-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, iDFFzgEBi4SB6QVJK8i03YUdb2A8TFHn4GqB/wzfnHVxpWxFzOwKyBqJfRATwXd/ 9CnDnovJkJ3Eu7StgFqNfA== 0000950129-95-000596.txt : 19950531 0000950129-95-000596.hdr.sgml : 19950531 ACCESSION NUMBER: 0000950129-95-000596 CONFORMED SUBMISSION TYPE: 424B1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950526 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL CORP /TX/ CENTRAL INDEX KEY: 0000005103 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 740483432 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B1 SEC ACT: 1933 Act SEC FILE NUMBER: 033-58317 FILM NUMBER: 95542963 BUSINESS ADDRESS: STREET 1: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019 BUSINESS PHONE: 7135221111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL CAPITAL LLC CENTRAL INDEX KEY: 0000943172 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B1 SEC ACT: 1933 Act SEC FILE NUMBER: 033-58317-01 FILM NUMBER: 95542964 BUSINESS ADDRESS: STREET 1: C/O AMERICAN GENERAL CORP STREET 2: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019 BUSINESS PHONE: 7135221111 MAIL ADDRESS: STREET 1: C/O AMERICAN GENERAL CORP STREET 2: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL DELAWARE LLC CENTRAL INDEX KEY: 0000943175 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B1 SEC ACT: 1933 Act SEC FILE NUMBER: 033-58317-02 FILM NUMBER: 95542965 BUSINESS ADDRESS: STREET 1: C/O AMERICAN GENERAL CORP STREET 2: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019-2155 BUSINESS PHONE: 7135221111 MAIL ADDRESS: STREET 1: C/O AMERICAN GENERAL CORP STREET 2: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019 424B1 1 AMERICAN GENERAL CORPORATION 424(B)(1) 1 Filed Pursuant to Rule 424(b)(1) Registration Nos. 33-58317 33-58317-01 33-58317-02 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 23, 1995 [AMERICAN GENERAL LOGO] 10,000,000 PREFERRED SECURITIES AMERICAN GENERAL CAPITAL 8.45% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, SERIES A (MIPSSM*) (LIQUIDATION PREFERENCE $25 PER SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY AMERICAN GENERAL CORPORATION --------------------- The 8.45% Cumulative Monthly Income Preferred Securities, Series A (the "Series A Preferred Securities"), representing the preferred limited liability company interests offered hereby, are being issued by American General Capital, L.L.C., a Delaware limited liability company ("American General Capital"). All of the common limited liability company interests in American General Capital (the "Common Securities") are owned directly or indirectly by American General Corporation, a Texas corporation ("American General" or the "Company"). American General Capital exists for the purpose of issuing limited liability company interests and investing the proceeds thereof in debt securities of American General. The proceeds from the offering of the Series A Preferred Securities will be used by American General Capital to purchase from American General its 8.45% Series A Junior Subordinated Debentures (the "Series A Junior Subordinated Debentures") having the terms described herein and in the accompanying Prospectus. (continued on next page) --------------------- SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN MATERIAL RISKS TO BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE SERIES A PREFERRED SECURITIES AND THE SERIES A JUNIOR SUBORDINATED DEBENTURES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSIDERATIONS. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ---------------------
PROCEEDS TO INITIAL PUBLIC UNDERWRITING AMERICAN GENERAL OFFERING PRICE COMMISSION(1) CAPITAL(2)(3) -------------- ------------- ---------------- Per Series A Preferred Security........ $25.00 (2) $25.00 Total(4)............................... $250,000,000 (2) $250,000,000
(1) American General Capital and American General have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting". (2) In view of the fact that the proceeds of the sale of the Series A Preferred Securities will be used by American General Capital to purchase the Series A Junior Subordinated Debentures of American General, the Underwriting Agreement provides that American General will pay to the Underwriters, as compensation ("Underwriters' Compensation"), $0.7875 per Series A Preferred Security (or $7,875,000 in the aggregate). See "Underwriting". (3) Expenses of the offering, which are payable by American General, are estimated to be $800,000. (4) American General Capital and American General have granted the Underwriters an option for 30 days to purchase up to an additional 1,500,000 Series A Preferred Securities at the initial public offering price per Series A Preferred Security solely to cover over-allotments, if any. American General will pay to the Underwriters, as Underwriters' Compensation, $0.7875 per Series A Preferred Security purchased pursuant to this option. If such option is exercised in full, the total initial public offering price, Underwriters' Compensation and proceeds to American General Capital will be $287,500,000, $9,056,250 and $287,500,000, respectively. See "Underwriting". --------------------- The Series A Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Series A Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company on or about June 5, 1995. - --------------- * MIPS is a service mark of Goldman, Sachs & Co. --------------------- GOLDMAN, SACHS & CO. MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED CS FIRST BOSTON DEAN WITTER REYNOLDS INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION KEMPER SECURITIES, INC. LEHMAN BROTHERS PRUDENTIAL SECURITIES INCORPORATED SALOMON BROTHERS INC SMITH BARNEY INC. --------------------- The date of this Prospectus Supplement is May 25, 1995. 2 (continued from previous page) The Series A Junior Subordinated Debentures are subordinated in right of payment to all Senior Indebtedness (as defined under "Description of the Junior Subordinated Debentures -- Subordination" in the accompanying Prospectus) of American General. As of March 31, 1995, American General had approximately $2.8 billion of indebtedness constituting Senior Indebtedness. Holders of the Series A Preferred Securities will be entitled to receive cumulative cash distributions ("dividends") from American General Capital at the annual rate of 8.45% of the liquidation preference of $25 per Series A Preferred Security, accruing from the date of original issuance and payable monthly in arrears on the last day of each calendar month of each year, commencing June 30, 1995. See "Description of the Series A Preferred Securities -- Dividends". In the event of the liquidation, dissolution or winding-up of American General Capital, holders of Series A Preferred Securities will be entitled to receive for each Series A Preferred Security a liquidation preference of $25 plus an amount equal to any accumulated and unpaid dividends (whether or not earned or declared), including any Additional Dividends (as defined herein), to the date of payment, subject to certain limitations, unless such liquidation, dissolution or winding-up is in connection with the exchange of the Series A Preferred Securities for the Series A Junior Subordinated Debentures. See "Description of the Series A Preferred Securities -- Liquidation Rights". The Series A Preferred Securities will be redeemable at the option of American General Capital (subject to the prior consent of American General), in whole or in part, from time to time, on or after June 5, 2000 at a cash redemption price equal to the liquidation preference for such Series A Preferred Securities plus accumulated and unpaid dividends (whether or not earned or declared), including any Additional Dividends, to the date fixed for redemption (the "Redemption Price"). Furthermore, at any time after the occurrence of a Special Event (as defined herein), American General Capital (subject to the prior consent of American General) may either (i) redeem the Series A Preferred Securities in whole, but not in part, at the Redemption Price, or (ii) exchange in the manner described herein, in whole but not in part, the Series A Preferred Securities for Series A Junior Subordinated Debentures. See "Description of the Series A Preferred Securities -- Special Event Redemption or Exchange". For a description of the terms relating to the mandatory redemption of the Series A Preferred Securities and the circumstances under which the repayment date of the Series A Preferred Securities may be extended, see "Description of the Series A Preferred Securities -- Mandatory Redemption". American General will irrevocably and unconditionally guarantee, on a subordinated basis and to the extent set forth herein and in the accompanying Prospectus, the payment of dividends by American General Capital on the Series A Preferred Securities (but only if and to the extent declared from funds of American General Capital legally available therefor), the Redemption Price payable with respect to Series A Preferred Securities (but only to the extent payable out of funds of American General Capital legally available therefor) and payments on liquidation, dissolution or winding-up with respect to the Series A Preferred Securities (but only to the extent that assets of American General Capital are available for distribution to holders of the Series A Preferred Securities) (the "Guarantee"). The Guarantee will be unsecured and will be subordinate to all other liabilities of American General (other than certain other guarantees) and will rank pari passu with the most senior preferred stock issued by American General. See "Description of the Guarantees" in the accompanying Prospectus. The Series A Preferred Securities have been approved for listing on the New York Stock Exchange ("NYSE"), subject to notice of issuance, under the symbol "AGC prM". --------------------- IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A PREFERRED SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. S-2 3 AMERICAN GENERAL CORPORATION GENERAL American General, with assets of $56 billion and shareholders' equity of $4.4 billion as of March 31, 1995, is the parent company of one of the nation's largest consumer financial services organizations. American General provides financial services directly to consumers, emphasizing personal service and frequent customer contact. American General's operating subsidiaries are leading providers of retirement annuities, consumer loans and life insurance. American General, headquartered in Houston, was incorporated as a general business corporation in Texas in 1980 and is the successor to American General Insurance Company, an insurance company incorporated in Texas in 1926. The principal executive offices of American General are located at 2929 Allen Parkway, Houston, Texas 77019-2155, and its telephone number is (713) 522-1111. RETIREMENT ANNUITIES Retirement Annuities represented 27% of the Company's segment earnings for the year ended December 31, 1994 and 27% for the three months ended March 31, 1995. The Variable Annuity Life Insurance Company ("VALIC"), American General's retirement annuity subsidiary with assets of $23 billion as of March 31, 1995, is a leading provider of tax-deferred retirement plans and annuities to employees of educational, health care and other not-for-profit organizations. Based on assets of $22 billion as of December 31, 1994, VALIC ranks as the 18th largest life insurance company in the United States. VALIC markets products in 50 states and the District of Columbia to approximately 840,000 customers through a national network of approximately 800 sales representatives. These sales representatives are highly trained retirement specialists, providing personalized service to VALIC's customers. VALIC currently holds among the strongest claims-paying ability ratings in the life insurance industry. Management believes that these ratings provide VALIC with a significant competitive advantage. VALIC is committed to using advanced technologies to improve customer service. VALIC recently introduced a new product, Portfolio DirectorSM, which offers customers an array of 18 different investment options, as well as access to professional investment managers, in order to have more flexibility in creating a diversified retirement portfolio. VALIC has also introduced Portfolio OptimizerSM, an innovative software program developed exclusively for VALIC which helps customers allocate retirement funds among investment options. VALIC's strategy for future growth is centered on increasing the size and effectiveness of its sales force in order to enter new geographic territories and further penetrate existing markets. CONSUMER FINANCE Consumer Finance represented 36% of the Company's segment earnings for the year ended December 31, 1994 and 30% for the three months ended March 31, 1995. American General Finance, Inc. and subsidiaries ("AGF"), with finance receivables of $8.2 billion as of March 31, 1995, is a leading provider of consumer and home equity loans, credit cards and credit-related insurance to individuals. With more than three million customers and over 1,300 branch offices, AGF ranks among the nation's largest consumer finance organizations. AGF provides financing programs through approximately 20,000 retail merchants and offers personalized service through over 9,000 employees in 41 states, Puerto Rico and the U.S. Virgin Islands. AGF has traditionally focused on marketing to creditworthy, middle-income families with annual household incomes of $25,000 to $50,000 and with a head of household typically between the ages of 25 and 45. Management believes that AGF's competitive advantages are its large branch office network, improved technology, new market development and strong credit ratings. AGF's branch office S-3 4 network gives it a local presence in approximately 900 communities. AGF continually seeks to develop local markets. For example, AGF provides retail financing programs through approximately 20,000 merchants nationwide. This growing merchant base provides a flow of new business and represents AGF's largest source of new loan customers. AGF's strategy for future growth is centered on growing the branch office customer base, further developing the retail dealer network and providing a wider array of financial products and services to its customers. LIFE INSURANCE Life Insurance represented 37% of the Company's segment earnings for the year ended December 31, 1994 and 43% for the three months ended March 31, 1995. American General's life insurance companies, with assets of $22 billion as of March 31, 1995, provide traditional and interest-sensitive life insurance and both fixed and variable annuity products to nearly five million households throughout all 50 states, the District of Columbia and Canada. This large customer base is served principally by American General Life and Accident Insurance Company ("AGLA"), American General Life Insurance Company ("AGL"), and, since January 1995, The Franklin Life Insurance Company ("Franklin Life") (see "Recent Developments" below). The life insurance companies meet the financial security needs of individual consumers, business owners and customers of financial institutions, and offer personalized service through 14,000 sales representatives and general agents. Management believes that specialization is the key to success in the highly competitive life insurance marketplace. Each of American General's life insurance companies specializes in serving a different market segment. AGLA concentrates on meeting the basic life insurance needs of families with incomes of less than $50,000. AGL serves the estate planning needs of middle- and upper-income households. Franklin Life provides individual life insurance to middle-income households, primarily in the Midwest. Management believes that the life insurance companies' competitive advantages are a strong market presence, financial strength and a commitment to personalized customer service. The life insurance companies' strategy for future growth centers on growing internally by increasing the size and productivity of the agency field force and externally by pursuing selective acquisitions. RECENT DEVELOPMENTS As of November 29, 1994, the Company signed a definitive agreement to acquire American Franklin Company ("AFC"), the holding company of Franklin Life, for $1.17 billion. The transaction closed on January 31, 1995. The purchase price consisted of $920 million in cash paid at closing and a $250 million dividend paid by AFC to its former parent prior to closing. This acquisition was accounted for using the purchase method. Beginning with the first quarter of 1995, Franklin Life was reported as part of the Life Insurance segment, increasing that segment's assets and life insurance in force by approximately 45% and 35%, respectively. Franklin Life was acquired to complement American General's existing life insurance distribution systems and further strengthen the Company's position in middle-income households, particularly in the Midwest. On December 23, 1994, the Company acquired a 40% interest in Western National Corporation ("WNC") through the acquisition of 24,947,500 shares of WNC's common stock for $274 million in cash. The acquisition was reflected in the Company's 1994 consolidated financial statements using the equity method of accounting. The Company's equity in the operating results of WNC for the period from to the acquisition date to December 31, 1994 did not have a material impact on the Company's 1994 consolidated results of operations. The shares of WNC were acquired for investment purposes. S-4 5 AMERICAN GENERAL CAPITAL, L.L.C. American General Capital, L.L.C. is a limited liability company formed in March 1995 under the laws of the State of Delaware. American General and American General Delaware Management Corporation, a wholly-owned subsidiary of American General, own all of the common limited liability company interests (the "Common Securities") of American General Capital, which securities are nontransferable. American General Capital is managed by American General Delaware Management Corporation, as manager (the "Manager"), in accordance with the Amended and Restated Limited Liability Company Agreement of American General Capital (the "LLC Agreement"). American General Capital exists solely for the purpose of issuing Preferred Securities and Common Securities and investing 99% of the proceeds thereof in Junior Subordinated Debentures. The remaining 1% of such proceeds will be invested in Eligible Investments (as defined in the LLC Agreement). See "Use of Proceeds." American General Capital's principal executive offices are located c/o American General Delaware Management Corporation at 2099 South Dupont Avenue, Dover, Delaware 19901, and its telephone number at such address is (302) 697-1912. INVESTMENT CONSIDERATIONS Prospective purchasers of Series A Preferred Securities should carefully review the information contained elsewhere in this Prospectus Supplement and the accompanying Prospectus and should particularly consider the following matters: SUBORDINATE OBLIGATIONS UNDER GUARANTEE AND SERIES A JUNIOR SUBORDINATED DEBENTURES American General Capital's ability to pay amounts due on the Series A Preferred Securities is solely dependent upon