and (subject to the provisions of Section 7.1 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 16.4 hereof, a an Officers' Certificate of the Company and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. Section 9.7 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. ARTICLE 10. GUARANTEE Section 10.1 Guarantee. The Guarantor hereby fully, unconditionally and irrevocably guarantees (the "Guarantee"), as primary obligor and not merely as surety, to each Holder of the Notes and the Trustee the full and punctual payment when due, whether at maturity, by acceleration, by redemption, upon repurchase at the option of a Holder or otherwise, of the principal of and premium, if any, and interest on the Notes and all other obligations of the Company under this Indenture (all the foregoing being hereinafter collectively called the "Obligations"). The Guarantor further agrees (to the extent permitted by law) that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it will remain bound under this Article 10 notwithstanding any extension or renewal of any Obligation. The obligations of the Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor, result in the obligations of the Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. The Guarantor waives presentation to, demand of payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. The Guarantor waives notice of any default under the Securities or the Obligations. The obligations of the Guarantor hereunder shall not be affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Company or any other person under this Indenture, the Notes or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; or (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them. 57 The Guarantor further agrees that the Guarantee herein constitutes a Guarantee of payment when due (and not a Guarantee of collection) and waives any right to require that any resort be had by any Holder to any security held for payment of the Obligations. Except as provided in Section 16.12, the obligations of the Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than payment of the Obligations in full), including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing and except as provided in Section 16.12, the obligations of the Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder to assert any claim or demand or to enforce any remedy under this Indenture, the Notes or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantor or would otherwise operate as a discharge of the Guarantor as a matter of law or equity. The Guarantor further agrees that the Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal and premium, if any, of or interest on any of the Obligations is rescinded or must otherwise be restored by any Holder upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder has at law or in equity against the Guarantor by virtue hereof, upon the failure of the Company to pay any of the Obligations when and as the same shall become due, whether at maturity, by acceleration, by redemption, upon repurchase at the option of a Holder or otherwise, the Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders an amount equal to the sum of (i) the unpaid amount of such Obligations then due and owing and (ii) accrued and unpaid interest on such Obligations then due and owing (but only to the extent not prohibited by law). The Guarantor further agrees that, as between the Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated as provided in this Indenture for the purposes of the Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations Guaranteed hereby and (y) in the event of any such declaration of acceleration of such Obligations, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purposes of this Guarantee. The Guarantor also agrees to pay any and all reasonable costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or the Holders in enforcing any rights under this Section. Section 10.2 No Subrogation. Notwithstanding any payment or payments made by the Guarantor hereunder, the Guarantor shall not be entitled to be subrogated to any of the rights of the Trustee or any Holder against the Company or any collateral security or Guarantee or right of 58 offset held by the Trustee or any Holder for the payment of the Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Company in respect of payments made by the Guarantor hereunder, until all amounts owing to the Trustee and the Holders by the Company on account of the Obligations are paid in full. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by the Guarantor in trust for the Trustee and the Holders, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Trustee in the exact form received by the Guarantor (duly indorsed by the Guarantor to the Trustee, if required), to be applied against the Obligations. Section 10.3 Consideration. The Guarantor has received, or will receive, direct or indirect benefits from the making of the Guarantee. ARTICLE 11. RESERVED Section 11.1 Reserved. ARTICLE 12. CONVERSION Section 12.1 Conversion Privilege. A Holder of a Security may convert such Security into shares of Common Stock at any time prior to the close of business on June 2, 2033, subject to the provisions of this Article 12 and paragraph 9 of the Securities. Upon determination that Holders are or will be entitled to convert their Securities into Common Stock in accordance with paragraph 9 of the Securities, the Company will issue a press release and publish such determination on the Company's website or through such other public medium as the Company may use at that time. The number of shares of Common Stock issuable upon conversion of a Security per $1,000 of Principal Amount at Maturity thereof (the "Conversion Rate") shall be determined in accordance with the provisions of paragraph 9 of the Securities. A Holder may convert a portion of the Principal Amount at Maturity of a Security if the portion is $1,000 or an integral multiple of $1,000. Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security. The Holders' rights to convert Securities into shares of Common Stock is subject to the Company's right to elect instead to pay each such Holder the amount of cash set forth in the next succeeding sentence, in lieu of delivering such shares of Common Stock, subject to the last sentence of this paragraph. The amount of cash to be paid pursuant to Section 12.2 hereof for each $1,000 Principal Amount at Maturity of a Security upon conversion shall be equal to the average Sale Price of the Common Stock for the five consecutive Trading Days immediately following (i) the date of the Company's notice of its election to deliver cash upon conversion, if the Company shall not have given a notice of redemption pursuant to Section 3.3, or (ii) the Conversion Date, in the case of a conversion following such a notice of redemption specifying an intent to deliver cash upon conversion, in either case multiplied by the Conversion Rate in effect on such Conversion Date. The Company shall not pay cash in lieu of delivering shares of 59 Common Stock upon the conversion of any Security pursuant to the terms of this Article 12 (other than cash in lieu of fractional shares pursuant to Section 12.3 hereof) if there has occurred (prior to, on or after, as the case may be, the Conversion Date or the date on which the Company delivers its notice of whether such Security shall be converted into Common Stock or cash pursuant to Section 3.2 hereof) and is continuing an Event of Default (other than a default in a cash payment upon conversion of such Security). Section 12.2 Conversion Procedure. To convert a Security, a Holder must satisfy the requirements in paragraph 9 in the Securities. The date on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date"). The Conversion Agent shall notify the Company of the Conversion Date within one Business Day following the Conversion Date. Within two Business Days following the Conversion Date, the Company shall deliver to the Holder, through the Trustee, written notice of whether such Security shall be converted into shares of Common Stock or paid in cash, unless the Company shall have previously delivered a notice of redemption pursuant to Section 3.3 hereof. If the Company shall have notified the Holder that all of such Security shall be converted into shares of Common Stock, the Company shall deliver to the Holder through the Conversion Agent, as promptly as practicable but in any event no later than the fifth Business Day following the Conversion Date a certificate for the number of full shares of Common Stock deliverable upon the conversion and cash in lieu of any fractional share determined pursuant to Section 12.3 hereof. Except as provided in the last sentence in the third paragraph of Section 12.1 hereof, if the Company shall have notified the Holder that all or a portion of such Security shall be paid in cash, the Company shall deliver to the Holder surrendering such Security the amount of cash payable with respect to such Security no later than the tenth Business Day following such Conversion Date, together with a certificate for the number of full shares of Common Stock deliverable upon the conversion and cash in lieu of any fractional share determined pursuant to Section 12.3 hereof. Except as provided in the last sentence in the third paragraph of Section 12.1 hereof, the Company may not change its election with respect to the consideration to be delivered upon conversion of a Security once the Company has notified the Holder in accordance with this paragraph. If shares of Common Stock are delivered as consideration, then the person in whose name the certificate representing such shares is registered shall be treated as a stockholder of record on and after the Conversion Date; provided, however, that no surrender of a Security on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the person or persons entitled to receive the shares of Common Stock upon such conversion as the record holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the person or persons entitled to receive such shares of Common Stock as the record holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; such conversion shall be at the Conversion Rate in effect on the date that such Security shall have been surrendered for conversion, as if the stock transfer books of the Company had not been closed. Upon conversion of a Security, such person shall no longer be a Holder of such Security. No payment or adjustment will be made for dividends on, or other distributions with respect to, any Common Stock except as provided in this Article 12. On conversion of a Security, that portion of accrued Original Issue Discount and cash interest, including Contingent Cash Interest, if any, attributable to the period from the Issue Date of the Security through but not including the Conversion Date, with respect to the converted Security shall not be cancelled, 60 extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the provisions hereof (except to the extent that semiannual and contingent interest are paid in cash as provided in paragraph 9 of the Securities); and such cash, if any, and/or the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as delivered, to the extent thereof, first in exchange for accrued Original Issue Discount and cash interest, including Contingent Cash Interest, if any, accrued through the Conversion Date, and the balance, if any, of such fair market value of such Common Stock (and any such cash payment in lieu of fractional shares) shall be treated as issued in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof. Notwithstanding the foregoing, accrued cash interest will be payable upon conversion of Securities made concurrently with or after acceleration of Securities following an Event of Default. If the Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the total Principal Amount at Maturity of the Securities converted. If the last day on which a Security may be converted is a Legal Holiday, the Security may be surrendered on the next succeeding day that is not a Legal Holiday. A Security surrendered for conversion based on (a) the Common Stock price may be surrendered for conversion at any time during the applicable calendar quarter, (b) the Security being called for redemption may be surrendered for conversion at any time prior to the close of business on the second Business Day immediately preceding the Redemption Date, even if it is not otherwise convertible at such time, (c) a credit downgrade may be surrendered for conversion until the close of business on any Business Day during the period of the continuance of the credit downgrade as more fully described in paragraph 9 of the Security, and (d) upon the occurrence of certain corporate transactions more fully described in paragraph 9 of the Security may be surrendered for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of such transaction until 15 days after the actual date of such transaction, and if such day is not a Business Day, the next occurring Business Day following such day; but in each of (a), (b), (c) and (d) above, in no event later than the close of business on June 2, 2033. Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in Principal Amount at Maturity to the unconverted portion of the Security surrendered. Section 12.3 Fractional Shares. The Company will not issue a fractional share of Common Stock upon conversion of a Security. Instead, the Company will deliver cash for the current market value of the fractional share. The current market value of a fractional share shall be determined, to the nearest 1/1,000th of a share, by multiplying the per share Sale Price of the Common Stock, on the last Trading Day prior to the Conversion Date, by the fractional amount and rounding the product to the nearest whole cent. 61 Section 12.4 Taxes on Conversion. If a Holder converts a Security, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name and any income tax which is imposed on the Holder as a result of the conversion. The Conversion Agent may refuse to deliver the certificates representing the Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude the Company from any tax withholding or directing the withholding of any tax required by law or regulations. Section 12.5 Company to Provide Stock. The Company shall, prior to issuance of any Securities under this Article 12, and from time to time as may be necessary, reserve out of its authorized but unissued Common Stock a sufficient number of shares of Common Stock to permit the conversion of the Securities. All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim created by the Company. The Company will endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. Section 12.6 Adjustment for Change in Capital Stock. Except as set forth in Section 12.14 hereof, if, after the Issue Date of the Securities, the Company: (a) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock or other Capital Stock; (b) subdivides its outstanding shares of Common Stock into a greater number of shares; (c) combines its outstanding shares of Common Stock into a smaller number of shares; or (d) issues by reclassification of its Common Stock any shares of its Capital Stock (other than rights, warrants or options for its Capital Stock); then the conversion privilege and the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Security thereafter converted may receive the number of shares or other units of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Security immediately prior to such action. 62 The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. If after an adjustment a Holder of a Security upon conversion of such Security may receive shares of two or more classes of Capital Stock of the Company, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article 12 with respect to the Common Stock, on terms comparable to those applicable to Common Stock in this Article 12. Section 12.7 Adjustment for Rights Issue. Except as set forth in Section 12.14 and Section 12.19 hereof, if after the Issue Date, the Company distributes any rights, warrants or options to all holders of its Common Stock entitling them, for a period expiring within 60 days of the Issue Date for each distribution, to purchase shares of Common Stock at a price per share less than the Sale Price of the Common Stock as of the Time of Determination, the Conversion Rate shall be adjusted in accordance with the formula: R' = R (O + N) ------------------------ (O + [(N x P)/M]) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. O = the number of shares of Common Stock outstanding on the record date for the distribution to which this Section 12.7 is being applied. N = the number of additional shares of Common Stock offered pursuant to the distribution. P = the offering price per share of the additional shares. M = the Average Sale Price, minus, in the event that there occurs (i) a distribution to which Section 12.6(d) applies or (ii) a distribution to which Section 12.8 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 12.7 applies and (y) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 12.7 applies, the fair market value (on the record date for the distribution to which this Section 12.7 applies) of the (1) Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 12.6(d) distribution or (2) assets of the Company or debt securities or any rights, warrants or options to purchase securities of the Company distributed in respect of each share of Common Stock in such Section 12.8 distribution, 63 as the case may be. The Board of Directors of the Company shall determine fair market values for the purposes of this Section 12.7. The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 12.7 applies. If all of the shares of Common Stock subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options. No adjustment shall be made under this Section 12.7 if the application of the formula stated above in this Section 12.7 would result in a value of R' that is equal to or less than the value of R. Section 12.8 Adjustment for Other Distributions. (a) If, after the Issue Date of the Securities, the Company distributes to all holders of its Common Stock any of its assets, excluding distributions of Capital Stock or equity interests referred to in Section 12.8(b), or debt securities or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 12.6 and distributions of rights, warrants or options referred to in Section 12.7 and (y) cash dividends or other cash distributions that are paid out of consolidated current net earnings or earnings retained in the business as shown on the books of the Company unless such cash dividends or other cash distributions are Extraordinary Cash Dividends) the Conversion Rate shall be adjusted, subject to the provisions of Section 12.8(c), in accordance with the formula: R' = R x M ----- M - F where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the Average Sale Price , minus, in the event that there occurs a distribution to which Section 12.6(d) applies, for which (i) the record date shall occur on or before the record date for the distribution to which this Section 12.8(a) applies and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 12.8(a) applies, the fair market value (on the record date for the distribution to which this Section 12.8(a) applies) of any Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 12.6(d) distribution. 64 F = the fair market value (on the record date for the distribution to which this Section 12.8(a) applies) of the assets, securities, rights, warrants or options to be distributed in respect of each share of Common Stock in the distribution to which this Section 12.8(a) is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently). The Board of Directors of the Company shall determine fair market values for the purposes of this Section 12.8(a). The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 12.8(a) applies. For purposes of this Section 12.8, the term "Extraordinary Cash Dividend" shall mean any cash dividend with respect to the Common Stock the amount of which, together with the aggregate amount of cash dividends on the Common Stock to be aggregated with such cash dividend in accordance with the provisions of this paragraph, exceeds the threshold percentage set forth in item (i) below. For purposes of item (i) below, the "Measurement Period" with respect to a cash dividend on the Common Stock shall mean the 365 consecutive day period ending on the date prior to the Ex-Dividend Time with respect to such cash dividend, and the "Relevant Cash Dividends" with respect to a cash dividend on the Common Stock shall mean the cash dividends on the Common Stock with Ex-Dividend Times occurring in the Measurement Period. (i) If, upon the date prior to the Ex-Dividend Time with respect to a cash dividend on the Common Stock, the aggregate amount of such cash dividend together with the amounts of all Relevant Cash Dividends exceeds on a per share basis the sum of (a) 5% of the Sale Price of the Common Stock on the last Trading Day preceding the date of declaration by the Board of Directors of the Company of the cash dividend or distribution with respect to which this provision is being applied, and (b) the quotient of the amount of any Contingent Cash Interest paid on a Security during the Ex-Dividend Measurement Period and the number of shares of Common Stock issuable upon conversion of a Security pursuant to Article 12 at the Conversion Rate in effect on the relevant Contingent Cash Interest Payment Date, then such cash dividend together with all Relevant Cash Dividends shall be deemed to be an Extraordinary Cash Dividend, and for purposes of applying the formula set forth in this Section 12.8(a), the value of "F" shall be equal to (y) the aggregate of the amount of such cash dividend together with the amount of all Relevant Cash Dividends, minus (z) the aggregate amount of all Relevant Cash Dividends for which a prior adjustment in the Conversion Rate was previously made under this Section 12.8. (ii) In making the determination required by item (i) above, the amount of cash dividends paid on a per share basis and the amount of any Relevant Cash Dividends specified in item (i) above, shall be appropriately adjusted to reflect the occurrence during such period of any event described in Section 12.6 hereof. 