its receipt of payments from American General on the Series A Junior Subordinated Debentures as and when required. American General's obligations under the Series A Junior Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness of American General. American General's obligations under the Guarantee are subordinate to all other liabilities of American General except for certain other guarantees executed by American General. The Guarantee will rank pari passu with the most senior preferred stock issued by American General. As of March 31, 1995, American General had approximately $2.8 billion of Senior Indebtedness outstanding. There are no terms in the Series A Preferred Securities, the Series A Junior Subordinated Debentures, the Junior Subordinated Indenture (as defined herein) or the Guarantee that limit American General's ability to incur additional indebtedness, including indebtedness that ranks senior to the Series A Junior Subordinated Debentures and the Guarantee, or the ability of its subsidiaries to incur additional indebtedness. In addition, because American General is a holding company, rights to participate in any distribution of assets of any subsidiary upon its liquidation or reorganization or otherwise (and thus the ability of holders of Series A Junior Subordinated Debentures and, to the extent of the Guarantee, the holders of Series A Preferred Securities, to benefit indirectly from such distribution) are subject to the prior claims of creditors of that subsidiary, except to the extent that American General may itself be a creditor of that subsidiary. Claims on American General's subsidiaries by other creditors include substantial claims for policy benefits and debt obligations, as well as other liabilities incurred in the ordinary course of business. In addition, since many of American General's subsidiaries are insurance companies subject to regulatory control by various state insurance departments, the ability of such subsidiaries to pay dividends to American General without prior regulatory approval is limited by applicable laws and regulations. Further, certain non-insurance subsidiaries are restricted in their ability to make dividend payments by long-term debt agreements. At December 31, 1994, the amount available to American General for dividends from subsidiaries not limited by such restrictions was $1.1 billion. The Guarantee guarantees payment to the holders of the Series A Preferred Securities of accumulated and unpaid monthly dividends (but only if and to the extent declared by American General Capital), amounts payable on redemption and amounts payable upon the liquidation, S-5 6 dissolution or winding-up of American General Capital. In each case, however, such amount is guaranteed only to the extent that American General Capital has funds on hand legally available therefor and payment thereof does not otherwise violate applicable law. If American General were to default on its obligation to pay interest or amounts payable on redemption or maturity of the Series A Junior Subordinated Debentures, American General Capital would lack legally available funds for the payment of dividends or amounts payable on redemption of the Series A Preferred Securities, and in such event holders of the Series A Preferred Securities would not be able to rely upon the Guarantee for payment of such amounts. Upon the liquidation, dissolution or winding-up of American General, its obligations under the Guarantee would rank junior to all of its other liabilities (other than certain other guarantees) and, therefore, funds may not be available for payment under the Guarantee. See "Description of the Guarantees" and "Description of the Junior Subordinated Debentures -- Subordination" in the accompanying Prospectus. OPTION TO EXTEND INTEREST PAYMENT PERIOD (DEFERRAL OF DIVIDENDS ON SERIES A PREFERRED SECURITIES) American General has the right to extend the interest payment period on the Series A Junior Subordinated Debentures from time to time to a period not exceeding 60 consecutive months (an "Extension Period"), in which event monthly dividend payments on the Series A Preferred Securities by American General Capital would be deferred but would continue to accumulate monthly and Additional Dividends, intended to provide monthly compounding on dividend arrearages, would also accumulate. Prior to the termination of any Extension Period of less than 60 consecutive months, American General may further extend the interest payment period as long as such Extension Period, as further extended, does not exceed 60 consecutive months and does not extend beyond the stated maturity date or date of redemption of the Series A Junior Subordinated Debentures. Upon the termination of any Extension Period and the payment of all accrued and unpaid interest (including compounded interest), American General may select a new Extension Period, subject to the preceding sentence. No interest will be due during an extended interest payment period until the end of such period. During any Extension Period, American General may not declare or pay any dividend on, and, subject to certain exceptions, American General may not, and American General may not permit any of its majority-owned subsidiaries to, redeem, purchase, acquire or make a liquidation payment with respect to, any of American General's capital stock or make any guarantee payments with respect to the foregoing. See "Description of the Series A Junior Subordinated Debentures -- Option to Extend Interest Payment Period." TAX CONSIDERATIONS OF EXTENDED INTEREST PAYMENT PERIOD (DEFERRAL OF DIVIDENDS ON SERIES A PREFERRED SECURITIES) If an extension of an interest payment period occurs, American General Capital, except in very limited circumstances, would continue to accrue income for United States federal income tax purposes, which would be allocated, but no corresponding amount of cash would be distributed, to holders of record of Series A Preferred Securities. As a result, such holders would be required to include such interest in gross income for United States federal income tax purposes in advance of the receipt of cash and would not receive the cash dividend related to such income from American General Capital if such a holder disposed of its Series A Preferred Securities prior to the record date for payment of dividends. See "Certain Federal Income Tax Considerations -- Original Issue Discount." SPECIAL EVENT REDEMPTION OR EXCHANGE At any time after the occurrence of a Special Event, American General Capital (subject to the prior consent of American General) may elect to either (i) redeem the Series A Preferred Securities, in whole but not in part, or (ii) exchange, in whole but not in part, the Series A Preferred Securities for Series A Junior Subordinated Debentures having an aggregate principal amount and S-6 7 accrued and unpaid interest equal to the aggregate liquidation preference and accumulated and unpaid dividends (including Additional Dividends), respectively, of the Series A Preferred Securities. Under current United States federal income tax law, such an exchange would not be a taxable event to holders of Series A Preferred Securities unless the relevant Special Event is a Tax Event (as defined herein) which causes American General Capital to be treated as an association taxable as a corporation. In such case, an exchange of Series A Preferred Securities for Series A Junior Subordinated Debentures may be a taxable event to holders of the Series A Preferred Securities. See "Description of the Series A Preferred Securities -- Special Event Redemption or Exchange for Series A Junior Subordinated Debentures" and "Certain Federal Income Tax Considerations -- Exchange of Series A Preferred Securities for Series A Junior Subordinated Debentures." S-7 8 CAPITALIZATION The following table sets forth the consolidated short-term debt and capitalization of American General as of March 31, 1995, as adjusted to reflect the proposed permanent financing of the AFC acquisition which, for pro forma purposes, was assumed to be partially financed with the estimated net proceeds from the sale of the Series A Preferred Securities (assuming the Underwriters' over-allotment option is not exercised). See "Use of Proceeds". (UNAUDITED) (IN MILLIONS)
MARCH 31, 1995 --------------------------- PRO FORMA, REFLECTING AFC HISTORICAL FINANCING(a) ---------- -------------- Short-term debt Corporate.................................................... $ 1,375 $ 685 Real Estate.................................................. 349 349 Consumer Finance............................................. 2,498 2,498 -------- -------- Total short-term debt................................ $ 4,222 $ 3,532 ======== ======== Long-term debt Corporate.................................................... $ 984 $ 1,432 Consumer Finance............................................. 4,763 4,763 -------- -------- Total long-term debt................................. 5,747 6,195 -------- -------- Company-obligated mandatorily redeemable preferred securities of American General Capital, L.L.C.(b)....................... - 242 Common stock subject to put contracts.......................... 47 47 Shareholders' equity Common stock................................................. 365 365 Net unrealized gains (losses) on securities(c)............... (84) (84) Retained earnings............................................ 4,606 4,606 Cost of treasury stock....................................... (465) (465) -------- -------- Total shareholders' equity........................... 4,422 4,422 -------- -------- Total capitalization (excluding short-term debt)..... $ 10,216 $ 10,906 ======== ========
- --------------- (a) Reflects the proposed permanent financing of the AFC acquisition, which includes the Offering (as defined herein), as though it occurred on March 31, 1995. See American General's Current Report on Form 8-K dated May 9, 1995 incorporated herein by reference. Does not include an offering of 5,000,000 6% Convertible Monthly Income Preferred Securities, Series A (liquidation preference $50 per security) of American General Delaware, L.L.C., which is expected to be made at about the same time as the Offering made hereby. The closing of the Offering is not contingent on the closing of such offering by American General Delaware, L.L.C. (b) American General Capital will own approximately $313 million in principal amount of Series A Junior Subordinated Debentures if the Underwriters' over-allotment option is not exercised, or approximately $360 million in principal amount of Series A Junior Subordinated Debentures if the Underwriters' over-allotment option is exercised in full, which in each case will constitute approximately 99% of the assets of American General Capital. (c) Includes a $106 million unrealized loss at March 31, 1995, due to the effect of SFAS 115. See "Management's Discussion and Analysis" within American General's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995 incorporated herein by reference. S-8 9 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS The following table sets forth the historical and pro forma ratios of earnings to combined fixed charges and preferred stock dividends for the periods indicated.
THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, -------------- -------------- PRO PRO FORMA FORMA 1995(a) 1995 1994(b) 1994 ------- ---- ------- ---- Ratio of earnings to combined fixed charges and preferred stock dividends: Consolidated operations............................. 2.5 2.5 2.4 2.4 Consolidated operations, corporate (parent company) fixed charges and preferred stock dividends only............................................. 6.4 7.6 5.6 7.6
- --------------- (a) Assuming the AFC acquisition and proposed permanent financing, including this Offering, had been effective as of January 1, 1994. (b) Assuming the AFC and WNC acquisitions and the AFC proposed permanent financing, including this Offering, had been effective as of January 1, 1994. See American General's Current Report on Form 8-K dated May 9, 1995 incorporated herein by reference. USE OF PROCEEDS American General Capital will invest the proceeds received from the sale of the Series A Preferred Securities in the Series A Junior Subordinated Debentures of American General. After paying the Underwriters' Compensation and other expenses associated with the offering made hereby (the "Offering"), American General will use the net proceeds of approximately $241 million (approximately $278 million if the Underwriters' over-allotment option is exercised in full) to repay short-term notes issued in connection with the acquisition of AFC. See "American General Corporation -- Recent Developments." At May 25, 1995, the blended interest rate on such short-term notes was 6.02% per annum. S-9 10 SUMMARY FINANCIAL INFORMATION OF AMERICAN GENERAL The following table presents summary consolidated financial information derived from American General's audited financial statements as of and for the five years ended December 31, 1994. The financial data as of and for the three months ended March 31, 1995 and 1994 has been derived from American General's unaudited quarterly financial statements, which, in the opinion of management, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the Company's results of operations and financial position. The results of operations for the three months ended March 31, 1995 are not necessarily indicative of results to be anticipated for the entire year. The table should be read in conjunction with "Management's Discussion and Analysis of American General" and the consolidated financial statements and the related notes incorporated herein by reference. (IN MILLIONS, EXCEPT PER SHARE DATA) Operating Results and Per Share Data
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, -------------------- -------------------------------------------------------- 1995 1994 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- -------- -------- Revenues............................... $ 1,518 $ 1,214 $ 4,841 $ 4,829 $ 4,602 $ 4,395 $ 4,434 ======== ======== ======== ======== ======== ======== ======== Business segment earnings Retirement Annuities................. $ 54 $ 53 $ 187 $ 162 $ 130 $ 110 $ 99 Consumer Finance..................... 60 53 245 206 161 136 125 Life Insurance....................... 84(a) 64 257 (9)(b) 323 326 303 -------- -------- -------- -------- -------- -------- -------- Total business segments........ 198 170 689 359 614 572 527 -------- -------- -------- -------- -------- -------- -------- Corporate operations Net interest on corporate debt....... (27) (19) (76) (81) (85) (87) (119) Expenses not allocated to segments... (9) (6) (29) (25) (28) (37) (52) Earnings on corporate assets......... 6 15 43 21 23 31 69 Net equity in WNC.................... 6 - - - - - - Net realized investment gains (losses)........................... 1 1 (114)(c) 6 9 1 137(d) -------- -------- -------- -------- -------- -------- -------- Total corporate operations..... (23) (9) (176) (79) (81) (92) 35 -------- -------- -------- -------- -------- -------- -------- Income before cumulative effect and tax rate related adjustment.............. 175 161 513 280 533 480 562 Tax rate related adjustment............ - - - (30) - - - Cumulative effect of accounting changes.............................. - - - (46) - - - -------- -------- -------- -------- -------- -------- -------- Net income..................... $ 175 $ 161 $ 513 $ 204 $ 533 $ 480 $ 562 ======== ======== ======== ======== ======== ======== ======== Net income per share................... $ .85 $ .75 $ 2.45 $ .94(b) $ 2.45 $ 2.13 $ 2.35 ======== ======== ======== ======== ======== ======== ======== Dividends per share.................... $ .31 $ .29 $ 1.16 $ 1.10 $ 1.04 $ 1.00 $ .79(e) ======== ======== ======== ======== ======== ======== ======== Average shares outstanding............. 205.2 213.3 209.4 216.6 217.7 225.4 238.6 ======== ======== ======== ======== ======== ======== ========
Financial Position and Book Value Per Share
MARCH 31, DECEMBER 31, -------------------- -------------------------------------------------------- 1995 1994 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- -------- -------- Assets.................................. $ 55,667(f) $ 44,281(f) $ 46,295(g) $ 43,982(g) $ 39,742 $ 36,105 $ 33,808 Debt (including short-term) Corporate............................. 2,359 1,354 1,475 1,257 1,371 1,391 1,555 Real Estate........................... 349 412 361 429 616 590 498 Consumer Finance...................... 7,261 5,947 7,090 5,843 5,484 5,243 5,096 Redeemable equity....................... 47 - 47 - - - 296 Shareholders' equity.................... 4,422(f) 4,593(f) 3,457(g) 5,137(g) 4,616 4,329 4,138 Book value per share.................... 21.77(f) 21.74(f) 17.05(g) 23.96(g) 21.33 19.86 18.57
- ------------ (a) Includes two months of operations for AFC, which was acquired January 31, 1995. (b) Includes $300 million write-down of goodwill. See "Significant Events -- 1993 Significant Events" within Item 7 and Note 1.7 within Item 8 of American General's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 incorporated herein by reference. (c) Results primarily from the capital gains offset program. See "Significant Events -- Capital Gains Offset Program" within Item 7 of American General's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 incorporated herein by reference. (d) Results primarily from the sale of substantially all of the common stock portfolio. (e) Excludes special dividends of $.61 per share. (f) Includes $172 million, $106 million, and $.52 decrease in assets, shareholders' equity, and book value per share, respectively, at March 31, 1995, and $195 million, $126 million, and $.59 increase in assets, shareholders' equity, and book value per share respectively, at March 31, 1994, due to the effect of SFAS 115. See "Management's Discussion and Analysis" within American General's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995 incorporated herein by reference. (g) Includes $986 million, $950 million, and $4.65 decrease in assets, shareholders' equity, and book value per share, respectively, at December 31, 1994, and $1.0 billion, $676 million, and $3.14 increase in assets, shareholders' equity, and book value per share, respectively, at December 31, 1993, due to the effect of SFAS 115. See "Significant Events -- Effect of SFAS 115" within Item 7 and Note 1.2 within Item 8 of American General's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 incorporated herein by reference. S-10 11 DESCRIPTION OF THE SERIES A PREFERRED SECURITIES GENERAL The following summary of certain terms and provisions of the Series A Preferred Securities supplements the description of the terms and provisions of the Preferred Securities set forth in the accompanying Prospectus under the heading "Description of the Preferred Securities," to which description reference is hereby made. Capitalized terms used and not defined in this Prospectus Supplement have the meanings ascribed to them in the accompanying Prospectus. The Series A Preferred Securities constitute a series of Preferred Securities of American General Capital having such dividend terms, liquidation preferences per share, voting rights, redemption provisions and other rights, preferences, privileges, limitations and restrictions as are set forth in the LLC Agreement, the Delaware Limited Liability Company Act (the "LLC Act") and the written action taken or to be taken pursuant to the LLC Agreement by the Manager relating to the Series A Preferred Securities (the "Series A Declaration"). The summary of certain terms and provisions of the Series A Preferred Securities set forth below does not purport to be complete and is subject to, and qualified in its entirety by reference to, the LLC Agreement and the Series A Declaration. The LLC Agreement and the form of the Series A Declaration have been filed as exhibits to the Registration Statement of which this Prospectus Supplement and accompanying Prospectus is a part. DIVIDENDS General. Holders of the Series A Preferred Securities will be entitled to receive cumulative cash dividends from American General Capital, accruing from the date of original issuance and payable monthly in arrears on the last day of each calendar month of each year, commencing June 30, 1995, except as otherwise described below. The dividends payable on each Series A Preferred Security will be fixed at the annual rate of $2.1125, or 8.45% of the liquidation preference of $25 per Series A Preferred Security. The amount of dividends payable for any full monthly dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months, and for any period shorter than a full monthly dividend period, will be computed on the basis of the actual number of days elapsed in such period. Payment of dividends is limited to the funds held by American General Capital and legally available for distribution to holders of Series A Preferred Securities. See "Description of the Series A Junior Subordinated Debentures -- Interest." Dividends on the Series A Preferred Securities must be declared monthly and paid on the last day of each calendar month to the extent that American General Capital has funds legally available for the payment of such dividends and cash on hand sufficient to make such payments. It is anticipated that the funds of American General Capital will be limited principally to payments received from American General under the Series A Junior Subordinated Debentures. If American General fails to make interest payments on the Series A Junior Subordinated Debentures, American General Capital will not have sufficient funds to pay dividends on the Series A Preferred Securities. The payment of dividends (but only if and to the extent declared from funds of American General Capital legally available therefor) will be guaranteed by American General as and to the extent set forth herein and under "Description of the Guarantees" in the accompanying Prospectus. American General has the right under the Series A Junior Subordinated Debentures to extend, from time to time, the interest payment period on the Series A Junior Subordinated Debentures for up to 60 consecutive months on one or more occasions, but not beyond the stated maturity date or date of redemption thereof. Monthly dividends on the Series A Preferred Securities would be deferred (but would continue to accumulate monthly and Additional Dividends, intended to provide monthly compounding on dividend arrearages, would also accumulate) by American General Capital during any such extension of the interest payment period. American General Capital will give written notice of American General's extension of the interest payment period to the holders of the Series A Preferred Securities no later than the last date on which it would be required to notify the S-11 12 NYSE of the record or payment date of the related dividend, which is currently 10 days prior to such record or payment date. See "-- Additional Dividends" and "Description of the Series A Junior Subordinated Debentures -- Option to Extend Interest Payment Period." Any failure by American General to make interest payments on the Series A Junior Subordinated Debentures within 10 days of the relevant payment dates in the absence of an extension of an interest payment period would constitute an Event of Default (as defined under "Description of the Junior Subordinated Debentures -- Events of Default" in the accompanying Prospectus) under the Junior Subordinated Indenture with respect to the Series A Junior Subordinated Debentures. American General has agreed, among other things, not to declare or pay any dividend on any of its capital stock at any time that American General has exercised its option to extend an interest payment period on the Series A Junior Subordinated Debentures and such extension is continuing or any Event of Default under the Junior Subordinated Indenture with respect to the Series A Junior Subordinated Debentures shall have occurred and be continuing. See "Description of the Guarantees -- Certain Covenants of American General" in the accompanying Prospectus. Dividends declared on the Series A Preferred Securities will be payable to the holders thereof as they appear on the books and records of American General Capital on the relevant record dates, which, if and so long as the Series A Preferred Securities are in book-entry form, will be one Business Day (as defined below) prior to the related payment dates. Subject to any applicable laws and regulations and the LLC Agreement and the Series A Declaration, each such payment will be made as described under "Description of the Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust Company" in the accompanying Prospectus. In the event that the Series A Preferred Securities shall not continue to remain in book-entry form, the Manager shall have the right to select relevant record dates that are more than one Business Day prior to the related payment dates. If any date on which dividends are payable on the Series A Preferred Securities is not a Business Day, then payment of the dividend payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day is in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. A "Business Day" means any day other than a Saturday, Sunday or other day on which banking institutions in The City of New York are authorized or obligated by law or executive order to close. Additional Dividends. Upon any dividend arrearages in respect of the Series A Preferred Securities, American General Capital will be required to declare and pay additional dividends on the Series A Preferred Securities in order to provide, in effect, monthly compounding on such dividend arrearages. The amounts payable to effect such monthly compounding on dividend arrearages in respect of the Series A Preferred Securities are referred to herein as "Additional Dividends." Certain Restrictions on American General Capital. If accumulated dividends (including Additional Dividends) have not been paid in full on the Series A Preferred Securities, American General Capital may not: (i) pay, or declare and set aside for payment, any dividends on the Preferred Securities of any other series or any other limited liability company interests in American General Capital ranking pari passu with the Series A Preferred Securities as to the payment of dividends ("Dividend Parity Securities"), unless the amount of any dividends declared on such Dividend Parity Securities is paid on such Dividend Parity Securities and the Series A Preferred Securities on a pro rata basis on the date such dividends are paid on such Dividend Parity Securities, so that the ratio of (x)(A) the aggregate amount paid as dividends on the Series A Preferred Securities to (B)the aggregate amount paid as dividends on such Dividend Parity Securities is the same as the ratio of (y)(A) the aggregate amount of all accumulated arrears of unpaid dividends on the Series A Preferred Securities to (B) the aggregate amount of all accumulated arrears of unpaid dividends on such Dividend Parity Securities; S-12 13 (ii) pay, or declare and set aside for payment, any dividends on any limited liability company interests in American General Capital ranking junior to the Series A Preferred Securities as to the payment of dividends ("Dividend Junior Securities"); or (iii) redeem, purchase, or otherwise acquire any Dividend Parity Securities or Dividend Junior Securities (other than purchases or acquisitions resulting from the reclassification of such securities or the exchange or conversion of any Dividend Parity Security or Dividend Junior Security pursuant to the terms thereof or the purchase of fractional interests therein upon such conversion or exchange); until, in each case, such time as all accumulated and unpaid dividends (including Additional Dividends) on all of the Series A Preferred Securities shall have been paid in full or have been irrevocably set aside for payment in full for all dividend periods terminating on or prior to, in the case of clauses (i) and (ii), the date of such payment, and in the case of clause (iii), the date of such redemption, purchase, or other acquisition. OPTIONAL REDEMPTION On or after June 5, 2000, the Series A Preferred Securities will be redeemable at the option of American General Capital (subject to the prior consent of American General), in whole or in part, from time to time, at the Redemption Price. American General Capital may not redeem the Series A Preferred Securities in part unless all accumulated and unpaid dividends (whether or not earned or declared), including Additional Dividends, have been paid in full on all Series A Preferred Securities for all monthly dividend periods terminating on or prior to the date of redemption. American General has the right to cause American General Capital to exercise such optional redemption rights. In addition, subject to applicable law (including, without limitation, United States federal securities laws), American General or its subsidiaries may at any time and from time to time purchase outstanding Series A Preferred Securities by tender, in the open market or otherwise. SPECIAL EVENT REDEMPTION OR EXCHANGE At any time after the occurrence of a Tax Event or an Investment Company Event (each, a "Special Event"), American General Capital (subject to the prior consent of American General) may, upon not less than 30 nor more than 60 calendar days' notice to the holders of Series A Preferred Securities, either (i) redeem the Series A Preferred Securities in whole but not in part, at the Redemption Price, or (ii) exchange, in whole but not in part, the Series A Preferred Securities for Series A Junior Subordinated Debentures having an aggregate principal amount and accrued and unpaid interest equal to the aggregate liquidation preference and accumulated and unpaid dividends (whether or not earned or declared), including Additional Dividends, to the date fixed for exchange, respectively, of the Series A Preferred Securities (a "Special Event Exchange"). In connection with any Special Event Exchange, American General Capital may be liquidated, dissolved or wound-up. Upon any Special Event Exchange, American General will use its best efforts to have the Series A Junior Subordinated Debentures listed on the NYSE or other exchange on which the Series A Preferred Securities may then be listed. American General has the right to cause American General Capital to exercise its right to effect a Special Event Exchange. "Tax Event" means that a change in any applicable United States law or regulation or in the interpretation thereof (including but not limited to the enactment or imminent enactment of any legislation, the publication of any judicial decisions, regulatory rulings, regulatory procedures, or notices or announcements (including notices or announcements of intent to adopt such procedures or regulations), or a change in the official position or the interpretation of any law or regulation by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such change is made known) shall have occurred after May 25, 1995, and that American General Capital or American General shall have received an opinion of nationally recognized S-13 14 independent legal counsel experienced in such matters that, as a result of such change, there exists more than an insubstantial risk that (i) American General Capital will be subject to federal income tax with respect to the interest received on the Series A Junior Subordinated Debentures, (ii) American General will be precluded from deducting the interest paid on the Series A Junior Subordinated Debentures for federal income tax purposes or (iii) American General Capital will be subject to more than a de minimis amount of other taxes, duties or other governmental charges. "Investment Company Event" means that a change in any applicable United States law or regulation or in the interpretation thereof (including but not limited to the enactment or imminent enactment of any legislation, the publication of any judicial decisions, regulatory rulings, regulatory procedures, or notices or announcements (including notices or announcements of intent to adopt such procedures or regulations), or a change in the official position or the interpretation of any law or regulation by any legislative body, court, governmental authority or regulatory body, irrespective of the manner in which such change is made known) shall have occurred after May 25, 1995, and that American General Capital or American General shall have received an opinion of nationally recognized independent legal counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act") that, as a result of such change, there exists more than an insubstantial risk that American General Capital is or will be considered an "investment company" which is required to be registered under the 1940 Act. After the date fixed for any Special Event Exchange, (i) the Series A Preferred Securities will no longer be deemed to be outstanding, (ii) any global certificate or certificates representing Series A Preferred Securities held by DTC or its nominee will be exchanged for a registered global certificate or certificates representing the Series A Junior Subordinated Debentures to be delivered upon such exchange, (iii) any certificates representing Series A Preferred Securities not held by DTC or its nominee and not surrendered for exchange will be deemed to represent Series A Junior Subordinated Debentures having a principal amount and accrued and unpaid interest equal to the liquidation preference and accumulated and unpaid dividends (whether or not earned or declared), including Additional Dividends, to the date fixed for exchange, respectively, of such Series A Preferred Securities until such certificates are surrendered to American General Capital or its agent for exchange (and until such certificates are so surrendered, no payments of interest or principal will be made with respect to such Series A Junior Subordinated Debentures) and (iv) all rights of the holders of the Series A Preferred Securities will cease, except the right of such holders to receive the Series A Junior Subordinated Debentures upon surrender of certificates representing the Series A Preferred Securities. MANDATORY REDEMPTION Upon repayment by American General of the principal of the Series A Junior Subordinated Debentures at stated maturity, earlier redemption or otherwise, including as a result of the acceleration of Series A Junior Subordinated Debentures upon the occurrence of an Event of Default under the Junior Subordinated Indenture with respect to the Series A Junior Subordinated Debentures, the Series A Preferred Securities will be subject to mandatory redemption, in whole but not in part, by American General Capital and the proceeds from such repayment will be applied to redeem the Series A Preferred Securities at the Redemption Price (unless such proceeds are used to fund the aggregate Liquidation Distributions (as defined herein) on the Series A Preferred Securities in connection with the liquidation, dissolution or winding-up of American General Capital). In the case of such repayment, the Series A Preferred Securities will only be redeemed when repayment of the Series A Junior Subordinated Debentures has actually been received by American General Capital. Notwithstanding the foregoing, the Series A Preferred Securities will not be so redeemed if (i) in lieu of repaying the Series A Junior Subordinated Debentures at stated maturity or date of earlier redemption, American General is permitted by American General Capital to exchange the Series A Junior Subordinated Debentures for new Junior Subordinated Debentures or (ii) American General repays the Series A Junior Subordinated Debentures at stated maturity or S-14 15 date of earlier redemption but is permitted by American General Capital to reborrow the proceeds from such repayment which reborrowing will be evidenced by new Junior Subordinated Debentures issued under the Indenture; provided, however, that American General Capital may only permit American General to so exchange the Series A Junior Subordinated Debentures for new Junior Subordinated Debentures or reborrow the proceeds from the repayment thereof if American General Capital owns all of the Series A Junior Subordinated Debentures and the following conditions are satisfied (which satisfaction, in the case of clauses (f) through (j), shall be determined in the judgment of the Manager and American General Capital's financial advisor (which will be selected by the Manager and must be unaffiliated with American General and be among the 30 largest investment banking firms, measured by total capital, in the United States at the time of the proposed issuance of the new Junior Subordinated Debentures that would evidence the new loan to be made in connection with such exchange or reborrowing)): (a) American General is not bankrupt, insolvent or in liquidation, (b) American General is not in default in the payment of any interest (including Additional Interest, as defined herein) or principal in respect of any Junior Subordinated Debentures, (c) American General has made timely payments on the Series A Junior Subordinated Debentures for the immediately preceding 24 months (and has not elected to extend any interest payment period of the Series A Junior Subordinated Debentures during such 24 month period), (d) such new Junior Subordinated Debentures will mature no later than the earlier of (1) the 49th anniversary of the date of the initial issuance of the Series A Junior Subordinated Debentures and (2) the 30th anniversary of the date such new Junior Subordinated Debentures are issued, (e) American General Capital is not in arrears in the payment of any dividends (including Additional Dividends) on the Series A Preferred Securities, (f) American General is expected to be able to make timely payment of principal of and interest on such new Junior Subordinated Debentures, (g) the issuance of such new Junior Subordinated Debentures is being made on terms, and under circumstances, that are consistent with those which a lender would then require for a loan to an unrelated party, (h) the interest rate on such new Junior Subordinated Debentures is sufficient to provide payments equal to or greater than the amount of dividend payments required under the Series A Preferred Securities, (i) the terms of such new Junior Subordinated Debentures are consistent with market circumstances and American General's financial condition