65 (b) If, after the Issue Date of the Securities, the Company pays a dividend or makes a distribution to all holders of its Common Stock consisting of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Company, the Conversion Rate shall be adjusted in accordance with the formula: R' = R x (1 + F/M) where: R' = the adjusted Conversion Rate. R = the current Conversion Rate. M = the average of the Post-Distribution Prices of the Common Stock for the 10 Trading Days commencing on and including the fifth Trading Day after the date on which "ex-dividend trading" commences for such dividend or distribution on the principal United States exchange or market which such securities are then listed or quoted (the "Ex-Dividend Date"). F = the fair market value of the securities distributed in respect of each share of Common Stock in the distribution to which this Section 12.8(b) applies, which shall be determined by multiplying the number of securities distributed in respect of each share of Common Stock in the distribution by the average of the Post-Distribution Prices of those securities for the 10 Trading Days commencing on and including the fifth Trading Day after the Ex-Dividend Date. "Post-Distribution Price" of Capital Stock or any similar equity interest on any date means the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "when issued" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated; provided that if on any date such units have not traded on a "when issued" basis, the Post-Distribution Price shall be the closing per unit sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date for trading of such units on a "regular way" basis without due bills (or similar concept) as reported in the composite transactions for the principal United States securities exchange on which such Capital Stock or equity interest is traded or, if the Capital Stock or equity interest, as the case may be, is not listed on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System or by the National Quotation Bureau Incorporated. In the absence of such quotation, the Company shall be entitled to determine the Post-Distribution Price on the basis of such quotations which reflect the post-distribution value of the Capital Stock or equity interests as it considers appropriate. (c) In the event that, with respect to any distribution to which Section 12.8 would otherwise apply, the difference "M-F" as defined in the formula set forth in Section 12.8 66 is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by Section 12.8 shall not be made and in lieu thereof the provisions of Section 12.14 shall apply to such distribution. Section 12.9 When Adjustment May Be Deferred. No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment and all adjustments that are made and carried forward shall be taken in the aggregate in order to determine if the 1% threshold is met. All calculations under this Article 12 shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be. Section 12.10 When No Adjustment Required. No adjustment need be made for a transaction referred to in Section 12.6, Section 12.7, Section 12.8 or Section 12.14 hereof if Securityholders may participate in the transaction. Such participation by Securityholders may include participation without conversion or upon conversion; provided, that if such participation is upon conversion, an adjustment shall be made at such time as the Securityholders are no longer entitled to participate. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. Unless otherwise required by a provision of this Article 12, no adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent the Securities become convertible pursuant to this Article 12 into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. No adjustment will be made pursuant to this Article 12 that would result, through the application of two or more provisions hereof, in the duplication of any adjustment. Section 12.11 Notice of Adjustment. Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. Upon receipt by it of such notice, and at the written request of the Company, the Conversion Agent will promptly mail such notice to Securityholders at the Company's expense. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof. Section 12.12 Voluntary Increase. The Company from time to time may increase the Conversion Rate by any amount for any period of time. Whenever the Conversion Rate is increased, the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. 67 A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 12.6, Section 12.7 or Section 12.8 or Section 12.14 hereof. Section 12.13 Notice of Certain Transactions. If: (a) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 12.6, Section 12.7 or Section 12.8 hereof (unless no adjustment is to occur pursuant to Section 12.10 hereof); or (b) the Company takes any action that would require a supplemental indenture pursuant to Section 12.14; or (c) there is a liquidation or dissolution of the Company; then the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction. Section 12.14 Reorganization of Company; Special Distributions. If the Company is a party to a transaction subject to Article 5 hereof (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of Common Stock immediately prior to such transaction do not receive securities, cash, property or other assets of the Company or any other Person) or a merger or binding share exchange which reclassifies or changes its outstanding Common Stock, the Person obligated to deliver securities, cash or other assets upon conversion of Securities shall, no later than the closing date of such transaction, enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Securities is an Affiliate of the successor Company, that issuer shall, no later than the closing date of such transaction, join in the supplemental indenture. The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Security immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder was not a constituent Person or an Affiliate of a constituent Person to such transaction. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article 12. The successor Company shall mail to Securityholders a notice briefly describing the supplemental indenture. If this Section applies, neither Section 12.6 nor Section 12.7 hereof applies. If the Company makes a distribution to all holders of its Common Stock of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of 68 Section 12.8 hereof, then, from and after the record date for determining the holders of Common Stock entitled to receive the distribution, a Holder of a Security that converts such Security in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of Common Stock into which the Security is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Security immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution. Section 12.15 Company Determination Final. Any determination that the Company or the Board of Directors of the Company must make pursuant to Section 12.3, Section 12.6, Section 12.7, Section 12.8, Section 12.9, Section 12.10, Section 12.14 or Section 12.17 hereof is conclusive. Section 12.16 Trustee's Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article 12 should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 12.14 hereof need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article 12. Each Conversion Agent (other than the Company or an Affiliate of the Company) shall have the same protection under this Section 12.16 as the Trustee. Section 12.17 Simultaneous Adjustments. In the event that this Article 12 requires adjustments to the Conversion Rate under more than one of Section 12.6, Section 12.7 or Section 12.8 hereof, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 12.6 hereof, second, the provisions of Section 12.8 hereof and, third, the provisions of Section 12.7 hereof. Section 12.18 Successive Adjustments. After an adjustment to the Conversion Rate under this Article 12, any subsequent event requiring an adjustment under this Article 12 shall cause an adjustment to the Conversion Rate as so adjusted. Section 12.19 Rights Issued in Respect of Common Stock Issued Upon Conversion. Each share of Common Stock issued upon conversion of Securities pursuant to this Article 12 shall be entitled to receive the appropriate number of common stock or preferred stock purchase rights, as the case may be (the "Rights"), if any, that all shares of Common Stock are entitled to receive and the certificates representing the Common Stock issued upon such conversion shall bear such legends, if any, in each case as may be provided by the terms of any shareholder rights agreement adopted by the Company, as the same may be amended from time to time (in each case, a "Rights Agreement"). If such Rights Agreement requires that each share of Common Stock issued upon conversion of Securities at any time prior to the distribution of separate certificates representing the Rights be entitled to receive such Rights, then, notwithstanding anything else to the contrary in the foregoing sections of this Article 12, there shall not be any adjustment to the conversion privilege or Conversion Rate or any other term or provision of the Securities as a result of the issuance of Rights, the distribution of separate certificates 69 representing the Rights, the exercise or redemption of such Rights in accordance with any such Rights Agreement, or the termination or invalidation of such Rights. Notwithstanding anything in this Section 12.19 to the contrary, if a Holder of Securities exercising his right of conversion after the distribution of Rights pursuant to a Rights Agreement is not entitled to receive the Rights that would otherwise be attributable (but for the date of conversion) to the shares of Common Stock to be issued upon conversion, the Conversion Rate will be adjusted for the distribution of such Rights pursuant to Section 12.8(a). If such an adjustment is made and such Rights are later redeemed, invalidated or terminated, then a corresponding reversing adjustment will be made to the Conversion Rate on an equitable basis. ARTICLE 13. PAYMENT OF INTEREST Section 13.1 Interest Payments. Cash interest or Contingent Cash Interest on any Security that is payable, and is punctually paid or duly provided for, on any applicable payment date shall be paid to the person in whose name that Security is registered at the close of business on the Record Date or accrual date, as the case may be, for such interest at the office or agency of the Company maintained for such purpose. Each installment of semiannual or cash interest or Contingent Cash Interest on any Security shall be paid in same-day funds by transfer to an account maintained by the payee located inside the United States, if the Trustee shall have received proper wire transfer instructions from such payee not later than the applicable Record Date or accrual date, as the case may be, or, if no such instructions have been received, by check mailed to the payee at its address set forth on the Registrar's books. In the case of a permanent Global Security, semiannual or cash interest or Contingent Cash Interest payable on any applicable payment date will be paid to the Depositary, with respect to that portion of such permanent Global Security held for its account by Cede & Co. for the purpose of permitting such party to credit the interest received by it in respect of such permanent Global Security to the accounts of the beneficial owners thereof. Section 13.2 Defaulted Interest. Except as otherwise specified with respect to the Securities, any semiannual or cash interest or Contingent Cash Interest on any Security that is payable, but is not punctually paid or duly provided for, within 30 days following any applicable payment date (herein called "Defaulted Interest", which term shall include any accrued and unpaid interest that has accrued on such defaulted amount in accordance with paragraph 1 of the Securities), shall be paid by the Company, at its election in each case (x) to the Holder as of Special Record Date, as determined in accordance with clause (a) below, or (y) in the manner set forth in clause (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the 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 (which shall not be less than 20 days after such notice is received by the Trustee), 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 on or prior to the date of the proposed payment, such money when deposited to be 70 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 (the "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 of Securities at his address as it appears on the list of Securityholders maintained pursuant to Section 2.5 hereof 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 mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Securities are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (b) of this Section 13.2. (b) The Company may make payment of any Defaulted Interest on the Securities in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and 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. Section 13.3 Interest Rights Preserved. Subject to the foregoing provisions of this Article 13 and Section 2.6 hereof, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to semiannual or cash interest and Contingent Cash Interest accrued and unpaid, and to accrue, which were carried by such other Security. ARTICLE 14. CONTINGENT CASH INTEREST Section 14.1 Contingent Cash Interest. The Company shall make Contingent Cash Interest payments to the Holders of Securities, as set forth in Section 14.2 below, during any six month period from June 3 to December 2 and from December 3 to June 2, beginning with the six-month period commencing on June 3, 2008 (each, a "Semiannual Period") if, but only if, the average of the Security Market Prices for the Applicable Five Trading Day Period equals 120% or more of the Relevant Value of such Security. During any Semiannual Period when Contingent Cash Interest is payable pursuant to this section, each Contingent Cash Interest payment due and payable on each $1,000 Principal Amount at Maturity shall be calculated for any Semiannual Period, at a rate equal to a per annum rate of 1.25% of the Security Market Price for the Applicable Five Trading Day Period. As used in this Article 14, "Applicable Five Trading Day Period" means the five Trading Days ending on the third Trading Day immediately preceding the first day of the applicable Semiannual Period. "Relevant Value" means the sum of the Issue Price and the accrued Original Issue Discount on such Security to the day immediately preceding the first day of the applicable Semiannual Period. "Security Market Price" means, as of any date of determination, the average of the secondary market bid quotations per $1,000 Principal Amount at Maturity of Securities 71 obtained by the Bid Solicitation Agent for $5,000,000 Principal Amount at Maturity of Securities at approximately 4:00 p.m., New York City time, on such determination date from three independent nationally recognized securities dealers (none of which shall be an Affiliate of the Company) selected by the Company; provided, however, that if (a) at least three such bids are not obtained by the Bid Solicitation Agent or (b) in the Company's reasonable judgment, the bid quotations are not indicative of the secondary market value of the Securities as of such determination date, then the Securities Market Price for such determination date shall equal the product of (i) the Conversion Rate in effect as of such determination date multiplied by (ii) the average Sale Price of the Common Stock for the five Trading Days ending on such determination date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such Trading Days during such five Trading Day period and ending on such determination date, of any event described in Section 12.6, Section 12.7 or Section 12.8 hereof (subject to the conditions set forth in Section 12.8 and Section 12.10 hereof). The Original Issue Discount of the Securities will continue to accrue whether or not Contingent Cash Interest payments are made. Section 14.2 Payment of Contingent Cash Interest; Contingent Cash Interest Rights Preserved. If payable, Contingent Cash Interest on a Security shall be paid to the Person who is the Holder of that Security on the 15th day preceding the last day of such Semiannual Period (the "Contingent Cash Interest Record Date"). Such payments shall be paid on the last day of the Semiannual Period (a "Contingent Cash Interest Payment Date"). Each payment of Contingent Cash Interest on any Security shall be paid (A) if such Security is held in the form of a Global Note, in the same-day funds by transfer to an account maintained by the payee located inside the United States, or (B) if such Security is held in the form of a Certificated Note, by check, mailed to the address of such Holder as set forth in the Security Register. In the case of a Global Note, interest payable on any Contingent Cash Interest Payment Date will be paid to the Depositary for the purpose of permitting DTC to credit the interest received by it in respect of such Global Note to the accounts of the beneficial owners thereof. Upon determination that Holders of Securities will be entitled to receive Contingent Cash Interest during a Semiannual Period, prior to the start of such Semiannual Period, the Company will issue a press release and publish such information on its website or through such other public medium as the Company may use at the time. The Company may unilaterally increase the amount of Contingent Cash Interest it is required to pay or pay interest or other amounts it is not obligated to pay but will have no obligation to do so. Section 14.3 Bid Solicitation Agent. The Bid Solicitation Agent shall solicit bids from securities dealers which the Company indicates that it believes are willing to bid for the Securities. The Company initially appoints the Trustee to act as the Bid Solicitation Agent. The Company may change the Bid Solicitation Agent at its discretion; provided, however, that the Bid Solicitation Agent may not be an Affiliate of the Company. 72 ARTICLE 15. TAX MATTERS Section 15.1 Tax Treatment. The parties hereto hereby agree, and each Holder and any beneficial holder of a Security by its purchase of a Security hereby agrees (in the absence of administrative pronouncement or judicial ruling to the contrary): (a) to treat the Securities as indebtedness of the Company for all United States federal income tax purposes; (b) to treat the Securities as debt instruments that are subject to U.S. Treasury Regulation section 1.1275-4(b); and (c) to treat any payment to and receipt by a Holder of Common Stock upon conversion of a Security, or upon a purchase by the Company at the option of the Holder of a Security where the Company elects to pay in Common Stock, as a contingent payment under U.S. Treasury Regulation section 1.1275-4(b). Section 15.2 Comparable Yield and Projected Payment Schedule. Solely for purposes of applying U.S. Treasury Regulation section 1.1275-4 to the Notes: (a) for United States Federal income tax purposes, the Company shall accrue interest with respect to outstanding Securities as tax original issue discount ("Tax Original Issue Discount") according to the "noncontingent bond method," as set forth in U.S. Treasury Regulation section 1.1275-4(b), using a comparable yield of 9.265%, compounded semiannually, and the projected payment schedule attached as Annex 1 to this Indenture; (b) the Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of Tax Original Issue Discount for United States federal income tax purposes (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such Tax Original Issue Discount that the Company determines to be relevant under the Internal Revenue Code of 1986, as amended from time to time, including the amount of any adjustment made under the noncontingent bond method to account for the amount of any difference between the amount of an actual payment and the amount of a projected payment; and (c) the Company acknowledges and agrees, and each Holder and any beneficial holder of a Security, by its purchase of a Security shall be deemed to acknowledge and agree, that (i) the comparable yield means the annual yield the Company would pay, as of the Issue Date, on a fixed rate, nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the Securities, (ii) the projected payment schedule is determined on the basis of an assumption of linear growth of stock price and a constant growth in dividend yield, (iii) the comparable yield and the projected payment schedule are not determined for any purpose other than for the purpose of applying U.S. Treasury Regulation section 1.1275-4(b)(4) to the Security and (iv) the comparable yield and the projected payment schedule do not constitute a projection or representation regarding the actual amounts payable on the Securities. 73 ARTICLE 16. MISCELLANEOUS Section 16.1 TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. The Guarantor, in addition to performing its obligations under the Guarantee, shall perform such other obligations as may be imposed upon it with respect to this Indenture under the TIA. Section 16.2 Notices. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person or delivery by courier guaranteeing overnight delivery or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers: if to the Company: American Financial Group, Inc. One East Fourth Street Cincinnati, Ohio 45202 Attention: Secretary Telephone: (513) 579-2121 Facsimile: (513) 579-0108 with a copy of any notice given pursuant to Article 6 hereof to: Keating, Muething & Klekamp, P.L.L. 1400 Provident Tower One East Fourth Street Cincinnati, Ohio 45202 Attention: Mark A. Weiss Telephone: (513) 579-6599 Facsimile: (513) 579-6956 if to the Guarantor: American Financial Corporation One East Fourth Street Cincinnati, Ohio 45202 Attention: General Counsel Telephone: (513) 579-2121 Facsimile: (513) 579-0108 with a copy of any notice given pursuant to Article 6 hereof to: Keating, Muething & Klekamp, P.L.L. 1400 Provident Tower One East Fourth Street Cincinnati, Ohio 45202 Attention: Mark A. Weiss Telephone: (513) 579-6599 74 Facsimile: (513) 579-6956 if to the Trustee: U.S. Bank National Association 425 Walnut Street, 6th floor Cincinnati, Ohio 45202 Attention: Corporate Trust Department Telephone: (513) 632-4427 Facsimile: (513) 632-5511 The Company, the Guarantor or the Trustee by notice given to the others in the manner provided above may designate additional or different addresses for subsequent notices or communications. Any notice or communication given to a Securityholder shall be mailed to the Securityholder, by first-class mail, postage prepaid, at the Securityholder's address as it appears on the list of Securityholders maintained pursuant to Section 2.5 hereof and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee. If the Company or the Guarantor mails a notice or communication to the Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar. Section 16.3 Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Guarantor, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c). Section 16.4 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company or the Guarantor to the Trustee to take any action under this Indenture, the Company or the Guarantor shall furnish to the Trustee: (a) an Officers' Certificate of the Company or the Guarantor stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (b) an Opinion of Counsel stating that, in the opinion of such counsel, such actions are authorized or permitted by this Indenture and that all such conditions precedent have been complied with. 75 Section 16.5 Statements Required in Certificate or Opinion. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include to the extent required by the Trustee: (a) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based; (c) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement that, in the opinion of such person, such covenant or condition has been complied with. Section 16.6 Separability Clause. In case any provision in this Indenture or in the Securities or the Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 16.7 Rules by Trustee, Paying Agent, Conversion Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, Conversion Agent and the Paying Agent may make reasonable rules for their functions. Section 16.8 Calculations. The calculation of the Purchase Price, Change in Control Purchase Price, Conversion Rate, Market Price, Sale Price of the Common Stock and each other calculation to be made hereunder shall be the obligation of the Company. All calculations made by the Company as contemplated pursuant to this Section 16.8 shall be final and binding on the Company, the Guarantor and the Holders absent manifest error. The Trustee, Paying Agent and Conversion Agent shall not be obligated to recalculate, recompute or confirm any such calculations. Section 16.9 Legal Holidays. A "Legal Holiday" is any day other than a Business Day. If any specified date (including a date for giving notice) is a Legal Holiday, the action shall be taken on the next succeeding day that is not a Legal Holiday, and, if the action to be taken on such date is a payment in respect of the Securities, no Original Issue Discount or interest, if any, shall accrue for the intervening period. Section 16.10 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE, THE SECURITIES AND THE GUARANTEE. Section 16.11 No Recourse Against Others. A director, officer, employee, agent, representative, stockholder or equity holder, as such, of the Company and the Guarantor shall not have any liability for any obligations of the Company or the Guarantor under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their 76 creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. Section 16.12 Successors. All agreements of the Company in this Indenture and the Securities shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor. All agreements of the Guarantor in this Indenture and the Securities shall bind its successor, provided, however, that in the event that the Guarantor shall merge with and into the Company, the Guarantee shall terminate and be of no further force or effect (provided that, in such event, the Securities shall remain obligations of the Company and the provisions of Article 5 hereof shall be complied with). Section 16.13 Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. 77 IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written. AMERICAN FINANCIAL GROUP, INC., as Issuer By: ________________________________ Name: Title: AMERICAN FINANCIAL CORPORATION, as Guarantor By: ________________________________ Name: Title: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: ________________________________ Name: Title: ANNEX 1 Projected Payment Schedule*
Projected Interest Payment per $1,000 Principal Amount at Maturity of Period Ending Notes* - -------------------------------------------------------------------------------- 12/2/03 $ 7.43 - -------------------------------------------------------------------------------- 6/2/04 7.43 - -------------------------------------------------------------------------------- 12/2/04 7.43 - -------------------------------------------------------------------------------- 6/2/05 7.43 - -------------------------------------------------------------------------------- 12/2/05 7.43 - -------------------------------------------------------------------------------- 6/2/06 7.43 - -------------------------------------------------------------------------------- 12/2/06 7.43 - -------------------------------------------------------------------------------- 6/2/07 7.43 - -------------------------------------------------------------------------------- 12/2/07 7.43 - -------------------------------------------------------------------------------- 6/2/08 7.43 - -------------------------------------------------------------------------------- 12/2/08 0.00 - -------------------------------------------------------------------------------- 6/2/09 0.00 - -------------------------------------------------------------------------------- 12/2/09 0.00 - -------------------------------------------------------------------------------- 6/2/10 0.00 - -------------------------------------------------------------------------------- 12/2/10 0.00 - -------------------------------------------------------------------------------- 6/2/11 3.09 - -------------------------------------------------------------------------------- 12/2/11 3.23 - -------------------------------------------------------------------------------- 6/2/12 3.38 - -------------------------------------------------------------------------------- 12/2/12 3.53 - -------------------------------------------------------------------------------- 6/2/13 3.70 - -------------------------------------------------------------------------------- 12/2/13 3.87 - -------------------------------------------------------------------------------- 6/2/14 4.04 - -------------------------------------------------------------------------------- 12/2/14 4.23 - -------------------------------------------------------------------------------- 6/2/15 4.42 - -------------------------------------------------------------------------------- 12/2/15 4.63 - -------------------------------------------------------------------------------- 6/2/16 4.84 - -------------------------------------------------------------------------------- 12/2/16 5.06 - -------------------------------------------------------------------------------- 6/2/17 5.29 - -------------------------------------------------------------------------------- 12/2/17 5.54 - -------------------------------------------------------------------------------- 6/2/18 5.79 - -------------------------------------------------------------------------------- 12/2/18 6.06 - -------------------------------------------------------------------------------- 6/2/19 6.34 - -------------------------------------------------------------------------------- 12/2/19 6.63 - -------------------------------------------------------------------------------- 6/2/20 6.93 - -------------------------------------------------------------------------------- 12/2/20 7.25 - -------------------------------------------------------------------------------- 6/2/21 7.58 - -------------------------------------------------------------------------------- 12/2/21 7.93 - --------------------------------------------------------------------------------
Annex 1-1 6/2/22 8.29 - -------------------------------------------------------------------------------- 12/2/22 8.68 - -------------------------------------------------------------------------------- 6/2/23 9.07 - -------------------------------------------------------------------------------- 12/2/23 9.49 - -------------------------------------------------------------------------------- 6/2/24 9.93 - -------------------------------------------------------------------------------- 12/2/24 10.38 - -------------------------------------------------------------------------------- 6/2/25 10.86 - -------------------------------------------------------------------------------- 12/2/25 11.36 - -------------------------------------------------------------------------------- 6/2/26 11.88 - -------------------------------------------------------------------------------- 12/2/26 12.43 - -------------------------------------------------------------------------------- 6/2/27 13.00 - -------------------------------------------------------------------------------- 12/2/27 13.59 - -------------------------------------------------------------------------------- 6/2/28 14.22 - -------------------------------------------------------------------------------- 12/2/28 14.87 - -------------------------------------------------------------------------------- 6/2/29 15.55 - -------------------------------------------------------------------------------- 12/2/29 16.27 - -------------------------------------------------------------------------------- 6/2/30 17.02 - -------------------------------------------------------------------------------- 12/2/30 17.80 - -------------------------------------------------------------------------------- 6/2/31 18.62 - -------------------------------------------------------------------------------- 12/2/31 19.47 - -------------------------------------------------------------------------------- 6/2/32 20.37 - -------------------------------------------------------------------------------- 12/2/32 21.30 - -------------------------------------------------------------------------------- Terminal Value at Maturity $3,750.67 - -------------------------------------------------------------------------
* The comparable yield and the schedule of projected payments are determined on the basis of an assumption of linear growth of the stock price and are not determined for any purpose other than for the determination of interest accruals and adjustments thereof in respect of the Securities for United States federal income tax purposes. The comparable yield and the schedule of projected payments do not constitute a projection or representation regarding the amounts payable on Securities. Annex 1-2 EXHIBIT A-1 [FORM OF FACE OF GLOBAL SECURITY] FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER'S "COMPARABLE YIELD" FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO ARTICLE 15 OF THE INDENTURE, THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE SECURITY, EACH BENEFICIAL HOLDER OF THE SECURITIES WILL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, (i) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO THE CONTINGENT PAYMENT DEBT INSTRUMENT REGULATIONS UNDER SECTION 1.1275-4 OF THE UNITED STATES TREASURY REGULATIONS AND, FOR PURPOSES OF THE REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF COMMON STOCK RECEIVED BY A BENEFICIAL HOLDER UPON ANY CONVERSION OF THE SECURITIES AS A CONTINGENT PAYMENT AND (ii) TO BE BOUND BY THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE," WITHIN THE MEANING OF THE REGULATIONS, WITH RESPECT TO THE SECURITIES AND TO ACCRUE ORIGINAL ISSUE DISCOUNT AT THE COMPARABLE YIELD AS DETERMINED BY THE COMPANY. THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" IS 9.265% PER ANNUM, COMPOUNDED SEMIANNUALLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS ATTACHED TO THE INDENTURE AS ANNEX 1. YOU MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, YIELD TO MATURITY, COMPARABLE YIELD, AND PROJECTED PAYMENT SCHEDULE FOR THE SECURITY BY TELEPHONING THE COMPANY AT (513) 579-2121 OR SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: AMERICAN FINANCIAL GROUP, INC., ONE EAST FOURTH STREET, CINCINNATI, OHIO 45202. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER 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 THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), 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. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO A-1-1 TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER (X) THE LATER OF THE LAST DAY SECURITIES OF THIS ISSUE WERE ISSUED AND (Y) THE LAST DATE ON WHICH AMERICAN FINANCIAL GROUP, INC. (THE "COMPANY" OR THE "ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF ANY HOLDER THAT IS NOT AN AFFILIATE OF THE COMPANY AFTER THE RESALE RESTRICTION TERMINATION DATE. THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE. A-1-2 AMERICAN FINANCIAL GROUP, INC. Senior Convertible Note due 2033 No. A-1 CUSIP: 025932 AC 8 Issue Date: June 2, 2003 Issue Price: $371.53 Original Issue Discount: $628.47 (for each $1,000 Principal (for each $1,000 Principal Amount at Maturity) Amount at Maturity) AMERICAN FINANCIAL GROUP, INC., an Ohio corporation (herein called the "Company"), promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of Four Hundred Seventy-One Million and Twenty-Five Thousand Dollars ($471,025,000) on June 2, 2033. This Security shall not bear interest except as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. Dated: June 2, 2003 AMERICAN FINANCIAL GROUP, INC. By:______________________________ Title: By:______________________________ Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION U.S. Bank National Association, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By:________________________ Authorized Officer A-1-3 [FORM OF REVERSE SIDE OF ALL SECURITIES] Senior Convertible Notes due 2033 1. Interest. The Company promises to pay interest in cash on the Principal Amount at Maturity of this Note at the rate per annum of 1.4861% from the Issue Date, or from the most recent date to which interest has been paid or provided for, until June 2, 2008. During such period, the Company will pay cash interest semiannually in arrears on June 2 and December 2 of each year (each an "Interest Payment Date") to Holders of record at the close of business on the Business Day prior to each May 18 or November 17 (whether or not a business day) (each a "Regular Record Date") immediately preceding such Interest Payment Date. Cash interest on the Securities will accrue from the most recent date to which interest has been paid or duly provided or, if no interest has been paid, from the Issue Date. Cash interest will be computed on the basis of a 360-day year composed of twelve 30-day months. After June 2, 2008, this Security shall not bear interest, except as specified in this paragraph or in paragraph 5 hereof. If the Principal Amount at Maturity hereof or any portion of such Principal Amount at Maturity is not paid when due (whether upon acceleration pursuant to Section 6.2 of the Indenture, upon the date set for payment of the Redemption Price pursuant to paragraph 6 hereof, upon the date set for payment of the Purchase Price or Change in Control Purchase Price pursuant to paragraph 7 hereof or upon the Stated Maturity of this Security) or if cash interest (including semiannual or Contingent Cash Interest, if any) due hereon or any portions of such cash interest is not paid when due in accordance with paragraph 5 hereof, then in each such case the overdue amount shall, to the extent permitted by law, bear interest at the rate of 4.00% per annum, compounded semiannually, which interest shall accrue from the date such overdue amount was originally due to the date payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand. The accrual of such interest on overdue amounts shall be in lieu of, and not in addition to, the continued accrual of Original Issue Discount or cash interest. Original Issue Discount (the difference between the Issue Price and the Principal Amount at Maturity of the Security), in the period during which a Security remains outstanding, shall accrue at 4.00% per annum beginning on June 2, 2008, on a semiannual bond equivalent basis using a 360-day year composed of twelve 30-day months. 2. Method of Payment. Subject to the terms and conditions of the Indenture, the Company will make payments in respect of Redemption Prices, Purchase Prices, Change in Control Purchase Prices and at Stated Maturity to Holders who surrender Securities to a Paying Agent to collect such payments in respect of the Securities. In addition, the Company will pay cash interest from the Issue Date until June 2, 2008, as more fully described in paragraph 1 hereof. The Company will pay any cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, in certain circumstances, provided for in the Indenture, the Company may make such cash payments by check payable in such money. A-1-4 3. Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. Initially, US Bank National Association, a national banking association (the "Trustee"), will act as Paying Agent, Conversion Agent, Registrar and Bid Solicitation Agent. The Company may appoint and change any Paying Agent, Conversion Agent, Registrar or co-registrar or Bid Solicitation Agent without notice, other than notice to the Trustee, except that the Company will maintain at least one Paying Agent in the United States, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent, Registrar or co-registrar. None of the Company, any of its Subsidiaries or any of their Affiliates shall act as Bid Solicitation Agent. 4. Indenture. The Company issued the Securities pursuant to an Indenture dated as of June 2, 2003 (the "Indenture"), between the Company and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time (the "TIA"). Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Securities are general unsecured and unsubordinated obligations, of the Company, limited to $471,025,000 aggregate Principal Amount at Maturity ($538,315,000 aggregate Principal Amount at Maturity if the Initial Purchasers exercise their option to purchase additional Securities) (subject to Section 2.7 of the Indenture). The Indenture does not limit other indebtedness of the Company or the Guarantor, secured or unsecured. 5. Contingent Cash Interest. Subject to the conditions of the Indenture and the accrual and record date provisions specified in this paragraph 5, the Company shall pay Contingent Cash Interest to the Securityholders during any Semiannual Period, with the initial six-month period commencing on June 3, 2008, if, but only if, the average of the Security Market Prices for the Applicable Five Trading Day Period equals 120% or more of the Relevant Value of such Security. Contingent Cash Interest, if any, will accrue and be payable to holders of this Security as of the Contingent Cash Interest Record Date. Original Issue Discount will continue to accrue at 4.00% whether or not Contingent Cash Interest is paid. The amount of Contingent Cash Interest payable per $1,000 Principal Amount at Maturity hereof in respect of any Semiannual Period of the applicable Contingent Cash Interest Period shall be at a rate equal to a per annum rate of 1.25% of the Security Market Price for the Applicable Five Trading Day Period. Upon determination that Securityholders will be entitled to receive Contingent Cash Interest during a Semiannual Period, the Company shall issue a press release and publish such information on its web site or through such other public medium it may use at the time. A-1-5 6. Redemption at the Option of the Company. No sinking fund is provided for the Securities. The Securities are redeemable for cash as a whole, or from time to time in part, at any time at the option of the Company in accordance with the Indenture at the Redemption Prices set forth below; provided, that the Securities are not redeemable prior to June 2, 2008. The table below shows Redemption Prices of a Security per $1,000 Principal Amount at Maturity on the dates shown below and at Stated Maturity, which prices reflect accrued Original Issue Discount calculated to each such date. The Redemption Price of a Security redeemed between such dates shall include an additional amount reflecting the additional Original Issue Discount accrued since the immediately preceding date in the table to, but not including, the Redemption Date and any accrued and unpaid cash interest. [Remainder of page intentionally left blank] A-1-6
(2) (3) (1) Accrued Original Redemption Price Redemption Date Note Issue Price Issue Discount (1) + (2) --------------- ---------------- -------------- --------- June 2, 2008..................... $371.53 $ 0.00 $ 371.53 2009..................... 371.53 15.01 386.54 2010..................... 371.53 30.63 402.16 2011..................... 371.53 46.87 418.40 2012..................... 371.53 63.78 435.31 2013..................... 371.53 81.36 452.89 2014..................... 371.53 99.66 471.19 2015..................... 371.53 118.70 490.23 2016..................... 371.53 138.50 510.03 2017..................... 371.53 159.11 530.64 2018..................... 371.53 180.54 552.07 2019..................... 371.53 202.85 574.38 2020..................... 371.53 226.05 597.58 2021..................... 371.53 250.19 621.72 2022..................... 371.53 275.31 646.84 2023..................... 371.53 301.44 672.97 2024..................... 371.53 328.63 700.16 2025..................... 371.53 356.92 728.45 2026..................... 371.53 386.35 757.88 2027..................... 371.53 416.96 788.49 2028..................... 371.53 448.82 820.35 2029..................... 371.53 481.96 853.49 2030..................... 371.53 516.44 887.97 2031..................... 371.53 552.32 923.85 2032..................... 371.53 589.64 961.17 At stated maturity....... 371.53 628.47 1,000.00
7. Purchase by the Company at the Option of the Holder. Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, the Securities held by such Holder on the following Purchase Dates and at the following Purchase Prices, plus accrued and unpaid cash interest, if any, per $1,000 Principal Amount at Maturity, upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the Business Day immediately preceding such Purchase Date and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture.