and (j) immediately prior to the issuance of such new Junior Subordinated Debentures, the senior unsecured long-term debt of American General is (or, if no such debt is outstanding, would be) rated not less than BBB (or the equivalent) by Standard & Poor's Corporation and Baa2 (or the equivalent) by Moody's Investors Service, Inc. and the subordinated unsecured long-term debt of American General (or, if more than one issue of such subordinated debt is outstanding, the most junior of such issues) is (or, if no such debt is outstanding, would be) rated not less than BBB- (or the equivalent) by Standard & Poor's Corporation and Baa3 by Moody's Investors Service, Inc. (or, if either of such rating organizations is not then rating American General's senior or subordinated unsecured long-term debt, as the case may be, the equivalent of such ratings by any other "nationally recognized statistical rating organization," as that term is defined by the Securities and Exchange Commission for purposes of Rule 436(g)(2) under the Securities Act of 1933, as amended). As a result of the foregoing conditions, such new Junior Subordinated Debentures will bear interest at a rate sufficient to provide payments equal to or greater than the amount of dividend payments required under the Series A Preferred Securities but, pursuant to clauses (g) and (i) above, may have other terms which vary from the terms of the Series A Junior Subordinated Debentures. REDEMPTION PROCEDURES Notice of any redemption (optional or mandatory) of Series A Preferred Securities (which notice will be irrevocable) will be given by American General Capital to American General and each record holder of Series A Preferred Securities that are being redeemed not fewer than 30 nor more than 60 calendar days prior to the date fixed for redemption thereof. If American General Capital gives a notice of redemption, then on the redemption date American General Capital will irrevocably S-15 16 deposit with DTC or the Paying Agent, as the case may be, sufficient funds to pay the Redemption Price for the Series A Preferred Securities to be redeemed and give DTC or the Paying Agent, as the case may be, irrevocable instructions and authority to pay the Redemption Price to the holders of the Series A Preferred Securities to be redeemed. See "Description of the Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust Company" in the accompanying Prospectus. If notice of redemption has been given and funds irrevocably deposited with DTC or the Paying Agent, as the case may be, as required, then immediately prior to the close of business on the date of such deposit, all rights of holders of the Series A Preferred Securities so called for redemption will cease, except the right of such holders to receive the Redemption Price, but without additional interest from and after such redemption date. In the event that any date fixed for redemption is not a Business Day, then payment of the Redemption Price payable on such date will be made the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that payment of the Redemption Price is improperly withheld or refused and not paid by either American General Capital or American General (pursuant to the Guarantee), dividends on the Series A Preferred Securities called for redemption (including any Additional Dividends thereon) will continue to accumulate at the then applicable rate, from the original redemption date to the date that the Redemption Price is actually paid and the holders of such Series A Preferred Securities may exercise all of their rights as holders of Series A Preferred Securities. LIQUIDATION RIGHTS In the event of any voluntary or involuntary liquidation, dissolution or winding-up of American General Capital other than in connection with or after the exchange of the Series A Preferred Securities for the Series A Junior Subordinated Debentures in the manner described under "-- Special Event Redemption or Exchange" above, the holders of Series A Preferred Securities then outstanding will be entitled to receive out of the assets of American General Capital legally available for distribution to the holders of limited liability company interests, after satisfaction of liabilities to creditors as required by the LLC Act but before any distribution of assets is made to holders of any Common Securities or any other class of limited liability company interests in American General Capital ranking junior to the Series A Preferred Securities as to the distribution of assets upon liquidation, dissolution or winding-up of American General Capital, but together with the holders of Preferred Securities of any other series or any other limited liability company interests in American General Capital then outstanding ranking pari passu with the Series A Preferred Securities as to the distribution of assets upon liquidation, dissolution or winding-up ("Liquidation Parity Securities"), an amount equal to the liquidation preference of $25 per Series A Preferred Security plus all accumulated and unpaid dividends (whether or not earned or declared), including any Additional Dividends, to the date of payment (the "Liquidation Distribution"). If, upon any such liquidation, dissolution or winding-up, the Liquidation Distributions can be paid only in part because American General Capital has insufficient assets available to pay in full the aggregate Liquidation Distributions on the Series A Preferred Securities and the aggregate maximum liquidation distributions on the Liquidation Parity Securities, then the amounts payable directly by American General Capital on the Series A Preferred Securities and on such Liquidation Parity Securities shall be paid on a pro rata basis, so that the ratio of (i)(A) the aggregate amount paid as Liquidation Distributions on the Series A Preferred Securities to (B) the aggregate amount paid as liquidation distributions on the Liquidation Parity Securities is the same as the ratio of (ii)(A) the aggregate Liquidation Distributions on the Series A Preferred Securities to (B) the aggregate maximum liquidation distributions on the Liquidation Parity Securities. If, upon any liquidation, dissolution or winding-up of American General Capital, the holders of Series A Preferred Securities are paid in full the Liquidation Distributions to which they are entitled, then such holders will not be entitled to receive or share in any other assets of American General S-16 17 Capital thereafter available for distribution to any other holders of limited liability company interests in American General Capital. Pursuant to the LLC Agreement, American General Capital shall be dissolved and its affairs shall be wound up upon the earliest to occur of (i) December 31, 2050 (the expiration of the period fixed for the duration of American General Capital); (ii) the bankruptcy, insolvency, liquidation, dissolution or winding-up of the Manager or American General (collectively, the "Common Members") or the withdrawal, retirement, resignation or expulsion of either Common Member from American General Capital or the occurrence of any other event that terminates the continued membership of either Common Member therein under the LLC Act; (iii) the entry of a decree of a judicial dissolution of American General Capital under the LLC Act; (iv) the decision of the Manager to dissolve American General Capital (subject to the voting rights of the holders of Series A Preferred Securities described under "Voting Rights" below and of other holders of limited liability company interests in American General Capital); (v) the election of the Manager, in connection with or after the exchange of all series of Preferred Securities outstanding (in accordance with the written action establishing each such series of Preferred Securities) for the related series of Junior Subordinated Debentures; or (vi) upon the written consent thereto of all holders of outstanding Common Securities and Preferred Securities of American General Capital. Any merger, consolidation, replacement, conveyance, transfer or lease effected in accordance with the provisions described under "Merger, Consolidation or Sale of Assets of American General Capital" below shall not be deemed a liquidation, dissolution or winding-up of American General Capital for the foregoing purposes. VOTING RIGHTS Except as provided below and under "Description of the Guarantees -- Amendments and Assignment" and "Description of the Junior Subordinated Debentures -- Modification of the Junior Subordinated Indenture" in the accompanying Prospectus and as otherwise required by law and provided by the LLC Agreement, the holders of the Series A Preferred Securities will have no voting rights. If (i) American General Capital fails to pay dividends in full (including any arrearages and Additional Dividends) on the Series A Preferred Securities for 18 consecutive months; (ii) an Event of Default under the Junior Subordinated Indenture with respect to the Series A Junior Subordinated Debentures occurs and is continuing; or (iii) American General is in default under any of its payment or other obligations under the Guarantee with respect to the Series A Preferred Securities, then the holders of outstanding Series A Preferred Securities will be entitled by the vote of a majority in aggregate liquidation preference of such holders to appoint and authorize a special trustee (a "Special Trustee") to enforce American General Capital's rights under the Series A Junior Subordinated Debentures against American General, enforce the obligations undertaken with respect to the Series A Preferred Securities by American General under the Guarantee and, to the extent permitted by law, declare and pay dividends on the Series A Preferred Securities to the extent funds of American General Capital are legally available therefor (but only in the event that American General Capital's failure to pay dividends on the Series A Preferred Securities is not a consequence of American General's exercise of its right to extend the interest payment period on the Series A Junior Subordinated Debentures). For purposes of determining whether American General Capital has failed to pay dividends in full for 18 consecutive months, dividends shall be deemed to remain in arrears, notwithstanding any partial payments in respect thereof, until all accumulated and unpaid dividends (including any Additional Dividends) have been or contemporaneously are declared and paid with respect to all monthly dividend periods terminating on or prior to the date of payment of such full cumulative dividends. Not later than 30 calendar days after such right to appoint a Special Trustee arises and upon not less than 15 calendar days' written notice by first-class mail to the holders of Series A Preferred Securities, the Manager will convene a meeting to elect a Special Trustee. If the Manager fails to convene such meeting within such 30-day period, the holders of at S-17 18 least 10% of the aggregate liquidation preference of the Series A Preferred Securities will be entitled to convene such meeting. In the event that, at such meeting, holders of less than a majority in aggregate liquidation preference of Series A Preferred Securities vote for such appointment, no Special Trustee shall be appointed. Any Special Trustee shall vacate office immediately if American General Capital (or American General pursuant to the Guarantee) shall have paid in full all accumulated and unpaid dividends (including any Additional Dividends) on the Series A Preferred Securities or such Event of Default under the Junior Subordinated Indenture or such default under the Guarantee, as the case may be, shall have been cured. Notwithstanding the appointment of any such Special Trustee, American General will retain all rights, including the right to extend the interest payment period from time to time as provided under "Description of the Series A Junior Subordinated Debentures -- Option to Extend Interest Payment Period," and be subject to all obligations under the Junior Subordinated Indenture and as obligor under the Series A Junior Subordinated Debentures, and any such extension would not constitute an Event of Default under the Junior Subordinated Indenture with respect to the Series A Junior Subordinated Debentures or enable a holder of Series A Preferred Securities to require the payment of a dividend that has not theretofore been declared. In furtherance of the foregoing, and without limiting the powers of any Special Trustee so appointed and for the avoidance of any doubt concerning the powers of the Special Trustee, any Special Trustee, in its own name and as trustee of an express trust, may, subject to the applicable provisions of the Junior Subordinated Indenture, institute a proceeding, including, without limitation, any suit in equity, an action at law or other judicial or administrative proceeding, to enforce American General Capital's creditor rights directly against American General to the same extent as American General Capital and on behalf of American General Capital, and may prosecute such proceeding to judgment or final decree, and enforce the same against American General and, subject to the subordination provisions contained in the Junior Subordinated Indenture, collect, out of the property, wherever situated, of American General the monies adjudged or decreed to be payable in the manner and to the extent provided by law. If any proposed amendment to the LLC Agreement or the Series A Declaration provides for, or the Manager otherwise proposes to effect, (i) any action that would materially adversely affect the powers, preferences or special rights of the Series A Preferred Securities, whether by way of amendment to the LLC Agreement, the Series A Declaration or otherwise, including, without limitation, the authorization or issuance of any limited liability company interests of American General Capital ranking, as to payment of dividends or distribution of assets upon liquidation, dissolution or winding-up of American General Capital, senior to the Series A Preferred Securities, (ii) the liquidation, dissolution or winding-up of American General Capital (in any case other than upon the occurrence of a Special Event Exchange, as described under "-- Merger, Consolidation or Sale of Assets of American General Capital" or as described in the proviso to the next succeeding sentence), or (iii) the commencement of any voluntary bankruptcy, insolvency, reorganization or other similar proceeding involving American General Capital, then the holders of outstanding Series A Preferred Securities will be entitled to vote on such amendment or action of the Manager (but not on any other amendment or action). In the case of an amendment or action described in clause (i) which would materially adversely affect the powers, preferences or special rights of any Dividend Parity Securities or any Liquidation Parity Securities, the holders of such Dividend Parity Securities or Liquidation Parity Securities, as the case may be, or, in the case of an amendment or action described in clause (ii) or (iii), the holders of all Liquidation Parity Securities, will be entitled to vote with the holders of the Series A Preferred Securities, together as a class, on such amendment or action of the Manager and such amendment or action shall not be effective except with the approval of the holders of at least 66 2/3% of the aggregate liquidation preference of such outstanding securities; provided, however, that no such approval shall be required if the liquidation, dissolution or winding-up of American General Capital is proposed or initiated upon the occurrence of certain of the events specified in the LLC Agreement. See "-- Liquidation Rights." S-18 19 The powers, preferences or special rights attached to the Series A Preferred Securities will be deemed not to be adversely affected by the creation or issuance of, and no vote will be required for the creation or issuance of, any further limited liability company interests of American General Capital ranking junior to or pari passu with the Series A Preferred Securities with respect to voting rights or rights to payment of dividends or distribution of assets upon liquidation, dissolution or winding-up of American General Capital. So long as any Series A Junior Subordinated Debentures are held by American General Capital, the Manager shall not (i) at any time in which a Special Trustee has been appointed, direct the time, method and place of conducting any proceeding for any remedy available to the Special Trustee or the Junior Subordinated Trustee, or the exercise of any trust or power conferred on the Special Trustee or the Junior Subordinated Trustee with respect to the Series A Junior Subordinated Debentures, (ii) waive compliance with, or any past default under, the Series A Junior Subordinated Debentures or the Junior Subordinated Indenture (to the extent that holders of Series A Junior Subordinated Debentures are entitled to the benefits of the covenant or condition waived or breached), (iii) exercise any right to rescind or annul a declaration that the principal of the Series A Junior Subordinated Debentures shall be due and payable, (iv) consent to any amendment or modification of the Series A Junior Subordinated Debentures or of the Junior Subordinated Indenture without, in each case, obtaining the prior approval of the holders of at least 66 2/3% of the aggregate liquidation preference of the Series A Preferred Securities then outstanding; provided, however, that where a waiver or consent under the Series A Junior Subordinated Debentures would require the waiver or consent of each holder affected thereby, no such waiver or consent shall be given by the Manager without the prior consent of each holder of the Series A Preferred Securities. The Manager shall not revoke any action previously authorized or approved by a vote of holders of the Series A Preferred Securities, without the approval of holders of at least 66 2/3% of the aggregate liquidation preference of the Series A Preferred Securities then outstanding (or, if such action required the approval of each holder, then only with the approval of each holder). The Manager shall notify all holders of the Series A Preferred Securities of any notice of default received from the Junior Subordinated Trustee under the Junior Subordinated Indenture with respect to the Series A Junior Subordinated Debentures. Any required approval of holders of the Series A Preferred Securities may be given at a separate meeting of such holders convened for such purpose or at a meeting of holders of limited liability company interests in American General Capital or pursuant to written consents. The Manager will cause a notice of any meeting at which holders of the Series A Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of the Series A Preferred Securities. Each such notice will include a statement setting forth (i) the date of such meeting or the date by which such action is to be taken, (ii) a description of any matter on which such holders are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. Notwithstanding that holders of Series A Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Series A Preferred Securities and any other series of Preferred Securities that are entitled to vote or consent with such Series A Preferred Securities as a single class at such time that are owned by American General or by any entity more than 50% of which is owned by American General, either directly or indirectly, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. TRANSFER AGENT, REGISTRAR AND PAYING AGENT Chemical Mellon Shareholder Services, LLC will act as Transfer Agent, Registrar and Paying Agent for the Series A Preferred Securities, but American General Capital may designate an additional or substitute Transfer Agent, Registrar or Paying Agent. In the event that the Series A Preferred Securities do not remain in book-entry-only form, registration of transfers of Series A S-19 20 Preferred Securities will be effected without charge by or on behalf of American General Capital, but upon payment in respect of any tax or other governmental charges which may be imposed in connection therewith (and/or the giving of such indemnity as American General Capital or the Manager may require with respect thereto). Exchanges of Series A Preferred Securities for Series A Junior Subordinated Debentures will be effected without charge by or on behalf of American General Capital, but upon payment in respect of any tax or other governmental charges which may be imposed (and/or the giving of such indemnity as American General Capital or the Manager may require with respect thereto) in connection with the issuance of any Series A Junior Subordinated Debentures in the name of any person other than the registered holder of the Series A Preferred Security for which the Series A Junior Subordinated Debenture is being exchanged or for any reason other than such exchange. American General Capital will not be required to register or cause to be registered the transfer of Series A Preferred Securities after such Series A Preferred Securities have been called for redemption or exchange. MERGER, CONSOLIDATION OR SALE OF ASSETS OF AMERICAN GENERAL CAPITAL American General Capital may not consolidate with, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, any entity, except with the prior approval of the holders of not less than 66 2/3% of the aggregate liquidation preference of the Series A Preferred Securities or as described below. American General Capital may, without the consent of the holders of the Series A Preferred Securities, consolidate with, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to, a limited liability company, limited partnership or trust organized as such under the laws of any state of the United States of America or the District of Columbia, provided that (i) such successor entity either (x) expressly assumes all of the obligations of American General Capital under the Series A Preferred Securities or (y) substitutes for the Series A Preferred Securities other securities having substantially the same terms as the Series A Preferred Securities (the "Successor Securities") so long as the Successor Securities rank, with respect to participation in the profits or assets of the successor entity, at least as high as the Series A Preferred Securities rank with respect to payment of dividends and distribution of assets upon the liquidation, dissolution or winding-up of American General Capital, (ii) American General expressly acknowledges such successor entity as the holder of the Series A Junior Subordinated Debentures and its obligations under the Guarantee with respect to the Successor Securities, (iii) such merger, consolidation, replacement, conveyance, transfer or lease does not cause the Series A Preferred Securities (or any Successor Securities) to be delisted (or, in the case of any Successor Securities, to fail to be listed) by any national securities exchange or other organization on which the Series A Preferred Securities are then listed, (iv) such merger, consolidation, replacement, conveyance, transfer or lease does not cause the Series A Preferred Securities (or any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, replacement, conveyance, transfer or lease does not adversely affect the powers, preferences and other special rights of the holders of the Series A Preferred Securities (or any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), and (vi) prior to such merger, consolidation, replacement, conveyance, transfer or lease, American General has received an opinion of nationally recognized independent legal counsel to American General Capital experienced in such matters to the effect that (x) such successor entity will be treated as a partnership or as a grantor trust, as appropriate, for federal income tax purposes, (y) following such merger, consolidation, replacement, conveyance, transfer or lease, American General and such successor entity will be in compliance with the 1940 Act without registering thereunder as an investment company and (z) such merger, consolidation, replacement, conveyance, transfer or lease will not adversely affect the limited liability of the holders of the Series A Preferred Securities (or any Successor Securities) or result in federal income tax liability to such holders other than with respect to any fractional share interests converted into cash. S-20 21 MISCELLANEOUS The Manager is authorized and directed to conduct its affairs and to operate American General Capital in such a way that American General Capital will not be deemed to be an "investment company" required to be registered under the 1940 Act or taxed as a corporation for federal income tax purposes and so that the Series A Junior Subordinated Debentures will be treated as indebtedness of American General for federal income tax purposes. In this connection, the Manager is authorized to take any action not inconsistent with applicable law, the LLC Agreement and the Series A Declaration that does not adversely affect the interests of the holders of the Series A Preferred Securities and that the Manager determines in its discretion to be necessary or desirable for such purposes. DESCRIPTION OF THE SERIES A JUNIOR SUBORDINATED DEBENTURES Set forth below is a description of the specific terms of the Series A Junior Subordinated Debentures in which American General Capital will invest (i) the proceeds of the issuance and sale of the Series A Preferred Securities and (ii) substantially all of the purchase price paid by American General and the Manager for the Common Securities and any related capital contribution (the "Common Securities Payment"). This description supplements the description of the general terms and provisions of the Junior Subordinated Debentures set forth in the accompanying Prospectus under the caption "Description of the Junior Subordinated Debentures." The form of the resolutions of American General's Board of Directors or a special committee thereof establishing the Series A Junior Subordinated Debentures is filed as an exhibit to the Registration Statement of which this Prospectus Supplement is a part. GENERAL The Series A Junior Subordinated Debentures will be limited in aggregate principal amount to the sum of the aggregate amount of the proceeds received by American General Capital from the Offering and the Common Securities Payment, less 1% of such sum. The entire principal amount of the Series A Junior Subordinated Debentures will become due and payable, together with any accrued and unpaid interest thereon, including Additional Interest, if any, on the earlier of (i) June 30, 2025 (subject to American General's right to exchange the Series A Junior Subordinated Debentures for new Junior Subordinated Debentures or to redeem or repay the Series A Junior Subordinated Debentures and reborrow the proceeds from such redemption or repayment of the Series A Junior Subordinated Debentures upon the terms and subject to the conditions set forth under "Description of the Series A Preferred Securities -- Mandatory Redemption") or (ii) the date upon which American General Capital is liquidated, dissolved or wound-up; provided, however, that in the event that the Series A Preferred Securities are exchanged for Series A Junior Subordinated Debentures in the manner described under "Description of the Series A Preferred Securities -- Special Event Redemption or Exchange," (x) the Series A Junior Subordinated Debentures will mature on June 30, 2025, notwithstanding that American General Capital may have liquidated, dissolved or wound-up in connection with or after such exchange and (y) the Series A Junior Subordinated Debentures will not thereafter be subject to an election by American General to exchange the Series A Junior Subordinated Debentures for new Junior Subordinated Debentures or to redeem or repay the Series A Junior Subordinated Debentures and reborrow the proceeds from such redemption or repayment. The Series A Junior Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness of American General in the manner described under the caption "Description of Junior Subordinated Debentures -- Subordination" in the accompanying Prospectus. S-21 22 INTEREST Each Series A Junior Subordinated Debenture will bear interest at the rate of 8.45% per annum from the original date of issuance, payable monthly in arrears on the last day of each calendar month of each year (each, an "Interest Payment Date"), commencing June 30, 1995. Interest will compound monthly and will accrue at the annual rate of 8.45% on any interest installment not paid when due. The amount of interest payable for any period will be computed on the basis of a 360-day year consisting of twelve 30-day months and, for any period shorter than a full month, will be computed on the basis of the actual number of days elapsed in such period. In the event that any date on which principal or interest is payable on the Series A Junior Subordinated Debentures is not a Business Day, then the required payment to be made on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. Interest payments on the Series A Junior Subordinated Debentures will generally be payable to the holders thereof as they appear in the security register maintained pursuant to the Junior Subordinated Indenture on the relevant record dates, which will be one Business Day prior to the relevant interest payment dates; provided, however, that if the Series A Junior Subordinated Debentures are not in book-entry-only form during any period following a Special Event Exchange, the relevant record date during such period will be the fifteenth day of the month with respect to the interest payment that is to be paid on the last day of such month. OPTION TO EXTEND INTEREST PAYMENT PERIOD American General will have the right at any time and from time to time during the term of the Series A Junior Subordinated Debentures to extend the interest payment period to a period ending on an Interest Payment Date not exceeding 60 consecutive months, but in no event beyond the stated maturity date or date of redemption of the Series A Junior Subordinated Debentures. At the end of any such Extension Period, American General shall pay all interest then accrued and unpaid (together with any Additional Interest to the extent permitted by applicable law). Prior to the termination of any Extension Period of less than 60 consecutive months, American General may further extend the interest payment period, provided that such Extension Period, as further extended, does not exceed 60 consecutive months and does not extend beyond the stated maturity date or date of redemption of the Series A Junior Subordinated Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, American General may select a new Extension Period, subject to the above requirements. No interest will be due during an Extension Period until the Interest Payment Date that is the last day of such Extension Period. During any Extension Period, American General has agreed not to take, and to cause its majority-owned subsidiaries not to take, certain actions as described under "Description of the Junior Subordinated Debentures -- Certain Covenants of American General" in the accompanying Prospectus. American General will give American General Capital, as holder of the Series A Junior Subordinated Debentures, notice of its selection of any Extension Period one Business Day prior to the earlier of (i) the date the dividends on the Series A Preferred Securities are payable or (ii) the date American General Capital is required to give notice to the NYSE or other applicable self-regulatory organization or to holders of the Series A Preferred Securities of the record date or the date such dividend is payable (which is currently 10 days prior to such date), but in any event not less than one Business Day prior to such record date. The Manager will cause American General Capital to give notice of American General's selection of such Extension Period to the holders of the Series A Preferred Securities. If the Series A Preferred Securities have been exchanged for the Series A Junior Subordinated Debentures following the occurrence of a Special Event, American General will give the holders of the Series A Junior Subordinated Debentures notice of its selection of any Extension Period not less than two Business Days prior to the record date related to the first interest payment S-22 23 date for which such Extension Period will be effective. If American General selects an Extension Period and thereafter elects to extend the Extension Period, then it is required to give a similar notice prior to the then scheduled end of the Extension Period. ADDITIONAL INTEREST American General will be required to pay interest at the rate of 8.45% per annum upon any interest that has not been paid on the Series A Junior Subordinated Debentures during an Extension Period. Accordingly, in such circumstances, American General will, to the fullest extent permitted by applicable law, pay interest upon interest in order to provide for monthly compounding on the Series A Junior Subordinated Debentures. The persons entitled to receive such interest shall be the holders of the Series A Junior Subordinated Debentures on the record date for the Interest Payment Date that is the last day of the Extension Period. In addition, if at any time prior to an exchange of the Series A Preferred Securities for Series A Junior Subordinated Debentures in connection with a Special Event, American General Capital shall be required to pay, with respect to its income derived from the interest payments on the Series A Junior Subordinated Debentures, any amounts for or on account of any taxes, duties, assessments or governmental charges of whatever nature imposed by the United States (other than withholding taxes), or any other taxing authority, then, in any such case, American General will, to the fullest extent permitted by applicable law, pay as additional interest such additional amounts ("Additional Amounts") as may be necessary in order that the net amounts received and retained by American General Capital after the payment of such taxes, duties, assessments or governmental charges (including such taxes, duties, assessments or governmental charges with respect to such Additional Amounts) shall result in American General Capital's having such funds as it would have had in the absence of the payment of such taxes, duties, assessments or governmental charges. The amounts of interest payable to effect monthly compounding on the Series A Junior Subordinated Debentures, together with any such Additional Amounts, are referred to herein as "Additional Interest." OPTIONAL REDEMPTION American General will have the right to redeem the Series A Junior Subordinated Debentures, in whole or in part, at any time or from time to time on or after June 5, 2000 at a cash redemption price equal to the unpaid principal amount thereof, without premium or penalty, plus any accrued and unpaid interest, including any Additional Interest, on the portion being redeemed. At any time after the occurrence of a Special Event and prior to a Special Event Exchange, American General will also have the right to redeem the Series A Junior Subordinated Debentures, in whole but not in part, at a cash redemption price equal to the unpaid principal amount thereof, without premium or penalty, plus any accrued and unpaid interest, including any Additional Interest, thereon to the Redemption Date. In addition, if at any time prior to a Special Event Exchange American General is, or in the opinion of nationally recognized independent legal counsel would be, required to pay Additional Amounts, American General will have the right to redeem the Series A Junior Subordinated Debentures, in whole but not in part, at a cash redemption price equal to the unpaid principal amount thereof, without premium or penalty, plus any accrued and unpaid interest, including any Additional Interest, thereon to the Redemption Date. If, prior to a Special Event Exchange, American General or any of its subsidiaries purchases any Series A Preferred Securities by tender, in the open market, or otherwise, American General may redeem the Series A Junior Subordinated Debentures in a principal amount not to exceed the aggregate liquidation preference of the Series A Preferred Securities so purchased, at a cash redemption price equal to the unpaid principal amount thereof, without premium or penalty, plus any accrued and unpaid interest, including any Additional Interest, thereon to the Redemption Date. S-23 24 Notice of any such redemption occurring after a Special Event Exchange will be given by American General to the holder or holders of the Series A Junior Subordinated Debentures in a manner similar to that required to be given by American General Capital with respect to the redemption of the Series A Preferred Securities. See "Description of the Series A Preferred Securities -- Redemption Procedures." MANDATORY PREPAYMENT If American General Capital redeems the Series A Preferred Securities in accordance with the terms thereof, the Series A Junior Subordinated Debentures will become due and payable in a principal amount equal to the aggregate liquidation preference of the Series A Preferred Securities so redeemed, together with any accrued and unpaid interest, including any Additional Interest, thereon to the Redemption Date. Any redemption pursuant to this provision shall be made prior to 12:00 noon, New York time, on the date of such redemption or at such other time on such earlier date as American General and American General Capital shall agree. SET-OFF Notwithstanding anything to the contrary in the Junior Subordinated Indenture, American General shall have the right to set-off any payment with respect to the Series A Junior Subordinated Debentures it is otherwise required to make thereunder with and to the extent American General has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee with respect to the Series A Preferred Securities. ENFORCEMENT OF CERTAIN RIGHTS BY SPECIAL TRUSTEE If, prior to a Special Event Exchange, (i) American General Capital fails to pay dividends in full (including any arrearages) on the Series A Preferred Securities for 18 consecutive months; (ii) an Event of Default under the Junior Subordinated Indenture with respect to the Series A Junior Subordinated Debentures occurs and is continuing; or (iii) American General is in default under any of its payment or other obligations under the Guarantee with respect to the Series A