Purchase Date Price Purchase - ------------- -------------- June 2, 2008 $371.53 June 2, 2013 452.89 June 2, 2018 552.07 June 2, 2023 672.97 June 2, 2028 820.35
A-1-7 The Purchase Price (equal to the Issue Price plus accrued Original Issue Discount to the Purchase Date) may be paid, at the option of the Company, in cash or by the issuance and delivery of shares of Common Stock of the Company, or in any combination thereof in accordance with the Indenture. At the option of the Holder and subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase the Securities held by such Holder no later than 30 Business Days after the occurrence of a Change in Control of the Company on or prior to June 2, 2008, but in no event prior to the date on which such a Change in Control occurs, for a Change in Control Purchase Price equal to the Issue Price plus accrued Original Issue Discount and accrued and unpaid cash interest, including Contingent Cash Interest, if any, to but not including the Change in Control Purchase Date, which Change in Control Purchase Price shall be paid in cash. A third party may make the offer and purchase of the Securities in lieu of the Company in accordance with the Indenture. Holders have the right to withdraw any Purchase Notice or Change in Control Purchase Notice, as the case may be, by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture. If cash (and/or securities if permitted under the Indenture) sufficient to pay the Purchase Price or Change in Control Purchase Price, as the case may be, of all Securities or portions thereof to be purchased as of the Purchase Date or the Change in Control Purchase Date, as the case may be, is deposited with the Paying Agent on the Business Day following the Purchase Date or the Change in Control Purchase Date, as the case may be, Original Issue Discount or cash interest (including Contingent Cash Interest), if any, shall cease to accrue on such Securities (or portions thereof) on such Purchase Date or Change in Control Purchase Date, as the case may be, and the Holder thereof shall have no other rights as such (other than the right to receive the Purchase Price or Change in Control Purchase Price, as the case may be, if any, upon surrender of such Security). 8. Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at the Holder's registered address. If money sufficient to pay the Redemption Price of, and accrued and unpaid cash interest, if any, with respect to, all Securities (or portions thereof) to be redeemed on the Redemption Date is deposited with the Paying Agent prior to or on the Redemption Date, on such Redemption Date, Original Issue Discount or cash interest (including Contingent Cash Interest), if any, shall cease to accrue on such Securities or portions thereof. Securities in denominations larger than $1,000 A-1-8 of Principal Amount at Maturity may be redeemed in part but only in integral multiples of $1,000 of Principal Amount at Maturity. 9. Conversion. Conversion Based on Sale Price of Common Stock. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition to conversion described below has not been satisfied, Holders may convert the Securities into Common Stock on a Conversion Date if the Sale Price of the Common Stock for at least 20 Trading Days in a period of 30 consecutive Trading Days ending on the last Trading Day of the most recently ended fiscal quarter, commencing with the quarter ending September 30, 2003, is greater than the conversion trigger price per share. The "conversion trigger price" for any fiscal quarter shall be 120% of the accreted conversion price per share (calculated without giving effect to accrued cash interest, if any) of Common Stock on the last day of such calendar quarter. If the foregoing condition is satisfied, then the Securities will be convertible on any Business Day during the following calendar quarter at the option of the Holder. The "accreted conversion price per share" of Common Stock as of any day equals the quotient of: - the Issue Price plus accrued Original Issue Discount that day, divided by - the number of shares of Common Stock issuable upon conversion of $1,000 Principal Amount at Maturity of Securities on that day pursuant to this paragraph 9 and Article 12 of the Indenture. Conversion Based on Credit Ratings Downgrade. Subject to the provisions of this paragraph 9 and the Indenture and notwithstanding the fact that any other condition to conversion has not been satisfied, the Securities shall be convertible into Common Stock at the election of a Holder on a Conversion Date at any time that (a) the credit rating assigned to the Securities by Moody's Investors Service Inc. and its successors ("Moody's") is Ba2 or lower or the credit rating assigned to the Securities by Standard & Poor's Credit Market Services, a division of the McGraw-Hill Companies Inc. and its successors ("Standard & Poor's") is BB or lower, or (b) the Securities are no longer rated by either or both of Moody's or Standard & Poor's, or (c) either or both of Moody's or Standard & Poor's have suspended or withdrawn their ratings of the Securities. Conversion upon Redemption. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition described herein to conversion has not been satisfied, a Holder may convert into Common Stock a Security or portion of a Security which has been called for redemption pursuant to paragraph 6 hereof, but such Securities may be surrendered for conversion only until the close of business on the second Business Day immediately preceding the Redemption Date. Conversion Upon Certain Distributions. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition to conversion has not been satisfied, in the event that the Company declares a dividend or distribution described in Section 12.7 of the A-1-9 Indenture, or a dividend or a distribution described in Section 12.8 of the Indenture and, in the case of a dividend or distribution described in Section 12.8 of the Indenture, the fair market value, per share, of such dividend or distribution per share of Common Stock exceeds 10% of the Sale Price of the Common Stock on the Business Day immediately preceding the date of declaration for such dividend or distribution, the Securities may be surrendered for conversion beginning on the date the Company gives notice to the Holders of such right, which shall not be less than 20 days prior to the Ex-Dividend Time for such dividend or distribution, and Securities may be surrendered for conversion at any time thereafter until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such dividend or distribution will not take place. Conversion Upon Occurrence of Certain Corporate Transactions. Subject to the provisions of this paragraph 9 and notwithstanding the fact that any other condition described herein to conversion has not been satisfied, in the event the Company is a party to a consolidation, merger, binding share exchange or a transfer of all or substantially all of the assets of the Company pursuant to which the Common Stock would be converted into cash, securities or other property as set forth in Section 12.14 of the Indenture, the Securities may be surrendered for conversion at any time from and after the date which is 15 days prior to the date announced by the Company as the anticipated effective time until 15 days after the actual effective date of such transaction, and at the effective time of such transaction the right to convert a Security into Common Stock will be deemed to have changed into a right to convert it into the kind and amount of cash, securities or other property which the holder would have received if the holder had converted its Security immediately prior to the transaction. A Security in respect of which a Holder has delivered a Purchase Notice or Change in Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. The initial Conversion Rate is 11.5016 shares of Common Stock per $1,000 Principal Amount at Maturity, subject to adjustment in the case of certain events described in the Indenture. The Company will deliver cash or a check in lieu of any fractional share of Common Stock. The ability to surrender Securities for conversion will expire at the close of business on June 2, 2033. To convert a Security, a Holder must (a) complete and manually sign the conversion notice (or complete and manually sign a facsimile of such notice) and deliver such notice to the Conversion Agent, (b) surrender the Security to the Conversion Agent, (c) furnish appropriate endorsements and transfer documents if required by the Conversion Agent, the Company or the Trustee and (d) pay any transfer or similar taxes, if required. A Holder may convert a portion of a Security if the Principal Amount at Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment or adjustment will be made for dividends on the Common Stock except as provided in the Indenture. On conversion of a Security, accrued Original Issue Discount and any accrued and unpaid cash interest, including Contingent Cash Interest, attributable to the period from the Issue Date through the Conversion Date shall not be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in A-1-10 full to the Holder thereof through the delivery of the Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the terms hereof; and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for Original Issue Discount and any accrued and unpaid cash interest, including Contingent Cash Interest, accrued through the Conversion Date, and the balance, if any, of such fair market value of such Common Stock (and any such cash payment) shall be treated as issued in exchange for the Issue Price of the Security being converted pursuant to the provisions hereof. Notwithstanding the foregoing, accrued cash interest, if any, will be payable upon any conversion of a Security at the option of the Holder made concurrently with or after acceleration of the Security following an Event of Default. Holders of a Security surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business of such Interest Payment Date will receive the semiannual interest payable on such Security on the corresponding Interest Payment Date notwithstanding the conversion, and such Security upon surrender must be accompanied by funds equal to the amount of such payment, unless such Security has been called for redemption, in which case no such payment shall be required. If Contingent Cash Interest is payable to Holders during any particular six-month period, and such Security is converted after the applicable accrual therefor and prior to the next succeeding Interest Payment Date, Holders at the close of business on the accrual date will receive the Contingent Cash Interest payable on such Security on the corresponding Interest Payment Date notwithstanding the conversion. A Security, upon surrender for conversion, must be accompanied by funds equal to the amount of Contingent Cash Interest payable on the principal amount of the Security so converted, unless such Security has been called for redemption, in which case no such payment shall be required. The Conversion Rate will be adjusted in accordance with Article 12 of the Indenture for dividends or distributions on Common Stock payable in Common Stock or other Capital Stock; subdivisions, combinations or certain reclassifications of Common Stock; distributions to all holders of Common Stock of certain rights to purchase Common Stock for a period expiring within 60 days of the Issue Date at less than the Sale Price of the Common Stock at the Time of Determination; and distributions to such holders of assets or debt securities of the Company or certain rights to purchase securities of the Company (excluding certain cash dividends or distributions) and certain rights pursuant to shareholder rights plans. The Company from time to time may voluntarily increase the Conversion Rate. If the Company is a party to a consolidation, merger or binding share exchange or a transfer of all or substantially all of its assets, or upon certain distributions described in the Indenture, the right to convert a Security into Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another person. A-1-11 10. [INTENTIONALLY OMITTED.] 11. [INTENTIONALLY OMITTED.] 12. Defaulted Interest. Except as otherwise specified with respect to the Securities, any Defaulted Interest on any Security shall forthwith cease to be payable to the registered Holder thereof on the relevant Regular Record Date or accrual date, as the case may be, and such Defaulted Interest shall be paid by the Company as provided for in Section 13.2 of the Indenture. 13. Denominations; Transfer; Exchange. The Securities are in fully registered form, without coupons, in denominations of $1,000 of Principal Amount at Maturity and integral multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or any Securities in respect of which a Purchase Notice or Change in Control Purchase Notice has been given and not withdrawn (except, in the case of a Security to be purchased in part, the portion of the Security not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed. 14. Persons Deemed Owners. The registered Holder of this Security may be treated as the owner of this Security for all purposes. 15. Unclaimed Money or Securities. The Trustee and the Paying Agent shall return to the Company upon written request any money or securities held by them for the payment of any amount with respect to the Securities that remains unclaimed for two years, subject to applicable unclaimed property laws. After return to the Company, a Holder entitled to the money or securities must look to the Company for payment as general creditors unless an applicable abandoned property law designates another person. 16. Amendment; Waiver. Subject to certain exceptions set forth in the Indenture, (a) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding and (b) certain Defaults may be waived with the written consent of the Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company and the Trustee may amend the Indenture or the Securities to cure any ambiguity or inconsistency, or to comply A-1-12 with Article 5 or Section 12.14 of the Indenture, to secure the Company's or the Guarantor's obligations under this Security or to add to the Company's or the Guarantor's covenants for the benefit of the Securityholders or to surrender any right or power conferred upon the Company or the Guarantor, to comply with any requirement of the SEC in connection with the qualification of the Indenture under the TIA or, if permitted by the Indenture, to release the Guarantor from its obligations under the Indenture or to make any change that does not adversely affect the rights of any Holders. 17. Defaults and Remedies. Under the Indenture, Events of Default include (a) default in payment of any cash interest or any Contingent Cash Interest when and after such default continues for 30 days; (b) default in payment of the Principal Amount at Maturity, Issue Price plus accrued Original Issue Discount or cash interest, Redemption Price, Purchase Price or Change in Control Purchase Price, as the case may be, in respect of the Securities when the same becomes due and payable; (c) failure by the Company or the Guarantor to comply with other agreements in the Indenture or the Securities, subject to notice and lapse of time; (d) default in the payment of any principal when due or resulting in acceleration of other indebtedness of the Company for borrowed money where the aggregate principal amount with respect to which the default or acceleration has occurred exceeds $10,000,000, and such acceleration has not been rescinded or annulled within a period of 10 days after receipt by the Company of a Notice of Default, subject to notice and lapse of time; provided, however, that if any such default shall be cured, waived, rescinded or annulled, then the Event of Default by reason thereof shall be deemed not to have occurred; (e) certain events of bankruptcy or insolvency involving the Company or the Guarantor and (f) except as permitted under the Indenture, the Guarantee is held in any final, non-appealable judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or the Guarantor, or any person acting on behalf of the Guarantor, denies or disaffirms its obligations under the Guarantee. If an Event of Default occurs and is continuing, the Trustee, or the Holders of at least 25% in aggregate Principal Amount at Maturity of the Securities at the time outstanding, may declare all the Securities to be due and payable immediately. Certain events of bankruptcy or insolvency involving the Company or the Guarantor are Events of Default which will result in the Issue Price plus Original Issue Discount and any accrued and unpaid cash interest or any Contingent Cash Interest on the Securities becoming due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in aggregate Principal Amount at Maturity of the Securities at the time outstanding may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of amounts specified in clause (a) or (b) above) if it determines that withholding notice is in their interests. 18. Trustee Dealings with the Company and the Guarantor. Subject to certain limitations imposed by the TIA, if applicable, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities A-1-13 and may otherwise deal with and collect obligations owed to it by the Company and the Guarantor or their Affiliates and may otherwise deal with the Company and the Guarantor or their Affiliates with the same rights it would have if it were not Trustee. 19. No Recourse Against Others. A director, officer, employee, agent, representative, stockholder or equity holder, as such, of the Company or the Guarantor shall not have any liability for any obligations of the Company or the Guarantor under the Securities or the Indenture or Guarantee or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 20. Guarantee. This Security will be entitled to the benefits of a certain Guarantee made for the benefit of the Holder. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantor, the Trustee and the Holders. 21. Authentication. This Security shall not be valid until an authorized signatory of the Trustee manually signs the Trustee's Certificate of Authentication on the other side of this Security. 22. Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with right of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 23. GOVERNING LAW. THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE, THIS SECURITY AND THE GUARANTEE. A-1-14 The Company will furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: American Financial Group, Inc. One East Fourth Street Cincinnati, Ohio 45202 Attention: General Counsel A-1-15 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to ________________________________________________ ________________________________________________ (Insert assignee's soc. sec. or tax ID no.) ________________________________________________ ________________________________________________ ________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _____________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. CONVERSION NOTICE To convert this Security into Common Stock of the Company, check the box: [ ] To convert only part of this Security, state the Principal Amount at Maturity to be converted (which must be $1,000 or an integral multiple of $1,000): $_______________________________________________ If you want the stock certificate made out in another person's name, fill in the form below: ________________________________________________ ________________________________________________ (Insert other person's soc. sec. or tax ID no.) ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ (Print or type other person's name, address and zip code) A-1-16 _______________________________________________________________________________ Date: _____________________ Your Signature:__________________________________ _______________________________________________________________________________ (Sign exactly as your name appears on the other side of this Security) A-1-17 EXHIBIT A-2 [FORM OF FACE OF CERTIFICATED SECURITY] FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS SECURITY IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL ACCRUE ORIGINAL ISSUE DISCOUNT AT THE ISSUER'S "COMPARABLE YIELD" FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO ARTICLE 15 OF THE INDENTURE, THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE SECURITY, EACH BENEFICIAL HOLDER OF THE SECURITIES WILL BE DEEMED TO HAVE AGREED, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES, (i) TO TREAT THE SECURITIES AS INDEBTEDNESS THAT IS SUBJECT TO THE CONTINGENT PAYMENT DEBT INSTRUMENT REGULATIONS UNDER SECTION 1.1275-4 OF THE UNITED STATES TREASURY REGULATIONS AND, FOR PURPOSES OF THE REGULATIONS, TO TREAT THE FAIR MARKET VALUE OF COMMON STOCK RECEIVED BY A BENEFICIAL HOLDER UPON ANY CONVERSION OF THE SECURITIES AS A CONTINGENT PAYMENT AND (ii) TO BE BOUND BY THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE," WITHIN THE MEANING OF THE REGULATIONS, WITH RESPECT TO THE SECURITIES AND TO ACCRUE ORIGINAL ISSUE DISCOUNT AT THE COMPARABLE YIELD AS DETERMINED BY THE COMPANY. THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" IS 9.265% PER ANNUM, COMPOUNDED SEMIANNUALLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS ATTACHED TO THE INDENTURE AS ANNEX 1. YOU MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE, YIELD TO MATURITY, COMPARABLE YIELD, AND PROJECTED PAYMENT SCHEDULE FOR THE SECURITY BY TELEPHONING THE COMPANY AT (513) 579-2121 OR SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: AMERICAN FINANCIAL GROUP, INC., ONE EAST FOURTH STREET, CINCINNATI, OHIO 45202. THIS SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER, SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF (X) THE LAST DAY SECURITIES OF THIS ISSUE WERE ISSUED AND (Y) AND THE LAST DATE ON WHICH AMERICAN FINANCIAL GROUP, INC. (THE "COMPANY" OR THE "ISSUER") OR ANY AFFILIATE OF THE COMPANY WAS THE A-2-1 OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF ANY HOLDER THAT IS NOT AN AFFILIATE OF THE COMPANY AFTER THE RESALE RESTRICTION TERMINATION DATE. THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF THE CONDITIONS SPECIFIED IN THE INDENTURE. A-2-2 AMERICAN FINANCIAL GROUP, INC. Senior Convertible Note due 2033 No. A-1 CUSIP: 025932 AC 8 Issue Date: June 2, 2003 Issue Price: $371.53 Original Issue Discount: $628.47 (for each $1,000 Principal (for each $1,000 Principal Amount at Maturity) Amount at Maturity) AMERICAN FINANCIAL GROUP, INC., an Ohio corporation (herein called the "Company"), promises to pay to Cede & Co. or registered assigns, the Principal Amount at Maturity of Four Hundred Seventy-One Million and Twenty-Five Thousand Dollars ($471,025,000) on June 2, 2033. This Security shall not bear interest except as specified on the other side of this Security. Original Issue Discount will accrue as specified on the other side of this Security. This Security is convertible as specified on the other side of this Security. Additional provisions of this Security are set forth on the other side of this Security. Dated: June 2, 2003 AMERICAN FINANCIAL GROUP, INC. By: ______________________________ Title: By: ______________________________ Title: TRUSTEE'S CERTIFICATE OF AUTHENTICATION ___________________________________, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture. By:______________________________ Authorized Officer A-2-3 [Form of Reverse Side of Certificated Security is the same the Form of Reverse Side of Global Security] A-2-4 EXHIBIT B-1 TRANSFER CERTIFICATE In connection with any transfer of any of the Securities within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) (or any successor provision) under the Securities Act of 1933, as amended (the "Securities Act"), the undersigned registered owner of this Security hereby certifies with respect to $471,025,000 Principal Amount at Maturity of the above-captioned securities presented or surrendered on the date hereof (the "Surrendered Securities") for registration of transfer, or for exchange or conversion where the securities issuable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a "transfer"), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Securities for the reason checked below: [ ] The transfer of the Surrendered Securities is made to the Company or any subsidiary of the Company; or [ ] The transfer of the Surrendered Securities complies with Rule 144A under the Securities Act; or [ ] The transfer of the Surrendered Securities is pursuant to an effective registration statement under the Securities Act; or [ ] The transfer of the Surrendered Securities is pursuant to an effective registration statement under the Securities Act; or [ ] The transfer of the Surrendered Securities is pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act; or [ ] The transfer of the Surrendered Securities is pursuant to another available exemption from the registration requirement of the Securities Act. and unless the box below is checked, the undersigned confirms that, to the undersigned's knowledge, such Securities are not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act (an "Affiliate"). [ ] The transferee is an Affiliate of the Company. DATE: _____________________ ______________________________ Signature(s) (If the registered owner is a corporation, partnership or fiduciary, the title of the Person signing on behalf of such registered owner must be stated.) EX-4.2 4 l01683aexv4w2.txt EX-4.2 REGISTRATION RIGHTS EXHIBIT 4.2 Executed Version REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of June 2, 2003 by and among American Financial Group, Inc., an Ohio corporation (the "Company"), American Financial Corporation (the "Guarantor") and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), UBS Warburg LLC and Credit Suisse First Boston LLC (the "Initial Purchasers"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company and the Guarantor have agreed to provide the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. The Company and the Guarantor agree with the Initial Purchasers, (i) for their benefit as Initial Purchasers and (ii) for the benefit of the beneficial owners (including the Initial Purchasers) from time to time of the Notes (as defined herein), and the beneficial owners from time to time of the Underlying Common Stock (as defined herein) issued upon conversion of Notes (each of the foregoing a "Holder" and together the "Holders"), as follows: Section 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. In addition to the terms that are defined elsewhere in this Agreement, the following terms shall have the following meanings: "Affiliate" with respect to any specified person, has the meaning specified in Rule 144. "Applicable Conversion Price" means, as of any date of determination, the Applicable Principal Amount per $1,000 principal amount at maturity of Notes as of such date of determination divided by the Conversion Rate in effect as of such date of determination or, if no Notes are then outstanding, the Conversion Rate that would be in effect were Notes then outstanding. "Applicable Principal Amount" means, as of any date of determination, with respect to each $1,000 principal amount at maturity of Notes, the sum of the initial issue price of such Notes ($371.53) plus accrued original issue discount and any accrued cash interest with respect to such Notes through such date of determination or, if no Notes are then outstanding, such sum calculated as if such Notes were then outstanding. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. "Common Stock" means any shares of the common stock, no par value per share, of the Company and any other shares of common stock as may constitute "Common Stock" for purposes of the Indenture, including the Underlying Common Stock. "Conversion Rate" has the meaning assigned to such term in the Indenture. "Damages Accrual Period" has the meaning specified in Section 2(e) hereof. "Damages Payment Date" means each June 2 and December 2. "Deferral Notice" has the meaning specified in Section 3(i) hereof. "Deferral Period" has the meaning specified in Section 3(i) hereof. "Effectiveness Deadline Date" has the meaning specified in Section 2(a) hereof. "Effectiveness Period" means the period of two years from the Issue Date or such shorter period ending on the date that all Registrable Securities have ceased to be Registrable Securities. "Event" has the meaning specified in Section 2(e) hereof. "Event Date" has the meaning specified in Section 2(e) hereof. "Event Termination Date" has the meaning specified in Section 2(e) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. "Filing Deadline Date" has the meaning specified in Section 2(a) hereof. "Guarantee" has the meaning specified in the Indenture. "Guarantor" has the meaning specified in the first paragraph of this Agreement. "Holder" has the meaning specified in the second paragraph of this Agreement. "Indenture" means the Indenture dated as of the date hereof among the Company, the Guarantor and U.S. Bank National Association, a national banking association, as trustee, pursuant to which the Notes are being issued. "Initial Shelf Registration Statement" has the meaning specified in Section 2(a) hereof. "Issue Date" means June 2, 2003. "Liquidated Damages Amount" has the meaning specified in Section 2(e) hereof. "Majority Holders" means the Holders of a majority of an aggregate principal amount at maturity of securities registered under any Shelf Registration Statement. "Material Event" has the meaning specified in Section 3(i) hereof. "NASD Rules" has the meaning set forth in Section 3(s) hereof. 2 "Notes" means the Senior Convertible Notes due 2033 of the Company to be purchased pursuant to the Purchase Agreement. "Notice and Questionnaire" means a written notice delivered to the Company and the Guarantor containing substantially the information called for by the Selling Securityholder Notice and Questionnaire attached as Annex A to the Offering Memorandum of the Company and the Guarantor dated May 27, 2003 relating to the Notes. "Notice Holder" means on any date, any Holder that has delivered a Notice and Questionnaire to the Company and the Guarantor on or prior to such date. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 415 promulgated under the Securities Act), as amended or supplemented by any amendment or prospectus supplement, including post-effective amendments, and all materials incorporated by reference or explicitly deemed to be incorporated by reference in such Prospectus. "Purchase Agreement" has the meaning specified in the first paragraph of this Agreement. "Record Holder" means with respect to any Damages Payment Date relating to any Note or shares of Underlying Common Stock as to which any Liquidated Damages Amount has accrued, the registered Holder of such Note or such shares of Underlying Common Stock, as the case may be, on the 15th day immediately prior to the next succeeding Damages Payment Date or, if all Events giving rise to the Liquidated Damages Amount payable on such Damage Payment Date have been cured and no such Event is continuing on such date, as of the date on which the last such Event was cured. "Registrable Securities" means the Notes, the Guarantee and the Underlying Common Stock until such securities have been converted or exchanged and, at all times subsequent to any such conversion or exchange, any securities into or for which such securities have been converted or exchanged, and any security issued with respect thereto upon any stock dividend, split, merger or similar event until, in the case of any such security, the earliest of (i) its effective registration under the Securities Act and resale in accordance with the Registration Statement covering it, (ii) expiration of the holding period that would be applicable thereto under Rule 144(k) were it not held by an Affiliate of the Company, or (iii) its sale to the public pursuant to Rule 144. "Registration Expenses" has the meaning specified in Section 5 hereof. "Registration Statement" means any registration statement of the Company and the Guarantor that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all materials 3 incorporated by reference or explicitly deemed to be incorporated by reference in such registration statement. "Restricted Securities" has the meaning assigned to such term in Rule 144. "Rule 144" means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule. "Rule 144A" means Rule 144A under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the SEC having substantially the same effect as such Rule. "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder. "Shelf Registration Statement" has the meaning specified in Section 2(a) hereof. "Subsequent Shelf Registration Statement" has the meaning specified in Section 2(b) hereof. "Subsequent Shelf Registration Statement Effectiveness Deadline Date" has the meaning specified in Section 2(d) hereof. "TIA" means the Trust Indenture Act of 1939, as amended. "Trustee" means U.S. Bank National Association, a national banking association (or any successor entity), the Trustee under the Indenture. "Underlying Common Stock" means the Common Stock into which the Notes are convertible or issued upon any such conversion. SECTION 2. Shelf Registration. (a) The Company and the Guarantor shall prepare and file or cause to be prepared and filed with the SEC no later than a date which is ninety (90) days after the Issue Date (the "Filing Deadline Date") a Registration Statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act (a "Shelf Registration Statement") registering the resale from time to time by Holders of all of the Registrable Securities (the "Initial Shelf Registration Statement"). The Initial Shelf Registration Statement shall be on an appropriate form permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution reasonably elected by the Holders and set forth in the Initial Shelf Registration Statement; provided, that in no event will such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior written consent of the Company and the Guarantor (such consent to be withheld or 4 granted in the Company's and the Guarantor's sole and absolute discretion). The Company and the Guarantor shall use reasonable best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act no later than the date (the "Effectiveness Deadline Date") that is one-hundred and eighty (180) days after the Issue Date, and to keep the Initial Shelf Registration Statement (and/or any Subsequent Shelf Registration Statement) continuously effective under the Securities Act (subject to Section 3(i)) until the expiration of the Effectiveness Period. Each Holder that became a Notice Holder on or prior to the date ten (10) Business Days prior to the time that the Initial Shelf Registration Statement became effective shall be named as a selling security holder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law. Notwithstanding the foregoing, no Holder shall be entitled to have the Registrable Securities held by it covered by such Shelf Registration Statement unless such Holder has provided a Notice and Questionnaire in accordance with Section 2(d) and is in compliance with Section 4. None of the Company's security holders (other than the Holders of Registrable Securities) shall have the right to include any of the Company's securities in the Shelf Registration Statement. (b) If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period (other than as provided in Section 3(i)), the Company and the Guarantor shall use reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty (30) days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected by the Company and the Guarantor to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement (a "Subsequent Shelf Registration Statement") covering all of the securities that as of the date of such filing are Registrable Securities. If any post-effective amendment or Subsequent Shelf Registration Statement is filed, the Company and the Guarantor shall use reasonable best efforts to cause the amended Registration Statement or the Subsequent Shelf Registration Statement, as the case may be, to become effective as promptly as is reasonably practicable after such filing or, if filed during a Deferral Period, after the expiration of such Deferral Period (but in no event later than 30 days after filing or expiration of the Deferral Period, as the case may be), and to keep such Registration Statement (or Subsequent Shelf Registration Statement) continuously effective (subject to Section 3(i)) until the end of the Effectiveness Period. (c) The Company and the Guarantor shall supplement and amend any Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantor for such Shelf Registration Statement, if required by the Securities Act or, to the extent to which the Company and the Guarantor do not reasonably object, as reasonably requested by the Initial Purchasers or by the Trustee on behalf of the registered Holders. (d) Each Holder of Registrable Securities agrees that if such Holder wishes to sell Registrable Securities pursuant to a Shelf Registration Statement and related 5 Prospectus, it will do so only in accordance with this Section 2(d) and Sections 3(i) and 4 of this Agreement. Each Holder of Registrable Securities wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire to the Company and the Guarantor at least five (5) Business Days prior to any intended distribution of Registrable Securities under a Shelf Registration Statement. With respect to any Holder who delivers a completed and executed Notice and Questionnaire to the Company and the Guarantor after the last date prior to initial effectiveness pursuant to which Registrable Securities may be included in the Initial Shelf Registration Statement, the Company and the Guarantor shall, as promptly as is reasonably practicable after the date a Notice and Questionnaire is delivered, but in any event, no later than five (5) Business Days after such date, (i) if required by applicable law, file with the SEC a supplement to the related Prospectus or an amendment to the Shelf Registration Statement or a Subsequent Shelf Registration Statement and any necessary supplement or amendment to any document incorporated therein by reference or file any other document required by the SEC so that the Holder delivering such Notice and Questionnaire is named as a selling security holder in a Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of the Registrable Securities in accordance with applicable law and, if the Company and the Guarantor shall file a post-effective amendment to the Shelf Registration Statement or file a Subsequent Shelf Registration Statement, they shall use their reasonable best efforts to cause such post-effective amendment or Subsequent Shelf Registration Statement, as the case may be, to be declared effective under the Securities Act as promptly as is reasonably practicable, but in any event by the date (the applicable date being the "Amendment Effectiveness Deadline Date" in the case of a post-effective amendment or the "Subsequent Shelf Registration Statement Effectiveness Deadline Date" in the case of a Subsequent Shelf Registration Statement) that is thirty (30) days after the date such post-effective amendment or Subsequent Shelf Registration Statement, as the case may be, is required by this clause to be filed; provided, however, that if a post-effective amendment or a Subsequent Shelf Registration Statement is required by the rules and regulations of the SEC in order to permit resales by Holders submitting Notices and Questionnaires after the last date prior to initial effectiveness pursuant to which Registrable Securities may be included in the Initial Shelf Registration Statement, neither the Company nor the Guarantor shall be required to