Preferred Securities, then, under the terms of the Series A Preferred Securities, the holders of outstanding Series A Preferred Securities will have the rights referred to under "Description of the Series A Preferred Securities -- Voting Rights," including the right to appoint a Special Trustee, which Special Trustee would be authorized, subject to the applicable provisions of the Junior Subordinated Indenture, to exercise American General Capital's right to accelerate the principal amount of the Series A Junior Subordinated Debentures and to enforce American General Capital's other creditor rights with respect to the Series A Junior Subordinated Debentures. Notwithstanding the appointment of any such Special Trustee, American General Delaware Management Corporation would continue as Manager and American General would retain all rights, including the right to extend the interest payment period from time to time as described above under the caption "-- Option to Extend Interest Payment Period," and be subject to all of the obligations under the Junior Subordinated Indenture and as obligor under the Series A Junior Subordinated Debentures. GLOBAL SECURITIES If, immediately prior to any Special Event Exchange following the occurrence of a Special Event, the Series A Preferred Securities are represented by one or more global securities held by DTC, then the Series A Junior Subordinated Debentures exchanged for the Series A Preferred Securities will be represented by one or more global securities registered in the name of DTC or its nominee and be deposited with DTC or its custodian. Unless and until it is exchanged in whole or in part for the Series A Junior Subordinated Debentures in definitive registered form, a global security may not be registered for transfer or exchange except in limited circumstances. S-24 25 For a description of DTC and DTC's book-entry system, see "Description of the Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust Company" in the accompanying Prospectus. As of the date of this Prospectus Supplement, the description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Series A Preferred Securities apply in all material respects to any debt obligations represented by one or more global securities held by DTC. MISCELLANEOUS For restrictions on certain actions of American General with respect to the Series A Junior Subordinated Debentures held by American General Capital, see "Description of the Series A Preferred Securities -- Voting Rights." If Series A Junior Subordinated Debentures are outstanding and owned by any entity other than American General, or its affiliates (including American General Capital), then any Series A Junior Subordinated Debentures owned by American General or its affiliates will not be entitled to vote or consent and will, for purposes of any such vote or consent, be treated as if they were not outstanding. Chemical Bank will serve as the initial Paying Agent and registrar for the Series A Junior Subordinated Debentures. S-25 26 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS GENERAL The following is a summary of the material federal income tax considerations relevant to the purchase, ownership and disposition of the Series A Preferred Securities, which in the opinion of Vinson & Elkins L.L.P., counsel to American General and American General Capital, is accurate insofar as it expresses conclusions of law. However, this summary does not address all federal income tax aspects of the Series A Preferred Securities, or the tax considerations relevant to certain types of holders subject to special treatment under the federal income tax laws (for example, banks, life insurance companies, securities or other dealers, or foreign persons and foreign entities). This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Regulations promulgated thereunder, judicial decisions and Internal Revenue Service ("IRS") rulings and notices. All of these authorities, however, are subject to change; any such change may cause the tax consequences to vary substantially from those described below. Moreover, the transactions described in this Prospectus Supplement and the accompanying Prospectus raise a number of novel tax issues which have not been ruled on by the courts or the IRS in similar transactions. As a result, there can be no assurance that the IRS will not audit these transactions and, if it does so, that the IRS will agree with the conclusions set forth below or the positions taken by American General and American General Capital in conformity therewith. See "-- American General Capital Information Returns and Audit Procedures" below. Unless otherwise indicated, the information below is directed at Holders (as defined below) who purchase Series A Preferred Securities on their original issue at their initial offering price, and that hold such Series A Preferred Securities as capital assets (generally property held for investment). For purposes of this discussion, a "Holder" is a beneficial owner of a Series A Preferred Security who or that is (i) a citizen or resident of the United States, (ii) a domestic corporation, partnership, estate or trust, or (iii) otherwise subject to United States federal income taxation on a net income basis in respect of a Series A Preferred Security. PROSPECTIVE PURCHASERS OF SERIES A PREFERRED SECURITIES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE UNITED STATES OR OTHER TAX CONSIDERATIONS OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF SERIES A PREFERRED SECURITIES, INCLUDING THE EFFECTS OF STATE, LOCAL AND FOREIGN TAX LAWS. TAX CLASSIFICATION While the following matters are not free from doubt, Vinson & Elkins L.L.P. is of the opinion that (i) American General Capital will be classified as a partnership for federal income tax purposes and not as an association taxable as a corporation and (ii) the Series A Junior Subordinated Debentures will be classified as indebtedness for federal income tax purposes. The following discussion assumes such classifications. INCOME FROM SERIES A PREFERRED SECURITIES Each Holder of Series A Preferred Securities will be required to include in gross income his distributive share of the net income of American General Capital, which net income generally will be equal to the amount of interest received or accrued by American General Capital on the Series A Junior Subordinated Debentures. Such income will not exceed dividends received on a Series A Preferred Security, except in limited circumstances. See "-- Original Issue Discount." Any amount so included in a Holder's gross income will increase his tax basis in the Series A Preferred Securities, and the amount of distributions of cash or other property by American General Capital to a Holder will reduce such Holder's tax basis in the Series A Preferred Securities. No portion of the amounts received on the Series A Preferred Securities will be eligible for the dividends received deduction. S-26 27 American General Capital does not presently intend to make an election under section 754 of the Code. Accordingly, a subsequent purchaser of Series A Preferred Securities will not be permitted to adjust the tax basis in his allocable share of American General Capital's assets so as to reflect any difference between his purchase price for the Series A Preferred Securities and his share of American General Capital's underlying tax basis in its assets. As a result, a Holder of Series A Preferred Securities may be required to report a larger or smaller amount of income from holding the Series A Preferred Securities than would otherwise be appropriate based upon the Holder's purchase price for the Series A Preferred Securities. ORIGINAL ISSUE DISCOUNT Under Treasury Regulations, the stated interest payments on the Series A Junior Subordinated Debentures will be treated as "original issue discount" because of the option that American General has, under the terms of the Series A Junior Subordinated Debentures, to extend interest payment periods for up to 60 consecutive months. Under the Code, a Holder of debt with original issue discount must include that discount in income on an economic accrual basis and before the receipt of cash attributable to the income regardless of his method of tax accounting. The amount of original issue discount that accrues in any month will approximately equal the amount of the interest that accrues in that month at the stated interest rate. In the event that the interest payment period is extended, however, American General Capital will accrue additional original issue discount approximately equal to the amount of the additional interest payment due at the end of the extended interest payment period on an economic accrual basis over the length of the extended interest period. Accrued income in respect of deferred interest will be allocated, but the corresponding cash will not be distributed, to Holders of record on the Business Day preceding the last day of each calendar month. As a result, Holders of record during an extended interest payment period will include interest in gross income in advance of the receipt of cash, and any such Holder who disposes of Series A Preferred Securities prior to the record date for the payment of dividends following such extended interest payment period will have included such Holder's allocable share of such interest in gross income but will not receive any cash related thereto from American General Capital. The tax basis of a Series A Preferred Security will be increased by the amount of any interest that is included in income without a corresponding receipt of cash and will be decreased when and if such cash is subsequently received from American General Capital. DISPOSITION OF SERIES A PREFERRED SECURITIES Generally, capital gain or loss will be recognized on a sale (including a complete redemption for cash) of Series A Preferred Securities equal to the difference between the amount realized and the Holder's tax basis in the Series A Preferred Securities sold. Gain or loss recognized by a Holder on the sale or exchange of a Series A Preferred Security held for more than one year generally will be taxable as long-term capital gain or loss. The adjusted tax basis of the Series A Preferred Securities sold generally will equal the amount paid for the Series A Preferred Securities, increased by accrued but unpaid original issue discount and other income, if any, as described herein allocated to such Holder, and reduced by any cash or other property distributed to such Holder by American General Capital. A Holder who acquires Series A Preferred Securities at different prices may be required to maintain a single aggregate adjusted tax basis in all of his Series A Preferred Securities and, upon sale or other disposition of some of such Series A Preferred Securities, to allocate a pro rata portion of such aggregate tax basis to the Series A Preferred Securities sold (rather than maintaining a separate tax basis in each Series A Preferred Security for purposes of computing gain or loss on a sale of that Series A Preferred Security). EXCHANGE OF SERIES A PREFERRED SECURITIES FOR SERIES A JUNIOR SUBORDINATED DEBENTURES The exchange of Series A Preferred Securities for Series A Junior Subordinated Debentures after the occurrence of a Special Event generally would be a nontaxable event to American General S-27 28 Capital and the Holders. Each Holder's aggregate tax basis for the Series A Junior Subordinated Debentures received in the exchange would be the same as the Holder's aggregate tax basis for his Series A Preferred Securities surrendered in the exchange, and the holding period for the Series A Junior Subordinated Debentures would include his holding period for his Series A Preferred Securities. However, if the relevant Special Event is a Tax Event which results in American General Capital's being treated as an association taxable as a corporation, the exchange would be a taxable event to the Holders in respect of which each Holder would recognize gain or loss equal to the difference between the Holder's aggregate tax basis for his Series A Preferred Securities surrendered in the exchange and the aggregate fair market value of the Series A Junior Subordinated Debentures received in the exchange. AMERICAN GENERAL CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES The Manager of American General Capital will furnish each Holder with a Schedule K-1 setting forth such Holder's allocable share of income for each year, as soon as practicable following the end of the year but in any event prior to March 15th of each succeeding year. Any person who holds Series A Preferred Securities as nominee for another person is required to furnish to American General Capital a written statement containing: (a) the name, address and taxpayer identification number of the beneficial owner and of the nominee; (b) information as to whether the beneficial owner is (i) a person that is not a United States person, (ii) a foreign government, an international organization or any wholly-owned agency or instrumentality of either, or (iii) a tax-exempt entity; and (c) a description of the Series A Preferred Securities held, acquired or transferred for the beneficial owner, including the dates of acquisitions and transfers, the methods and costs of acquisitions, and the net proceeds from transfers. Brokers and financial institutions are also required to furnish written statements containing similar information with respect to Series A Preferred Securities they hold for their own accounts. A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is imposed by the Code for failure to report such information to American General Capital. The nominee is required to supply the beneficial owners of the Series A Preferred Securities with the information furnished to American General Capital. The Manager, as the tax matters partner, will be responsible for representing American General Capital (and, indirectly, the Holders) in any dispute with the IRS involving the partnership information returns filed by American General Capital. The Code provides for administrative examination of such returns as if American General Capital (which is treated as a partnership) were a separate and distinct taxpayer. Generally, the statute of limitations for partnership items reflected or required to be reflected on a partnership information return does not expire until three years after the later of the filing or the last date for filing of such return. Any adverse determination following an audit of a return of American General Capital by the appropriate taxing authorities could result in an adjustment of the returns of the Holders, and, under certain circumstances, a Holder may be precluded from separately litigating a proposed adjustment to the items of American General Capital. An adjustment could also result in an audit of a Holder's return and adjustments of items not related to the income and losses of American General Capital. UNITED STATES ALIEN HOLDERS For purposes of this discussion, a "United States Alien Holder" is any holder that is, as to the United States for federal income tax purposes, a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust not subject to United States federal income tax on a net income basis with respect to a Series A Preferred Security or a Series A Junior Subordinated Debenture. Under present United States federal income tax law: (i) payments by American General Capital or any of its paying agents to any United States S-28 29 Alien Holder of a Series A Preferred Security and payments of principal or interest by American General on the Series A Junior Subordinated Debentures to any United States Alien Holder of a Series A Junior Subordinated Debenture will not be subject to United States federal withholding tax; provided that (a) the beneficial owner of the Series A Preferred Security or Series A Junior Subordinated Debenture, as the case may be, does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of American General entitled to vote, (b) the beneficial owner of the Series A Preferred Security or Series A Junior Subordinated Debenture, as the case may be, is not a controlled foreign corporation that is related to American General through stock ownership, and (c) either (A) the beneficial owner of the Series A Preferred Security or Series A Junior Subordinated Debenture certifies to American General Capital or its agent, under penalties of perjury, that it is a United States Alien Holder and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "Financial Institution") and holds the Series A Preferred Security or Series A Junior Subordinated Debenture certifies to American General Capital or its agent under penalties of perjury that such statement has been received from the beneficial owner by it or by a Financial Institution between it and the beneficial owner and furnishes American General Capital or its agent with a copy thereof; and (ii) a United States Alien Holder of a Series A Preferred Security or Series A Junior Subordinated Debenture will not be subject to United States federal income tax on any gain realized upon the sale or other disposition of a Series A Preferred Security or Series A Junior Subordinated Debenture, provided such United States Alien Holder is not present in the United States for 183 days or more during the taxable year. BACKUP WITHHOLDING AND INFORMATION REPORTING In general, information reporting requirements will apply to payments of dividends on, and payments of the proceeds of the sale of, Series A Preferred Securities within the United States to noncorporate Holders, and "backup withholding" at a rate of 31% will apply to such payments if such a Holder fails to provide an accurate taxpayer identification number. THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSIDERATIONS TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SERIES A PREFERRED SECURITIES, INCLUDING THE TAX CONSIDERATIONS UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS. S-29 30 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, American General Capital has agreed to sell to each of the Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Alex. Brown & Sons Incorporated, CS First Boston Corporation, Dean Witter Reynolds Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Kemper Securities, Inc., Lehman Brothers Inc., Prudential Securities Incorporated, Salomon Brothers Inc and Smith Barney Inc. are acting as representatives, has severally agreed to purchase from American General Capital, the respective number of Series A Preferred Securities set forth opposite its name below:
NUMBER OF SERIES A PREFERRED UNDERWRITER SECURITIES ----------- ---------- Goldman, Sachs & Co..................................................... 825,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................... 825,000 Alex. Brown & Sons Incorporated......................................... 825,000 CS First Boston Corporation............................................. 825,000 Dean Witter Reynolds Inc. .............................................. 825,000 Donaldson, Lufkin & Jenrette Securities Corporation..................... 825,000 Kemper Securities, Inc. ................................................ 825,000 Lehman Brothers Inc. ................................................... 825,000 Prudential Securities Incorporated...................................... 825,000 Salomon Brothers Inc ................................................... 825,000 Smith Barney Inc. ...................................................... 825,000 Advest, Inc. ........................................................... 25,000 Bear, Stearns & Co. Inc. ............................................... 75,000 J.C. Bradford & Co. .................................................... 75,000 Craigie Incorporated.................................................... 25,000 Dain Bosworth Incorporated.............................................. 25,000 Doft & Co., Inc. ....................................................... 25,000 A.G. Edwards & Sons, Inc. .............................................. 75,000 Fahnestock & Co. Inc. .................................................. 25,000 Interstate/Johnson Lane Corporation .................................... 25,000 Janney Montgomery Scott Inc. ........................................... 25,000 Legg Mason Wood Walker, Incorporated.................................... 25,000 McDonald & Company Securities, Inc. .................................... 25,000 McGinn, Smith & Co., Inc. .............................................. 25,000 Morgan Keegan & Company, Inc. .......................................... 25,000 Olde Discount Corporation............................................... 25,000 PaineWebber Incorporated................................................ 75,000 Piper Jaffray Inc. ..................................................... 25,000 Principal Financial Securities, Inc. ................................... 25,000 Rauscher Pierce Refsnes, Inc. .......................................... 75,000 Raymond James & Associates, Inc. ....................................... 25,000 The Robinson-Humphrey Company, Inc. .................................... 75,000 Trilon International Inc. .............................................. 25,000 Tucker Anthony Incorporated............................................. 25,000 U.S. Clearing Corp. .................................................... 25,000 Wheat, First Securities, Inc. .......................................... 25,000 ---------- Total......................................................... 10,000,000 ==========
S-30 31 Under the terms and conditions of the Underwriting Agreement, the Underwriters are committed to take and pay for all such Series A Preferred Securities offered hereby, if any are taken. The Underwriters propose to offer the Series A Preferred Securities in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus Supplement, and in part to certain securities dealers at such price less a concession of $0.50 per Series A Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $0.25 per Series A Preferred Security to certain brokers and dealers. After the Series A Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the representatives. In view of the fact that the proceeds from the sale of the Series A Preferred Securities will be used by American General Capital to purchase the Series A Junior Subordinated Debentures of American General, the Underwriting Agreement provides that American General will pay, as compensation to the Underwriters, a commission of $0.7875 per Series A Preferred Security. American General Capital and American General have granted the Underwriters an option exercisable for 30 days after the date of this Prospectus Supplement to purchase up to an aggregate of 1,500,000 additional Series A Preferred Securities at the initial public offering price per Series A Preferred Security solely to cover over-allotments, if any. If the Underwriters exercise their over-allotment option, the Underwriters have severally agreed, subject to certain conditions, to purchase approximately the same percentage thereof that the number of Series A Preferred Securities to be purchased by each of them, as shown in the foregoing table, bears to the total Series A Preferred Securities offered. Certain of the Underwriters are customers of, or engage in transactions with, and from time to time have performed services for, American General and its subsidiaries and associated companies in the ordinary course of business. Because the National Association of Securities Dealers, Inc. (the "NASD") may view the Series A Preferred Securities offered hereby as interests in a direct participation program, the Offering is being made in compliance with Section 34 of the NASD's Rules of Fair Practice. The Underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority without the prior written approval of the transaction by the customer. Prior to the Offering, there has been no public market for the Series A Preferred Securities. The Series A Preferred Securities have been approved for listing on the NYSE, subject to notice of issuance, under the symbol "AGC prM." In order to meet one of the requirements for listing the Series A Preferred Securities on the NYSE, the Underwriters have undertaken to sell lots of 100 or more Series A Preferred Securities to a minimum of 400 beneficial holders. Trading of the Series A Preferred Securities on the NYSE is expected to commence within a seven-day period after the initial delivery of the Series A Preferred Securities. The representatives have advised American General and American General Capital that they intend to make a market in the Series A Preferred Securities prior to the commencement of trading on the NYSE, but are not obligated to do so and may discontinue any such market making at any time without notice. American General and American General Capital have agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. S-31 32 PROSPECTUS (LOGO) $1,250,000,000 AMERICAN GENERAL DELAWARE, L.L.C. AMERICAN GENERAL CAPITAL, L.L.C. PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY AMERICAN GENERAL CORPORATION ------------------------ American General Delaware, L.L.C. and American General Capital, L.L.C., each a Delaware limited liability company (each, an "American General LLC" and, together, the "American General LLCs"), may separately offer from time to time, in one or more series, their preferred limited liability company interests (the "Preferred Securities"). The payment of periodic cash distributions ("dividends") with respect to Preferred Securities of each of the American General LLCs, and payments on redemption and liquidation with respect to such Preferred Securities will be guaranteed by American General Corporation, a Texas corporation ("American General" or the "Company"), to the extent described herein (each, a "Guarantee"). See "Description of the Guarantees." American General's obligations under the Guarantees will be subordinate and junior in right of payment to all other liabilities of American General and pari passu with the most senior preferred stock issued by American General. Concurrently with the issuance of each series of Preferred Securities, the American General LLC issuing such Preferred Securities will invest the proceeds thereof in a series of American General's junior subordinated debentures (the "Junior Subordinated Debentures"), which will bear interest at the same rate as the dividend rate on such Preferred Securities. If and to the extent set forth in the Prospectus Supplement pertaining to the particular series of Preferred Securities in respect of which this Prospectus is being delivered (the "Prospectus Supplement"), such Junior Subordinated Debentures subsequently may be distributed to holders of such series of Preferred Securities upon the occurrence of certain events. The Junior Subordinated Debentures will be unsecured and subordinate and junior in right of payment to Senior Indebtedness (as defined herein) of American General. See "Description of the Junior Subordinated Debentures." The specific terms of the Preferred Securities of any particular series in respect of which this Prospectus is being delivered will be set forth in the Prospectus Supplement which will describe, without limitation and to the extent applicable, the following: the specific designation, number of Preferred Securities, dividend rate (or the method of determining such rate), dates on which dividends will be payable, liquidation preference, any voting rights, any redemption provisions, terms for any conversion or exchange into Common Stock, par value $.50 per share, of American General ("American General Common Stock"), Preferred Stock, par value $1.50 per share, of American General ("American General Preferred Stock") or other securities, the initial public offering price, any listing on a securities exchange, and any other rights, preferences, privileges, limitations and restrictions thereof. The specific terms of the related series of Junior Subordinated Debentures will also be described in such Prospectus Supplement. The Preferred Securities may be offered in amounts, at prices and on terms to be determined at the time of offering; provided, however, that the aggregate initial public offering price of all Preferred Securities sold hereunder may not exceed $1,250,000,000, less the aggregate initial public offering price of all securities of American General which are sold under a separate prospectus which also constitutes a part of the Registration Statement of which this Prospectus constitutes a part. See "Available Information." The Prospectus Supplement relating to any series of Preferred Securities will contain information concerning certain United States federal income tax considerations applicable to such Preferred Securities and the related series of Junior Subordinated Debentures. The Preferred Securities may be sold directly, through agents, underwriters or dealers as designated from time to time, or through a combination of such methods. If any such agents, underwriters or dealers are involved in the sale of the Preferred Securities in respect of which this Prospectus is being delivered, the names of such agents, underwriters or dealers and any applicable agent's commission, underwriter's discount or dealer's purchase price and the net proceeds to the applicable American General LLC from such sale will be set forth in, or may be calculated on the basis set forth in, the applicable Prospectus Supplement. See "Plan of Distribution" for possible indemnification arrangements for any such agents, underwriters and dealers. This Prospectus may not be used to consummate sales of the Preferred Securities unless accompanied by a Prospectus Supplement. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The date of this Prospectus is May 23, 1995. 33 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. AVAILABLE INFORMATION American General is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by American General may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at 500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such materials may be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, such material may also be inspected and copied at the offices of The New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and The Pacific Stock Exchange, Incorporated, 301 Pine Street, San Francisco, California 94104. The American General LLCs and American General have filed with the Commission a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, which constitutes part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is hereby made to the Registration Statement. In addition to this Prospectus, the Registration Statement contains another prospectus which relates to the offer and sale from time to time of various securities of American General. The $1,250,000,000 aggregate maximum initial public offering price of Preferred Securities which may be sold under this Prospectus will be reduced by the amount of the aggregate initial public offering price of any securities sold under such other prospectus. Statements contained herein concerning the provisions of any document filed as an exhibit to the Registration Statement or otherwise filed with the Commission are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. No separate financial statements of either of the American General LLCs have been included herein. American General and the American General LLCs do not consider that such financial statements would be material to holders of the Preferred Securities because each American General LLC is a newly formed special purpose entity, has no operating history, has no independent operations and is not engaged in, and does not propose to engage in, any activity other than as set forth below, and because American General will guarantee the obligations of each American General LLC under the terms of the Preferred Securities to the extent set forth herein and in the applicable Prospectus Supplement. See "American General LLCs" and "Description of the Guarantees." INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by American General with the Commission pursuant to the Exchange Act (File No. 1-7981), are incorporated herein by reference: - American General's Annual Report on Form 10-K for the fiscal year ended December 31, 1994; - American General's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995; and - American General's Current Reports on Form 8-K dated February 14, 1995, March 22, 1995, April 14, 1995 and May 9, 1995. Each document filed by American General pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of Preferred Securities made hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such document. Any statement contained herein, in a Prospectus Supplement or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein, in a Prospectus Supplement or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement or this Prospectus. 2 34 American General will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of the documents which are incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to American General, 2929 Allen Parkway, Houston, Texas 77019-2155, Attention: Treasury Department, telephone (713) 831-1949. AMERICAN GENERAL American General is the parent company of one of the nation's largest consumer financial services organizations. American General is headquartered in Houston, Texas and operates through its subsidiaries in all 50 states, the District of Columbia, Canada, Puerto Rico, and the U.S. Virgin Islands. American General was incorporated as a general business corporation in Texas in 1980 and is the successor to American General Insurance Company, incorporated in Texas in 1926. American General's operations are classified into three business segments: Retirement Annuities, which specializes in providing tax-deferred retirement plans and annuities to employees of educational, health care and other not-for-profit organizations; Consumer Finance, which offers consumer and home equity loans, credit cards, and credit-related insurance to individuals through more than 1,300 branch offices; and Life Insurance, which provides traditional and interest-sensitive life insurance and both fixed and variable annuity products through 14,000 sales representatives and general agents. Since American General is a holding company, rights to participate in any distribution of assets of any subsidiary upon its liquidation or reorganization or otherwise (and thus the ability of holders of securities or guarantees issued by American General to benefit indirectly from such distribution) are subject to the prior claims of creditors of that subsidiary, except to the extent that American General may itself be a creditor of that subsidiary. Claims on American General's subsidiaries by other creditors include substantial claims for policy benefits and debt obligations, as well as other liabilities incurred in the ordinary course of business. In addition, since many of American General's subsidiaries are insurance companies subject to regulatory control by various state insurance departments, the ability of such subsidiaries to pay dividends to American General without prior regulatory approval is limited by applicable laws and regulations. Further, certain non-insurance subsidiaries are similarly restricted in their ability to make dividend payments by long-term debt agreements. At December 31, 1994, the amount available to American General for dividends from subsidiaries not limited by such restrictions was $1.1 billion. The principal executive offices of American General are located at 2929 Allen Parkway, Houston, Texas 77019-2155, and its telephone number is (713) 522-1111. AMERICAN GENERAL LLCS American General Delaware, L.L.C. and American General Capital, L.L.C. are each a limited liability company formed in March 1995 under the laws of the State of Delaware. American General owns directly or indirectly all of the common limited liability interests (the "Common Securities") of each American General LLC, which securities are nontransferable. Each of the American General LLCs will be managed by American General Delaware Management Corporation, a wholly-owned subsidiary of American General, as manager (the "Manager"), in accordance with its respective Limited Liability Company Agreement, as amended (each, an "LLC Agreement"). Each American General LLC exists solely for the purpose of issuing Preferred Securities and Common Securities and investing 99% of the proceeds thereof in Junior Subordinated Debentures. The remaining 1% of such proceeds will be invested by the applicable American General LLC in Eligible Investments (as defined in the applicable LLC Agreement). See "Use of Proceeds." The principal executive offices of each of the American General LLCs are located c/o the Manager at 2099 South Dupont Avenue, Dover, Delaware 19901. 3 35 Pursuant to each LLC Agreement, the members of an American General LLC that own Common Securities have unlimited liabilities for the debts, obligations and liabilities of such American General LLC in the same manner as a general partner of a Delaware limited partnership (which do not include obligations to holders of Preferred Securities in their capacity as such), to the extent not fully satisfied and discharged by such American General LLC. That liability on the part of such members is for the benefit of, and is enforceable by, the liquidating trustee of such American General LLC in the event of its dissolution and is for the benefit of third parties to whom such American General LLC owes such debts, obligations and liabilities. The holders of Preferred Securities, in their capacity as members of an American General LLC, will not be liable for the debts, obligations or liabilities of such American General LLC (subject to their obligation to repay any funds wrongfully distributed to them). RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS The ratio of earnings to fixed charges is calculated by dividing total fixed charges into earnings available for the payment of fixed charges. Earnings available for the payment of fixed charges is the sum of fixed charges deducted from income and income before tax expense, accounting changes, and preferred stock dividends. Total fixed charges consist of interest expense, capitalized interest, a portion of rental expense, and preferred stock dividends of majority-owned subsidiaries. The following table sets forth the ratio of earnings to fixed charges for the periods indicated.