file more than one post-effective amendment or Subsequent Shelf Registration Statement for such purpose in any thirty (30) day period; (ii) provide such Holder copies of any documents filed pursuant to Section 2(d)(i); and (iii) notify such Holder as promptly as is reasonably practicable after the effectiveness under the Securities Act of any post-effective amendment or Subsequent Shelf Registration Statement filed pursuant to Section 2(d)(i); provided, that if such Notice and Questionnaire is delivered during a Deferral Period, the Company and the Guarantor shall so inform the Holder delivering such Notice and Questionnaire and shall take the actions set forth in clauses (i), (ii) and (iii) above not later than five (5) Business Days following expiration of the Deferral Period in accordance with Section 3(i); provided, further, that if under applicable law the Company and the Guarantor have more than one option as to the type or manner of making any such filing, they will make the required filing or filings in the manner or of a type that is reasonably expected to result in the earliest availability of 6 the Prospectus for effecting resales of Registrable Securities. Notwithstanding anything contained herein to the contrary, the Company and the Guarantor shall be under no obligation to name any Holder that is not a Notice Holder as a selling security holder in any Registration Statement or related Prospectus; provided, however, that any Holder that becomes a Notice Holder pursuant to the provisions of Section 2(d) of this Agreement (whether or not such Holder was a Notice Holder at the time a Registration Statement was initially declared effective) shall be named as a selling security holder in a Registration Statement or related Prospectus subject to and in accordance with the requirements of this Section 2(d). Notwithstanding the provisions of Section 3, any amendment or supplement to a Registration Statement and any Subsequent Shelf Registration Statement pursuant to this Section 2(d) that solely lists additional selling security holders need not be submitted for review by other Notice Holders. (e) The parties hereto agree that the Holders of Registrable Securities will suffer damages, and that it would not be feasible to ascertain the extent of such damages with precision, if (i) the Initial Shelf Registration Statement has not been filed on or prior to the Filing Deadline Date, (ii) the Initial Shelf Registration Statement has not been declared effective under the Securities Act on or prior to the Effectiveness Deadline Date (iii) either a supplement to a Prospectus, a post-effective amendment or a Subsequent Shelf Registration Statement is required to be filed and fails to be filed within the prescribed period set forth in Section 2(d) (the applicable date being an "Additional Filing Deadline Date") or in the case of a post-effective amendment or a Subsequent Shelf Registration Statement, such post-effective amendment or Subsequent Shelf Registration Statement is not declared effective by the SEC by the Amendment Effectiveness Deadline Date or the Subsequent Shelf Registration Statement Effectiveness Deadline Date or (iv) the aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(i) hereof (each of the events of a type described in any of the foregoing clauses (i) through (iv) are individually referred to herein as an "Event," and the Filing Deadline Date in the case of clause (i), the Effectiveness Deadline Date in the case of clause (ii), the Additional Filing Deadline Date, the Amendment Effectiveness Deadline Date or the Subsequent Shelf Registration Statement Effectiveness Deadline Date, as the case may be, in the case of clause (iii) and the date on which the aggregate duration of Deferral Periods in any period exceeds the number of days permitted by Section 3(i) hereof in the case of clause (iv), being referred to herein as an "Event Date"). Events shall be deemed to continue until the "Event Termination Date," which shall be the following dates with respect to the respective types of Events: the date the Initial Shelf Registration Statement is filed in the case of an Event of the type described in clause (i), the date the Initial Shelf Registration Statement is declared effective under the Securities Act in the case of an Event of the type described in clause (ii), the date a post-effective amendment to the Initial Shelf Registration Statement or Subsequent Shelf Registration Statement, whichever is required, is filed or becomes effective, as the case may be, in the case of an Event of the type described in clause (iii) and the termination of the Deferral Period that caused the limit on the aggregate duration of Deferral Periods in a period set forth in Section 3(i) to be exceeded in the case of the commencement of an Event of the type described in clause (iv). 7 Accordingly, commencing on (and including) any Event Date and ending on (but excluding) the next date after an Event Termination Date (a "Damages Accrual Period"), the Company and the Guarantor, jointly and severally, agree to pay, as liquidated damages and not as a penalty, an amount (the "Liquidated Damages Amount"), payable on the Damages Payment Dates to Record Holders of then outstanding Notes that are Registrable Securities or of then outstanding shares of Underlying Common Stock issued upon conversion of Notes that are Registrable Securities, as the case may be, accruing, for each portion of such Damages Accrual Period beginning on and including a Damages Payment Date (or, in respect of the first time that the Liquidation Damages Amount is to be paid to Holders on a Damages Payment Date as a result of the occurrence of any particular Event, from the Event Date) and ending on but excluding the first to occur of (A) the date of the end of the Damages Accrual Period or (B) the next Damages Payment Date, at a rate per annum equal to one-quarter of one percent (0.25%) for the first 90-day period, based on a 360-day year comprised of twelve (12) 30-day months from the Event Date, and thereafter at a rate per annum equal to one-half of one percent (0.5%) of the aggregate Applicable Principal Amount of such Notes, calculated based on a 360-day year comprised of twelve (12) 30-day months or the aggregate Applicable Conversion Price of the shares of Underlying Common Stock, as the case may be, in each case determined as of the Business Day immediately preceding the next Damages Payment Date; provided, that in the case of a Damages Accrual Period that is in effect solely as a result of an Event of the type described in clause (ii) of the immediately preceding paragraph, no Liquidated Damages Amount shall be payable by the Company or the Guarantor to any Holder if no Holder has delivered a Notice and Questionnaire to the Company and the Guarantor in accordance with Section 2(d) and the failure to receive such a Notice and Questionnaire prevents the performance necessary to keep such Event from occurring; provided, further, that any Liquidated Damages Amount accrued with respect to any Note or portion thereof called for redemption on a redemption date or converted into Underlying Common Stock on a conversion date prior to the Damages Payment Date, shall, in any such event, be paid instead to the Holder who submitted such Note or portion thereof for redemption or conversion on the applicable redemption date or conversion date, as the case may be, on such date (or promptly following the conversion date, in the case of conversion). Notwithstanding the foregoing, no Liquidated Damages Amounts shall accrue as to any Registrable Security from and after the earlier of (x) the date such security is no longer a Registrable Security and (y) expiration of the Effectiveness Period. The rate of accrual of the Liquidated Damages Amount with respect to any period shall not exceed the rate provided for in this paragraph notwithstanding the occurrence of multiple concurrent Events. Following the cure of all Events requiring the payment by the Company and the Guarantor of Liquidated Damages Amounts to the Holders of Registrable Securities pursuant to this Section, the accrual of Liquidated Damages Amounts will cease (without in any way limiting the effect of any subsequent Event requiring the payment of the Liquidated Damages Amount by the Company and the Guarantor). The Trustee, subject to the applicable provisions of the Indenture, shall be entitled, for the benefit of Holders of Notes or Underlying Common Stock, to seek any available remedy for the enforcement of this Agreement, including for the payment of 8 any Liquidated Damages Amount. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, the parties agree that the sole monetary damages payable for a violation of the terms of this Agreement with respect to which liquidated damages are expressly provided shall be such liquidated damages. Nothing shall preclude a Notice Holder or Holder of Registrable Securities from pursuing or obtaining specific performance or other equitable relief with respect to this Agreement. All of the Company's and the Guarantor's obligations set forth in this Section 2(e) that are outstanding with respect to any Registrable Security at the time such security ceases to be a Registrable Security shall survive until such time as all such obligations with respect to such security have been satisfied in full (notwithstanding termination of this Agreement pursuant to Section 8(k)). The parties hereto agree that the liquidated damages provided for in this Section 2(e) constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of the Shelf Registration Statement to be filed, declared effective amended or replaced to include the names of all Notice Holders or available for effecting resales of Registrable Securities in accordance with the provisions hereof. SECTION 3. Registration Procedures. In connection with the registration obligations of the Company and the Guarantor under Section 2 hereof, the Company and the Guarantor shall: (a) Before filing any Registration Statement or Prospectus or any amendments or supplements (other than supplements that solely add one or more Notice Holders as selling security holders) thereto with the SEC, furnish to the Initial Purchasers copies of all such documents proposed to be filed and use reasonable best efforts to reflect in each such document when so filed with the SEC such comments as the Initial Purchasers reasonably shall propose within three (3) Business Days of the delivery of such copies to the Initial Purchasers. (b) Prepare and file with the SEC such amendments and post-effective amendments to the Initial Shelf Registration Statement and any Subsequent Shelf Registration Statements, as the case may be, as may be necessary to keep such Initial Registration Statement and/or such Subsequent Shelf Registration Statements continuously effective for the applicable period specified in Section 2(a); cause the related Prospectus(es) to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and use reasonable best efforts to comply with the provisions of the Securities Act applicable to it with respect to the disposition of all securities covered by any Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by the sellers thereof set forth in any such Registration Statement as so amended or any such Prospectus as so supplemented. (c) As promptly as reasonably practicable give notice to the Notice Holders and the Initial Purchasers (i) when any Prospectus, Prospectus supplement, Registration 9 Statement or post-effective amendment to a Registration Statement has been filed with the SEC and, with respect to a Registration Statement or any post-effective amendment, when the same has been declared effective (provided, however, that neither the Company nor the Guarantor shall be required by this clause (i) to notify (A) the Initial Purchasers of the filing of a Prospectus supplement that solely adds one or more Notice Holders as selling security holders or (B) any Notice Holder of the filing of a Prospectus supplement that solely adds one or more other Notice Holders as selling security holders), (ii) of any request, following the effectiveness of the Initial Shelf Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to any Registration Statement or related Prospectus or for additional information, (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order or injunction suspending or enjoining the use of any Prospectus or the effectiveness of any Registration Statement or the initiation or threatening of any proceedings for that purpose, (iv) of the receipt by the Company, the Guarantor or either of their legal counsel of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (v) of the occurrence of (but not the nature of or details concerning) a Material Event (provided, however, that no notice by the Company or the Guarantor shall be required pursuant to this clause (v) in the event that the Company and the Guarantor either promptly files a Prospectus supplement to update the Prospectus or a Current Report on Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which, in either case, contains the requisite information with respect to such Material Event that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements contained therein not misleading) and (vi) of the determination by the Company and the Guarantor that a post-effective amendment to a Registration Statement or Subsequent Shelf Registration Statement will be filed with the SEC, which notice may, at the discretion of the Company and the Guarantor (or as required pursuant to Section 3(i)), state that it constitutes a Deferral Notice, in which event the provisions of Section 3(i) shall apply. (d) Use reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or the lifting of any suspension of qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction in which they have been qualified for sale, in either case as soon as reasonably possible or, if any such order or suspension is made effective during any Deferral Period, as soon as reasonably possible after the expiration of such Deferral Period. (e) If reasonably requested by the Initial Purchasers or any Notice Holder, as promptly as reasonably practicable incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement or a Subsequent Shelf Registration Statement such information as the Initial Purchasers or such Notice Holder shall, on the basis of a written opinion of nationally-recognized counsel experienced in such matters, determine to be required to be included therein by applicable law and make any required 10 filings of such Prospectus supplement, such post-effective amendment or such Subsequent Shelf Registration Statement; provided, that neither the Company nor the Guarantor shall be required to take any actions under this Section 3(e) that are not, in the reasonable opinion of counsel for the Company and the Guarantor, required for compliance with applicable law. (f) As promptly as reasonably practicable after the filing of such documents with the SEC furnish to each Notice Holder and the Initial Purchasers, upon their written request and without charge, at least one (1) conformed copy of each Registration Statement and any amendment thereto, including financial statements, but excluding schedules, all documents incorporated or deemed to be incorporated therein by reference and all exhibits (unless requested in writing to the Company and the Guarantor by such Notice Holder or the Initial Purchasers, as the case may be). (g) During the Effectiveness Period, deliver to each Notice Holder in connection with any sale of Registrable Securities pursuant to a Registration Statement, without charge, as many copies of the Prospectus or Prospectuses relating to such Registrable Securities (including each preliminary prospectus) and any amendment or supplement thereto as such Notice Holder may reasonably request; and the Company and the Guarantor hereby consent (except during such periods that a Deferral Notice is outstanding and has not been revoked) to the use of such Prospectus or each amendment or supplement thereto by each Notice Holder in connection with any offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto in the manner set forth therein. (h) Subject to Section 3(i), prior to any public offering of the Registrable Securities pursuant to a Shelf Registration Statement, use commercially reasonable efforts to register or qualify or cooperate with the Notice Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any Notice Holder reasonably requests in writing (which request may be included in the Notice and Questionnaire), it being agreed that no such registration or qualification will be made unless so requested; prior to any public offering of the Registrable Securities pursuant to a Shelf Registration Statement, use commercially reasonable efforts to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period in connection with such Notice Holder's offer and sale of Registrable Securities pursuant to such registration or qualification (or exemption therefrom) and do any and all other acts or things necessary to enable the disposition in such jurisdictions of such Registrable Securities in the manner set forth in the relevant Registration Statement and the related Prospectus; provided, that neither the Company nor the Guarantor will be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it is not otherwise qualified or (ii) take any action that would subject it to general service of process in suits or to taxation in any such jurisdiction where it is not then so subject. (i) Upon (A) the issuance by the SEC of a stop order suspending the effectiveness of any Shelf Registration Statement or the initiation of proceedings with 11 respect to any Shelf Registration Statement under Section 8(d) or 8(e) of the Securities Act, (B) the occurrence of any event or the existence of any fact (a "Material Event") as a result of which any Registration Statement shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or any Prospectus shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (including, in any such case, as a result of the non-availability of financial statements), or (C) the occurrence or existence of any pending corporate development that, in the discretion of either the Company or the Guarantor, makes it appropriate to suspend the availability of any Shelf Registration Statement and the related Prospectus, (i) in the case of clause (B) above, subject to the next sentence, as promptly as practicable prepare and file a post-effective amendment to such Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document that would be incorporated by reference into such Registration Statement and Prospectus so that such Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and such Prospectus does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, as thereafter delivered to the purchasers of the Registrable Securities being sold thereunder, and, in the case of a post-effective amendment to a Registration Statement, subject to the next sentence, use reasonable best efforts to cause it to be declared effective as promptly as is reasonably practicable, and (ii) give notice to the Notice Holders that the availability of the Shelf Registration Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Registration Statement until such Notice Holder's receipt of copies of the supplemented or amended Prospectus provided for in clause (i) above, or until it is advised in writing by the Company and the Guarantor that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Company and the Guarantor will use reasonable best efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clause (A) above, as promptly as is practicable, (y) in the case of clause (B) above, as soon as, in the judgment of the Company and the Guarantor, public disclosure of such Material Event would not be prejudicial to or contrary to the interests of the Company or the Guarantor or, if necessary to avoid unreasonable burden or expense, as soon as reasonably practicable thereafter and (z) in the case of clause (C) above, as soon as, in the discretion of the Company and the Guarantor, such suspension is no longer appropriate. So long as the period during which the availability of the Registration Statement and any Prospectus is suspended (the "Deferral Period") does not exceed thirty (30) days during any three (3) month period or sixty (60) days during any twelve (12) month period, the Company and the Guarantor shall not incur any obligation to pay liquidated damages pursuant to Section 2(e). 12 (j) If reasonably requested in writing in connection with a disposition of Registrable Securities pursuant to a Registration Statement, make reasonably available for inspection during normal business hours by a representative for the Notice Holders of such Registrable Securities and any broker-dealers, attorneys and accountants retained by such Notice Holders, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the appropriate executive officers, directors and designated employees of the Company and its subsidiaries to make reasonably available for inspection during normal business hours all relevant information reasonably requested by such representative for the Notice Holders or any such broker-dealers, attorneys or accountants in connection with such disposition, in each case as is customary for similar "due diligence" examinations; provided, however, that such persons shall first agree in writing with the Company that any information that is reasonably designated by the Company in writing as confidential at the time of delivery of such information shall be kept confidential by such persons and shall be used solely for the purposes of exercising rights under this Agreement, unless (i) disclosure of such information is required by court or administrative order or is necessary to respond to inquiries of regulatory authorities, (ii) disclosure of such information is required by law (including any disclosure requirements pursuant to federal securities laws in connection with the filing of any Registration Statement or the use of any Prospectus referred to in this Agreement) or necessary to defend or prosecute a claim brought against or by any such persons (e.g., to establish a "due diligence" defense), (iii) such information becomes generally available to the public other than as a result of a disclosure or failure to safeguard by any such person or (iv) such information becomes available to any such person from a source other than the Company and such source is not bound by a confidentiality agreement; and provided, further, that the foregoing inspection and information gathering shall, to the greatest extent possible, be coordinated on behalf of all the Notice Holders and the other parties entitled thereto by the counsel referred to in Section 5. (k) Comply with all applicable rules and regulations of the SEC and make generally available to its security holders earning statements (which need not be audited) satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company commencing after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (l) Cooperate with each Notice Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities sold pursuant to a Registration Statement, and cause such Registrable Securities to be in such denominations as are permitted by the Indenture and registered in such names as such Notice Holder may request in writing at least two Business Days prior to any sale of such Registrable Securities. 13 (m) Provide a CUSIP number for all Registrable Securities covered by a Registration Statement not later than the effective date of the Initial Registration Statement and provide the Trustee for the Notes and the transfer agent for the Common Stock with certificates for the Registrable Securities that are in a form eligible for deposit with The Depository Trust Company. (n) Make reasonable best effort to provide such information as is required for any filings required to be made with the National Association of Securities Dealers, Inc. (o) Upon (i) the filing of the Initial Shelf Registration Statement and (ii) the effectiveness of the Initial Shelf Registration Statement, announce the same, in each case by release to Reuters Economic Services and Bloomberg Business News or other means of dissemination reasonably expected to make such information known publicly. (p) Take all actions and enter into such customary agreements (including, if requested, an underwriting agreement in customary form) as are necessary, or reasonably requested by the Majority Holders of the Registrable Securities being sold, in order to expedite or facilitate disposition of such Registrable Securities (subject to the provisions of Section 2(a) pertaining to underwritten offerings); and in such connection, whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration: (i) the Company and the Guarantor shall make such representations and warranties to the Holders of such Registrable Securities and the underwriters, if any, in form, substance and scope as has been customarily made by the Company to underwriters in similar offerings of securities of the Company; (ii) the Company and the Guarantor shall obtain opinions of counsel of the Company and the Guarantor and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the Majority Holders of the Registrable Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings of the Company; (iii) the Company and the Guarantor shall obtain "cold comfort" letters and updates thereof from the Company's and the Guarantor's independent certified public accountants (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements are, or are required to be, included in any Shelf Registration Statement) addressed to the underwriters, if any, and use reasonable best efforts to have such letter addressed to the selling Holders of Registrable Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters to underwriters in connection with similar underwritten offerings of the Company; 14 (iv) the Company and the Guarantor shall, if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 6 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said Section; and (v) the Company and the Guarantor shall deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Majority Holders of the Registrable Securities being sold and the managing underwriters, if any; the above to be done at (x) the effectiveness of any Shelf Registration Statement (and each post-effective amendment thereto) and (y) each closing under any underwriting or similar agreement as and to the extent required thereunder. (q) Cause the Indenture to be qualified under the TIA not later than the effective date of the Initial Registration Statement; and in connection therewith, cooperate with the Trustee to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner. (r) Use its reasonable best efforts to cause all Common Stock to be listed on the New York Stock Exchange. (s) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "NASD Rules") of the National Association of Securities Dealers, Inc.) thereof, whether as a Holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company will assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by: (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of any Shelf Registration Statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereof and, if any portion of the offering contemplated by such Shelf Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield or price, as the case may be, of such Registrable Securities; (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof; and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the NASD Rules. 15 SECTION 4. Holder's Obligations. Each Holder agrees, by acquisition of the Registrable Securities, that no Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to a Registration Statement or to receive a Prospectus relating thereto, unless such Holder has furnished the Company and the Guarantor with a Notice and Questionnaire as required pursuant to Section 2(d) hereof (including the information required to be included in such Notice and Questionnaire) and the information set forth in the next sentence. Each Notice Holder agrees promptly to furnish to the Company and the Guarantor all information required to be disclosed in order to make the information previously furnished to the Company and the Guarantor by such Notice Holder not misleading, any other information regarding such Notice Holder and the distribution of such Registrable Securities as may be required to be disclosed in the Registration Statement under applicable law or pursuant to SEC comments, any information otherwise required by the Company and the Guarantor to comply with applicable law or regulations and any information as the Company or the Guarantor may reasonably request. Each Holder further agrees, following the termination of the Effectiveness Period, to notify the Company within thirty (30) Business Days of a request of the amount of Registrable Securities sold pursuant to any Registration Statement and, in the absence of a response, the Company shall be entitled to assume that all of the Holder's Registrable Securities were so sold. 16 SECTION 5. Registration Expenses. The Company shall bear all fees and expenses incurred in connection with the performance by the Company and the Guarantor of their obligations under Sections 2 and 3 of this Agreement whether or not any of the Registration Statements are filed or declared effective. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (x) with respect to filings required to be made with the National Association of Securities Dealers, Inc. and (y) of compliance with federal and state securities or Blue Sky laws to the extent such filings or compliance are required pursuant to this Agreement (including, without limitation, reasonable fees and disbursements of the counsel specified in the next sentence in connection with Blue Sky qualifications of the Registrable Securities under the laws of such jurisdictions as the Notice Holders of a majority of the Registrable Securities being sold pursuant to a Registration Statement may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities in a form eligible for deposit with The Depository Trust Company), (iii) duplication expenses relating to copies of any Registration Statement or Prospectus delivered to any Holders hereunder, (iv) fees and disbursements of counsel for the Company and the Guarantor in connection with the Shelf Registration Statement, and (v) reasonable fees and disbursements of the Trustee and its counsel and of the registrar and transfer agent for the Common Stock. In addition, the Company shall bear or reimburse the Notice Holders for the fees and disbursements of one firm of legal counsel for the Holders, which shall, upon the written consent of the Initial Purchasers (which shall not be unreasonably withheld), be a nationally recognized law firm experienced in securities law matters designated by the Company. In addition, the Company shall pay the internal expenses of the Company and the Guarantor (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange on which the same securities of the Company are then listed and the fees and expenses of any person, including special experts, retained by the Company or the Guarantor. SECTION 6. Indemnification; Contribution. (a) The Company and the Guarantor, jointly and severally, agree to indemnify and hold harmless the Initial Purchasers and each Holder of Registrable Securities and each person, if any, who controls any Initial Purchaser or any Holder of Registrable Securities within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or arising out of any untrue statement or alleged untrue statement of a material 17 fact included in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided, that (subject to Section 6(d) below) any such settlement is effected with the prior written consent of the Company and the Guarantor; and (iii) subject to Section 6(c) below, against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company and the Guarantor by or on behalf of the Initial Purchasers, such Holder of Registrable Securities (which also acknowledges the indemnity provisions herein) or any person, if any, who controls any Initial Purchaser or any such Holder of Registrable Securities expressly for use in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (b) In connection with any Shelf Registration Statement in which a Holder, including, without limitation, the Initial Purchasers, of Registrable Securities is participating, in furnishing information relating to such Holder of Registrable Securities to the Company and the Guarantor in writing expressly for use in such Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto, the Holders of such Registrable Securities agree, severally and not jointly, to indemnify and hold harmless the Initial Purchasers and each person, if any, who controls any Initial Purchaser within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and the Company and the Guarantor, and each person, if any, who controls either the Company or the Guarantor within the meaning of either such Section, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), or any preliminary prospectus or the Prospectus (or any amendment or supplement 18 thereto) in reliance upon and in conformity with written information furnished to the Company and the Guarantor by or on behalf of such Holder of Registrable Securities (which also acknowledges the indemnity provisions herein) or any person, if any, who controls any such Holder of Registrable Securities expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of these indemnity provisions. The indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain a separate firm as its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed in writing to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the reasonable fees and expenses of more than one firm (in addition to any local counsel) for the Initial Purchasers, Holders of Registrable Securities, and all persons, if any, who control the Initial Purchasers or Holders of Registrable Securities within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act and (b) the reasonable fees and expenses of more than one firm (in addition to any local counsel) for the Company and the Guarantor, their directors, and each person, if any, who controls either the Company or the Guarantor within the meaning of either such Section, and that all such reasonable fees and expenses shall be reimbursed as they are incurred. In the event a separate firm is retained for the Initial Purchasers, Holders of Registrable Securities, and control persons of any Initial Purchaser and Holders of Registrable Securities, such firm shall be designated in writing by the Initial Purchasers. In the event a separate firm is retained for the Company and the Guarantor, and such directors, officers and control persons of the Company or the Guarantor, such firm shall be designated in writing by the Company and the Guarantor. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, 19 compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for the reasonable fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement; provided, that an indemnifying party shall not be liable for any such settlement effected without its written consent if such indemnifying party (1) reimburses such indemnified party in accordance with such request to the extent it considers such request to be reasonable and (2) provides written notice to the indemnified party describing any unpaid balance it believes is unreasonable and the reasons therefor, in each case prior to the date of such settlement. (e) If the indemnification to which an indemnified party is entitled under this Section 6 is for any reason unavailable to or insufficient although applicable in accordance with its terms to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantor on the one hand and the Holders of the Registrable Securities or the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor or by the Holder of the Registrable Securities or the Initial Purchasers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(e) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 6(e). The aggregate amount of losses, liabilities, claims, damages, and expenses incurred by an indemnified party and referred to above in this Section 6(e) shall be deemed to include any out-of-pocket legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or 20 body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 6, no Holder of any Registrable Securities shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which the Registrable Securities sold by such Holder of Registrable Securities and distributed to the public were offered to the public exceeds the amount of any damages that such Holder of Registrable Securities have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6(e), each person, if any, who controls any Initial Purchaser or any Holder of Registrable Securities within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers or such Holder, and each person, if any, who controls the Company or the Guarantor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. SECTION 7. Information Requirements. The Company covenants that, if at any time before the end of the Effectiveness Period the Company is not subject to the reporting requirements of the Exchange Act, it will cooperate with any Holder of Registrable Securities and take such further reasonable action as any Holder of Registrable Securities may reasonably request in writing (including, without limitation, making such reasonable representations as any such Holder may reasonably request), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations of Rule 144 and Rule 144A and customarily taken in connection with sales pursuant to such exemptions. Upon the written request of any Holder of Registrable Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such filing requirements, unless such a statement has been included in the Company's most recent report required to be filed and filed pursuant to Section 13 or Section 15(d) of Exchange Act. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities under any section of the Exchange Act. SECTION 8. Miscellaneous (a) No Conflicting Agreements. Neither the Company nor the Guarantor is, as of the date hereof, a party to, nor shall they, on or after the date of this Agreement, enter into, any agreement with respect to the Company's securities that conflicts with the rights granted to the Holders of Registrable Securities in this Agreement. The Company and the Guarantor represent and warrants that the rights granted to the Holders of 21 Registrable Securities hereunder do not in any way conflict with the rights granted to the holders of the Company's securities under any other agreements. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company and the Guarantor have obtained the written consent of the Majority Holders of the then outstanding Underlying Common Stock constituting Registrable Securities (with Holders of Notes deemed to be the Holders, for purposes of this Section, of the number of outstanding shares of Underlying Common Stock into which such Notes are or would be convertible or exchangeable as of the date on which such consent is requested). Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by Majority Holders of the Registrable Securities being sold by such Holders pursuant to such Registration Statement; provided, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 8(b), whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, by telecopier, by courier guaranteeing overnight delivery or by first-class mail, return receipt requested, and shall be deemed given (i) when made, if made by hand delivery, (ii) upon telephonic confirmation, if made by telecopier, (iii) one (1) Business Day after being deposited with such courier, if made by overnight courier or (iv) on the date indicated on the notice of receipt, if made by certified mail, return receipt requested, to the parties as follows: if to a Holder of Registrable Securities that is not a Notice Holder, at the address for such Holder then appearing in the Registrar (as defined in the Indenture); if to a Notice Holder, at the most current address given by such Holder to the Company and the Guarantor in a Notice and Questionnaire or any amendment thereto; if to the Company or the Guarantor, to: c/o American Financial Group, Inc. One East Fourth Street, Suite 919 Cincinnati, OH 45202 Telephone No. (513) 579-2121 Facsimile No. (513) 579-0108 Attention: Deputy General Counsel 22 and Keating Muething & Klekamp One East Fourth Street, 14th Floor Cincinnati, OH 45202 Telephone No. (513) 579-6599 Facsimile No. (513) 579-6956 Attention: Mark A. Weiss and if to the Initial Purchasers, to: Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated 4 World Financial Center New York, New York 10080 Telephone No. (212) 449-8333 Facsimile No. (212) 449-6739 Attention: Jeff Consolino and UBS Warburg LLC 299 Park Avenue, 34th Floor New York, New York 10171 Telephone: 212-821-3750 Facsimile: 212-821-4610 Attention: Richard Ng-Yow and Credit Suisse First Boston LLC Eleven Madison Avenue New York, New York 10010 Telephone: 212-538-8218 Facsimile: 212-448-3236 Attention: Mark Ellman or to such other address as such person may have furnished to the other persons identified in this Section 8(c) in writing in accordance herewith. (d) Approval of Holders. Whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other than the Initial Purchasers or subsequent Holders of Registrable Securities if such subsequent Holders are deemed to 23 be such affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties and, without requiring any express assignment, shall inure to the benefit of and be binding upon each Holder of any Registrable Securities. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and in respect of the registration rights granted by the Company and the Guarantor with respect to the Registrable Securities. Except as provided in the Purchase Agreement, there are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company and the Guarantor with respect to the Registrable Securities. This Agreement supersedes all prior or contemporaneous agreements and undertakings, written or oral, among the parties with respect to such registration rights. (k) Termination. This Agreement and the obligations of the parties hereunder shall terminate upon the end of the Effectiveness Period, except for any liabilities or obligations under Sections 4, 5 or 6 hereof and the obligations to make payments of and provide for liquidated damages under Section 2(e) hereof to the extent such damages accrue prior to the end of the Effectiveness Period, each of which shall remain in effect in accordance with its terms. 24 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. Very truly yours, AMERICAN FINANCIAL GROUP, INC. By ____________________________ Name: Title: Very truly yours, AMERICAN FINANCIAL CORPORATION By ____________________________ Name: Title: Accepted as of the date first above written: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: ____________________________ Name: Title: Accepted as of the date first above written: UBS WARBURG LLC By: ____________________________ Name: Title: By: ____________________________ Name: Title: Accepted as of the date first above written: CREDIT SUISSE FIRST BOSTON LLC By: ____________________________ Name: Title: EX-5 5 l01683aexv5.txt EX-5 OPINION OF KEATING, MUETHING & KLEKAMP EXHIBIT 5 [KMK LOGO] KEATING, MUETHING & KLEKAMP, P.L.L. ATTORNEYS AT LAW 1400 PROVIDENT TOWER - ONE EAST FOURTH STREET - CINCINNATI, OHIO 45202 TEL. (513) 579-6400 - TDD (513) 579-6461 MARK A. WEISS DIRECT DIAL: (513) 579-6599 FACSIMILE: (513) 579-6457 E-MAIL: MWEISS@KMKLAW.COM June 27, 2003 American Financial Group, Inc. American Financial Corporation One East Fourth Street Cincinnati, Ohio 45202 Ladies and Gentlemen: We have acted as counsel to American Financial Group, Inc., an Ohio corporation (the "Company") and American Financial Corporation, an Ohio corporation (the "Guarantor"), in connection with a registration statement on Form S-3 (the "Registration Statement"), filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, for the registration of $511,015,000 aggregate principal amount at maturity of Senior Convertible Notes due 2033 (the "Notes") of the Company guaranteed by the Guarantor (the "Guarantee"), and 5,877,490 shares of common stock of the Company issuable upon conversion of the Notes, plus such additional shares which may become deliverable upon conversion of the Notes to prevent dilution resulting from stock splits, stock dividends and similar transactions (the "Shares"). The Notes and the Shares are being registered on behalf of the holders of the Notes. We have, as counsel, examined the Indenture dated as of June 2, 2003 (the "Indenture"), among the Company, the Guarantor and U.S. Bank National Association, as trustee (the "Trustee") and such corporate records, certificates of public officials and officers of the Company and the Guarantor and other documents and reviewed such questions of law as we have deemed necessary or appropriate to enable us to render the opinions expressed below. As to various questions of fact material to such opinions, we have relied upon representations of the Company and the Guarantor. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and the Guarantor and such agreements, certificates of public officials, certificates of officers or other representatives of the Company, the Guarantor and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. In making our examination of executed documents, we have assumed that the parties thereto, other than the Company and the Guarantor, had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the execution and delivery of such documents by the parties to such documents, and the validity and binding effect thereof. As to any facts material to the opinions expressed herein which we did not independently establish or verify, we have relied upon oral or written statements and representations of officers and other representatives of the Company, the Guarantor and others. Based solely on the examination detailed above, we are of the opinion that: 1. The Notes have been duly authorized by the Company, and the Guarantee has been duly authorized by the Guarantor, and, assuming the Notes have been duly authenticated by the Trustee in accordance with the provisions of the Indenture, each of the Notes and the Guarantee constitute legal, valid and binding obligations of the Company and the Guarantor, respectively, enforceable against the Company and the Guarantor in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors' rights generally, and except as the enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 2. The Shares issuable upon conversion of the Notes have been duly and validly authorized and reserved for issuance upon such conversion by all necessary corporate action, and such Shares, when issued upon conversion of the Notes in accordance with the terms of the Indenture, will be duly and validly issued and fully paid and non-assessable. We hereby consent to be named in the Registration Statement and the Prospectus part thereof as the attorneys who have passed upon legal matters in connection with the sale of the aforesaid Notes, Guarantee and Shares and to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission thereunder. Sincerely yours, KEATING, MUETHING & KLEKAMP, P.L.L. By:_________________________________ Mark A. Weiss EX-8 6 l01683aexv8.txt EX-8 OPINION OF AKEN GUMP STRAUSS EXHIBIT 8 (202) 887-4000/fax: (202) 887-4288 www.akingump.com Opinion of AKIN GUMP STRAUSS HAUER & FELD LLP as to Certain U.S. Federal Tax Matters June __, 2003 American Financial Group, Inc. One East Fourth Street Cincinnati, Ohio 45202 Re: Senior Convertible Notes due 2032 of American Financial Group, Inc. Common stock, no par value per share, of American Financial Group, Inc. Ladies and Gentlemen: This opinion is furnished to you in connection with a registration statement on Form S-3 (the "REGISTRATION STATEMENT"), filed by American Financial Group, Inc., an Ohio corporation (the "COMPANY") with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for the registration of $511,015,000 aggregate principal amount at maturity of the Company's Senior Convertible Notes due 2032 (the "NOTES") and the shares of the Company common stock (the "SHARES") issuable upon conversion of the Notes. The Notes and the Shares are being registered on behalf of the holders of the Notes. We have acted as special United States federal income tax counsel for the Company in connection with the preparation and filing of the Registration Statement. In this capacity, we have examined and relied upon the information set forth in the Registration Statement and such other documents, agreements and instruments as we have deemed necessary as a basis for the opinion hereinafter expressed, and have also made such inquiries of such officers and representatives of the Company as we deemed necessary. In our examinations, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. In rendering this opinion, we have assumed the legal capacity of all natural persons, the authenticity of all documents presented to us as originals, the conformity with the originals of all documents presented to us as copies and the genuineness of all signatures. Based upon the foregoing and after consideration of applicable current law, we are of the opinion that, subject to the limitations set forth therein, such discussion, insofar as it relates to matters of United States federal income tax law, is accurate in all material respects. Our opinion is based upon the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated American Financial Group, Inc. June [ ], 2003 Page 2 thereunder, court decisions, and rulings and pronouncements of the Internal Revenue Service, now in effect, all of which are subject to change, possibly with retroactive effect, or to different interpretations. We express no opinion as to the accuracy of any statements of law relating to the Notes except as set forth above, or as to any other matters relating to the Registration Statement. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as Exhibit 8 to the Registration Statement, and to the references therein to us. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended. Very truly yours, EX-12 7 l01683aexv12.txt EX-12 COMPUTATION OF EARNINGS . . . AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES EXHIBIT 12 - COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND FIXED CHARGES (DOLLARS IN THOUSANDS)
Three Months Ended March 31, Year Ended December 31, --------------------- ----------------------- 2003 2002 2002 2001 ---- ---- ---- ---- Excluding Interest on Annuities Pre-tax income (loss) $ 29,290 $ 39,049 $130,350 $(12,751) Minority interest in subsidiaries having fixed charges* 9,505 7,600 33,839 43,187 Less undistributed equity in (earnings) losses of investees (857) 4,205 13,830 25,462 Fixed charges: Interest expense 13,012 14,160 60,271 60,616 Debt discount (premium) and expense 389 203 879 1,072 One-third of rentals 4,120 4,225 16,483 16,900 -------- -------- -------- -------- EARNINGS $ 55,459 $ 69,442 $255,652 $134,486 ======== ======== ======== ======== Fixed charges: Interest expense $ 13,012 $ 14,160 $ 60,271 $ 60,616 Debt discount (premium) and expense 389 203 879 1,072 One-third of rentals 4,120 4,225 16,483 16,900 Pretax preferred dividend requirements of subsidiaries 7,163 6,936 28,184 32,296 Capitalized interest - - - - -------- -------- -------- -------- FIXED CHARGES $ 24,684 $ 25,524 $105,817 $110,884 ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 2.25 2.72 2.42 1.21 ======== ======== ======== ======== Including Interest on Annuities Earnings - Per Above $ 55,459 $ 69,442 $255,652 $134,486 Interest on Annuities 74,847 75,525 300,966 294,654 -------- -------- -------- -------- EARNINGS $130,306 $144,967 $556,618 $429,140 ======== ======== ======== ======== Fixed charges - Per Above $ 24,684 $ 25,524 $105,817 $110,884 Interest on Annuities 74,847 75,525 300,966 294,654 -------- -------- -------- -------- FIXED CHARGES $ 99,531 $101,049 $406,783 $405,538 ======== ======== ======== ======== Ratio of Earnings To Fixed Charges 1.31 1.43 1.37 1.06 ======== ======== ======== ======== Earning in Excess of Fixed Charges $ 30,775 $ 43,918 $149,835 $ 23,602 ======== ======== ======== ========
Year Ended December 31, -------------------------------- 2000 1999 1998 ---- ---- ---- Excluding Interest on Annuities Pre-tax income (loss) $(77,298) $223,307 $203,489 Minority interest in subsidiaries having fixed charges* 44,961 48,780 55,646 Less undistributed equity in (earnings) losses of investees 142,230 32,156 17,997 Fixed charges: Interest expense 67,638 64,544 58,925 Debt discount (premium) and expense 763 (129) (504) One-third of rentals 13,963 12,226 11,883 -------- -------- -------- EARNINGS $192,257 $380,884 $347,436 ======== ======== ======== Fixed charges: Interest expense $ 67,638 $ 64,544 $ 58,925 Debt discount (premium) and expense 763 (129) (504) One-third of rentals 13,963 12,226 11,883 Pretax preferred dividend requirements of subsidiaries 35,648 36,566 37,628 Capitalized interest - - - -------- -------- -------- FIXED CHARGES $118,012 $113,207 $107,932 ======== ======== ======== Ratio of Earnings to Fixed Charges 1.63 3.36 3.22 ======== ======== ======== Including Interest on Annuities Earnings - Per Above $192,257 $380,884 $347,436 Interest on Annuities 293,171 262,632 261,666 -------- -------- -------- EARNINGS $485,428 $643,516 $609,102 ======== ======== ======== Fixed charges - Per Above $118,012 $113,207 $107,932 Interest on Annuities 293,171 262,632 261,666 -------- -------- -------- FIXED CHARGES $411,183 $375,839 $369,598 ======== ======== ======== Ratio of Earnings To Fixed Charges 1.18 1.71 1.65 ======== ======== ======== Earning in Excess of Fixed Charges $ 74,245 $267,677 $239,504 ======== ======== ========
* Amounts include subsidiary preferred dividends and accrued distributions on trust preferred securities. EX-23.3 8 l01683aexv23w3.txt EX-23.3 CONSENT OF ERNST & YOUNG Exhibit 23.3 Consent of Independent Auditors We consent to the reference to our firm under the caption "Independent Auditors" in the Registration Statement (Form S-3) and related Prospectus of American Financial Group, Inc. for the registration of $511,015,00 of Senior Convertible Notes due 2033 and 2,000,000 shares of its common stock and to the incorporation by reference therein of our reports dated February 19, 2003, with respect to the consolidated financial statements and schedules of (1) American Financial Group, Inc. and (2) American Financial Corporation, both included in their respective Annual Reports (Form 10-K) for the year ended December 31, 2002, and filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Cincinnati, Ohio June 23, 2003 EX-25 9 l01683aexv25.txt EX-25 FORM T-1 Exhibit 25 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM T-1 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) ------------------------------------------------------- U.S. BANK NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) 31-0841368 I.R.S. Employer Identification No. - ---------------------------------------- --------------------------------------- 180 East Fifth Street St. Paul, Minnesota 55101 - ---------------------------------------- --------------------------------------- (Address of principal executive offices) (Zip Code) - ---------------------------------------- --------------------------------------- Robert T. Jones U.S. Bank National Association 425 Walnut Street, CN-WN-06CT Cincinnati, Ohio 45202 (513) 632-4427 (Name, address and telephone number of agent for service) (Issuer with respect to the Securities) - -------------------------------------------------------------------------------- Ohio 31-1544320 - ---------------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) - ---------------------------------------- --------------------------------------- - -------------------------------------------------------------------------------- One East Fourth Street Cincinnati, Ohio 45202 - ---------------------------------------- --------------------------------------- Address of Principal Executive Offices) (Zip Code) - ---------------------------------------- --------------------------------------- SENIOR CONVERTIBLE NOTES due 2003 (TITLE OF THE INDENTURE SECURITIES) ================================================================================ FORM T-1 ITEM 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. Comptroller of the Currency Washington, D.C. b) Whether it is authorized to exercise corporate trust powers. Yes ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None ITEMS 3-15 Items 3-15 are not applicable because to the best of the Trustee's knowledge, the obligor is not in default under any Indenture for which the Trustee acts as Trustee. ITEM 16. LIST OF EXHIBITS: List below all exhibits filed as a part of this statement of eligibility and qualification. 1. A copy of the Articles of Association of the Trustee.* 2. A copy of the certificate of authority of the Trustee to commence business.* 3. A copy of the certificate of authority of the Trustee to exercise corporate trust powers.* 4. A copy of the existing bylaws of the Trustee.* 5. A copy of each Indenture referred to in Item 4. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939, attached as Exhibit 6. 7. Report of Condition of the Trustee as of December 31, 2002, published pursuant to law or the requirements of its supervising or examining authority, attached as Exhibit 7. * Incorporated by reference to Registration Number 333-67188. 2 NOTE The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors, or affiliates, are based upon information furnished to the Trustee by the obligors. While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of St. Paul, State of Minnesota on the 30th day of June, 2003. U.S. BANK NATIONAL ASSOCIATION By: /s/ Robert T. Jones ------------------------------- Robert T. Jones Vice President By: /s/ William Sicking ----------------------------------- William Sicking Vice President 3 EXHIBIT 6 CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Dated: June 30, 2003 U.S. BANK NATIONAL ASSOCIATION By: /s/ Robert T. Jones --------------------------------- Robert T. Jones Vice President By: /s/ William Sicking -------------------------- Vice President 4 EXHIBIT 7 U.S. BANK NATIONAL ASSOCIATION STATEMENT OF FINANCIAL CONDITION AS OF 3/31/2003 ($000's)
3/31/2003 --------- ASSETS Cash and Due From Depository Institutions $9,084,839 Federal Reserve Stock 0 Securities 30,038,992 Federal Funds 833,567 Loans & Lease Financing Receivables 115,894,797 Fixed Assets 1,462,006 Intangible Assets 9,080,815 Other Assets 11,583,795 ------------ TOTAL ASSETS $177,978,811 LIABILITIES Deposits $121,508,878 Fed Funds 3,820,981 Treasury Demand Notes 0 Trading Liabilities 454,575 Other Borrowed Money 21,082,000 Acceptances 139,821 Subordinated Notes and Debentures 5,694,952 Other Liabilities 5,164,656 ------------ TOTAL LIABILITIES $157,865,863 EQUITY Minority Interest in Subsidiaries $ 993,907 Common and Preferred Stock 18,200 Surplus 11,015,123 Undivided Profits 8,085,718 ------------ TOTAL EQUITY CAPITAL $ 20,112,948 TOTAL LIABILITIES AND EQUITY CAPITAL $177,978,811
To the best of the undersigned's determination, as of the date hereof, the above financial information is true and correct. U.S. BANK NATIONAL ASSOCIATION By: /s/ Robert T. Jones ------------------------------- Vice President Date: June 30, 2003 5 -----END PRIVACY-ENHANCED MESSAGE-----