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, ----------- ----------------------------------- 1995 1994 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- ---- ---- Ratio of earnings to fixed charges: Consolidated operations................... 2.5 3.0 2.4 2.1 2.4 2.1 2.2 Consolidated operations, corporate (parent company) fixed charges only............ 7.6 9.3 7.6 6.0 7.2 5.8 5.3
Because no preferred stock dividends were paid in the periods reported above (other than preferred stock dividends paid by a subsidiary in 1990), the ratio of earnings to combined fixed charges and preferred stock dividends for such periods is the same as the ratio of earnings to fixed charges. USE OF PROCEEDS Each of the American General LLCs will invest the proceeds received from any sale by it of Preferred Securities in Junior Subordinated Debentures of American General. Unless otherwise specified in the applicable Prospectus Supplement, the net proceeds to be received by American General from the sale of Junior Subordinated Debentures will be added to American General's general corporate funds and may be used for repayment of long- or short-term indebtedness or for general corporate purposes. DESCRIPTION OF THE PREFERRED SECURITIES The following is a summary of certain terms and provisions of the Preferred Securities. Reference is made to the amended LLC Agreement of the applicable American General LLC and the written action taken or to be taken pursuant to such LLC Agreement establishing the rights, preferences, privileges, limitations and restrictions relating to the Preferred Securities of each series (each, a "Declaration"). The summaries set forth below and in the applicable Prospectus Supplement address the material terms of the Preferred Securities of any particular series but do not purport to be complete and are subject to, and qualified in their entirety by reference to, the 4 36 applicable LLC Agreement and Declaration. Capitalized terms used in the summaries below and not otherwise defined herein have the respective meanings set forth in the applicable LLC Agreement and Declaration. GENERAL Each American General LLC is authorized to issue, from time to time, Common Securities and Preferred Securities, in one or more series, with such dividend terms, liquidation preferences per share, voting rights, redemption provisions, conversion or exchange rights and other rights, preferences, privileges, limitations and restrictions as are set forth in its LLC Agreement, the Delaware Limited Liability Company Act (the "LLC Act") and the Declaration adopted or to be adopted with respect to each such series. All of the Preferred Securities which may be issued in one or more series by either American General LLC will rank pari passu with each other series issued by such American General LLC with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding-up. Holders of Preferred Securities will have no preemptive rights and will not have the right to remove or replace the Manager of either American General LLC. The holders of Preferred Securities, in their capacity as members of an American General LLC, are not liable for the debts, obligations or liabilities of such American General LLC (subject to their obligation to repay any funds wrongfully distributed to them). Reference is made to the Prospectus Supplement relating to the particular series of Preferred Securities being offered thereby for the specific terms thereof, including: (i) the particular American General LLC issuing such series of Preferred Securities; (ii) the initial public offering price of such series of Preferred Securities; (iii) the specific designation of such series of Preferred Securities which shall distinguish it from other series; (iv) the number of Preferred Securities included in such series, which number may be increased or decreased from time to time unless otherwise provided by the Manager in creating the series; (v) the annual dividend rate of Preferred Securities of such series (or method of determining such rate) and when dividends will accrue and be payable; (vi) whether dividends on Preferred Securities of such series shall be cumulative, and, if so, the date or dates or method of determining the date or dates from which dividends on Preferred Securities of such series shall be cumulative; (vii) the amount or amounts which shall be paid out of the assets of such American General LLC to the holders of Preferred Securities of such series upon voluntary or involuntary liquidation, dissolution or winding-up of such American General LLC; (viii) if applicable, the price or prices at which, the date or dates on which, the period or periods within which and the terms and conditions upon which Preferred Securities of such series may be redeemed or purchased, in whole or in part, at the option of such American General LLC or the Manager; (ix) the obligation, if any, of such American General LLC to purchase or redeem Preferred Securities of such series and the price or prices at which, the date or dates on which, the period or periods within which and the terms and conditions upon which Preferred Securities of such series shall be purchased or redeemed, in whole or in part, pursuant to such obligation; (x) the voting rights, if any, of Preferred Securities of such series in addition to those required by law, including the number of votes per Preferred Security of such series and any requirement for the approval by the holders of a certain specified percentage of Preferred Securities of such series as a condition to specified action or amendments to the LLC Agreement of such American General LLC or the applicable Declaration; (xi) the terms and conditions, if any, under which Preferred Securities of such series may be converted into shares of American General Common Stock, including the conversion price per share and the circumstances, if any, under which any such conversion right shall expire; (xii) the terms and conditions, if any, under which Preferred Securities of such series may be exchanged for shares of a series of American General Preferred Stock; (xiii) the terms and conditions, if any, upon which the related series of Junior Subordinated Debentures may be distributed to holders of Preferred Securities of such series; (xiv) if applicable, any securities exchange upon which the Preferred Securities of such series shall be listed; and (xv) any other rights, preferences, privileges, limitations or restrictions of the Preferred Securities of such series (and such Prospectus Supplement may state that any of the terms set forth herein are inapplicable 5 37 to Preferred Securities of such series or are modified to the extent described therein). All Preferred Securities offered hereby will be guaranteed by American General to the extent set forth below under "Description of the Guarantees" and in the applicable Prospectus Supplement. Certain federal income tax considerations applicable to an investment in Preferred Securities will be described in the Prospectus Supplement relating thereto. BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC") will act as securities depositary for the Preferred Securities. Each series of Preferred Securities will be issued only as fully-registered securities registered in the name of Cede & Co. (as nominee for DTC). One or more fully-registered global Preferred Security certificates will be issued by the applicable American General LLC, representing in the aggregate the total number of Preferred Securities of a series, and will be deposited with or on behalf of DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of a Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct or Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased the Preferred Securities. Transfers of ownership interests in Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in a series of Preferred Securities, except upon a resignation of DTC, upon the occurrence of an Event of Default (as defined below) under the Junior Subordinated Indenture (as defined below) with respect to the related series of Junior Subordinated Debentures or upon a decision by the applicable American General LLC, approved by American General, to discontinue the book-entry system for such series of Preferred Securities. The laws of some jurisdictions require that certain purchasers take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in a global Preferred Security. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 6 38 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices with respect to the Preferred Securities will be sent to Cede & Co. If less than all of a series of Preferred Securities are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to the applicable American General LLC as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). Dividend payments on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices and will be the responsibility of each Participant and not of DTC, the American General LLCs or American General, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of dividends to DTC is the responsibility of the applicable American General LLC, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. In order to convert a Preferred Security represented by a global Preferred Security certificate, the Beneficial Owner must give notice of its election to convert such Preferred Security, through its Direct or Indirect Participant, to the Conversion Agent, and must effect delivery thereof by causing the Direct Participant to transfer its interest in the related global Preferred Security certificate, on DTC's records, to the Conversion Agent. Except as provided herein, a Beneficial Owner in a global Preferred Security will not be entitled to receive physical delivery of Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC and the applicable Participants to exercise any rights under any series of the Preferred Securities. DTC may discontinue providing its services as securities depositary with respect to the Preferred Securities or any series thereof at any time by giving reasonable notice to each applicable American General LLC. Under such circumstances, in the event that a successor depositary is not obtained, certificates representing the applicable series of Preferred Securities will be printed and delivered. If an Event of Default occurs under the Junior Subordinated Indenture with respect to the related series of Junior Subordinated Debentures or if an American General LLC (with the consent of American General) decides to discontinue use of the system of book-entry transfers through DTC (or a successor depositary), certificates representing the applicable series of Preferred Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that American General and the American General LLCs believe to be reliable, but neither American General, either American General LLC nor any agent, underwriter or dealer takes responsibility for the accuracy thereof. 7 39 DESCRIPTION OF THE GUARANTEES Set forth below is a summary of information concerning the separate Guarantees which will be executed and delivered by American General to each American General LLC. Each such Guarantee delivered to an American General LLC will be for the benefit of the holders from time to time of the Preferred Securities issued by the applicable American General LLC. The summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, each Guarantee, a form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. GENERAL American General will execute separate Guarantees with respect to all Preferred Securities, regardless of series, issued by each American General LLC. Pursuant to each Guarantee, American General will irrevocably and unconditionally agree, on a subordinated basis and to the extent set forth therein, to pay in full to the holders of the Preferred Securities of each series issued by the applicable American General LLC, the Guarantee Payments (as defined below) (except to the extent previously paid by such American General LLC), as and when due, regardless of any defense, right of set-off or counterclaim that such American General LLC may have or assert. The following payments with respect to any series of Preferred Securities issued by an American General LLC, to the extent not paid by such American General LLC, are the "Guarantee Payments": (a) any accumulated and unpaid dividends (whether or not earned) (including any additional dividends intended to provide monthly compounding on dividend arrearages) which are required to be paid on any such Preferred Securities, but only if and to the extent that such dividends have been declared from funds of such American General LLC legally available therefor; (b) the redemption price, including all accumulated and unpaid dividends (whether or not earned or declared and including any additional dividends intended to provide monthly compounding of dividend arrearages) payable with respect to any such Preferred Securities called for redemption (the "Redemption Price"), but only to the extent payable out of funds of such American General LLC legally available therefor, and (c) upon a voluntary or involuntary liquidation, dissolution, or winding-up of such American General LLC other than in connection with or after the exchange, if applicable, of any such Preferred Securities for the related series of Junior Subordinated Debentures, the lesser of (i) the aggregate of the liquidation preference and all accumulated and unpaid dividends (whether or not earned or declared and including any additional dividends intended to provide monthly compounding on dividend arrearages) on any such Preferred Securities to the date of payment and (ii) the amount of assets of such American General LLC available for distribution to holders of any such Preferred Securities in liquidation, dissolution or winding-up of such American General LLC. American General's obligation to make a Guarantee Payment in respect of a series of Preferred Securities may be satisfied by American General's direct payment of the required amounts to the holders of such series of Preferred Securities or by causing the applicable American General LLC to pay such amounts to such holders. If American General fails to make interest or redemption payments on a series of Junior Subordinated Debentures held by an American General LLC, such American General LLC will have insufficient funds to pay dividends on, the Redemption Price of, or the liquidation distribution with respect to, the related series of Preferred Securities. Upon the bankruptcy, liquidation or winding-up of American General, its obligations under the Junior Subordinated Debentures will rank junior to all Senior Indebtedness (as defined below) of American General and, therefore, funds may not be available for payment on such series of Junior Subordinated Debentures. The Guarantees do not cover payment of dividends, the Redemption Price or the liquidation distribution when the applicable American General LLC does not have sufficient funds legally available to make such payments. Furthermore, upon any such bankruptcy, liquidation or winding-up of American General, its obligations under the Guarantees will rank junior to all its other liabilities and, therefore, funds may not be available for payment under the Guarantees. 8 40 The Guarantees will constitute guarantees of payment and not of collection. Each Guarantee will be deposited with the Manager of the applicable American General LLC to be held for the benefit of the holders of Preferred Securities issued by such American General LLC. In the event of the appointment by the holders of a series of Preferred Securities of a special trustee (a "Special Trustee"), the Special Trustee may enforce such Guarantee to the extent it relates to such series. The Prospectus Supplement with respect to each series of Preferred Securities will set forth the procedures for the appointment of any such Special Trustee. If no Special Trustee has been appointed to enforce such Guarantee, the Manager of such American General LLC shall have the right to enforce such Guarantee on behalf of the holders of such series of Preferred Securities. The holders of not less than 66 2/3% of the aggregate liquidation preference of such series of Preferred Securities then outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available with respect to such series of Preferred Securities under such Guarantee, including the giving of directions to such Manager or Special Trustee, as the case may be; provided, however, that, notwithstanding the foregoing, each holder of such series of Preferred Securities shall have the right to institute a legal proceeding directly against American General to enforce its rights under such Guarantee, and American General waives any right or remedy to require that any action be first brought against the applicable American General LLC or any other person or entity before proceeding directly against American General. The provisions of the Guarantees, when taken together with the obligations of American General under the LLC Agreements and the Junior Subordinated Indenture, constitute full and unconditional guarantees by American General of dividend, redemption and liquidation payments due on the Preferred Securities. Absent a default by American General under any of these agreements, all dividend, redemption and liquidation payments on the Preferred Securities will be made and American General is fully and unconditionally responsible for causing such payments to be made. CERTAIN COVENANTS OF AMERICAN GENERAL In each Guarantee, American General will covenant and agree that, so long as any Preferred Securities subject to such Guarantee remain outstanding, American General will not declare or pay any dividend on, and American General will not, and American General will not permit any of its majority-owned subsidiaries to, redeem, purchase, acquire or make a liquidation payment with respect to, any of American General's capital stock (other than (i) purchases or acquisitions of shares of American General Common Stock in connection with the satisfaction by American General or any of its majority-owned subsidiaries of its obligations under any employee benefit plans or the satisfaction by American General of its obligations pursuant to any put contract requiring American General to purchase shares of American General Common Stock, (ii) as a result of a reclassification of American General's capital stock or the exchange or conversion of one class or series of American General's capital stock for another class or series of American General's capital stock, (iii) redemptions or purchases of any share purchase rights issued by American General pursuant to the Rights Agreement (see "Description of American General Common Stock -- Preferred Share Purchase Rights") or the declaration and payment of a dividend of similar share purchase rights in the future or (iv) the purchase of fractional interests in shares of American General's capital stock pursuant to the conversion or exchange provisions of such American General capital stock or the security being converted or exchanged) or make any guarantee payments with respect to the foregoing, if at such time American General has exercised its option to extend an interest payment period on the series of Junior Subordinated Debentures related to such Preferred Securities and such extension is continuing, American General is in default with respect to its payment or other obligations under such Guarantee or there has occurred and is continuing any Event of Default under the Junior Subordinated Indenture with respect to the series of Junior Subordinated Debentures related to such Preferred Securities. American General will covenant to take all actions necessary to ensure the compliance of its majority-owned subsidiaries with the above covenant. 9 41 In each Guarantee, American General will also covenant that, so long as any Preferred Securities subject to such Guarantee remain outstanding, it will (a) not cause or permit any Common Securities to be transferred (other than, in the case of American General, in connection with a merger or consolidation permitted under the Junior Subordinated Indenture as described under "-- Consolidation, Merger and Sale" or, in the case of the Manager, in connection with any merger or consolidation involving the Manager), (b) maintain direct or indirect ownership of all outstanding Common Securities and other limited liability company interests in the applicable American General LLC other than any series of Preferred Securities (except as permitted in the applicable LLC Agreement), (c) cause at least 21% of all interests in the capital, income, gain, loss, deduction and credit of such American General LLC to be represented by Common Securities, (d) not voluntarily liquidate, dissolve or wind-up itself (other than in connection with a merger or consolidation permitted under the Junior Subordinated Indenture as described under "-- Consolidation, Merger and Sale"), or permit the Manager (other than in connection with any merger or consolidation involving the Manager) or such American General LLC (other than in connection with or after an exchange of all outstanding series of Preferred Securities of such American General LLC for the related series of Junior Subordinated Debentures, if so provided in the applicable Declaration) to liquidate, dissolve or wind-up, (e) cause American General Delaware Management Corporation or any successor thereto by merger or consolidation to remain the Manager and to timely perform all of its duties as Manager of such American General LLC (including the duty to cause such American General LLC to declare and pay dividends on such Preferred Securities to the extent set forth in the applicable LLC Agreement and Declaration) and (f) subject to the terms of such Preferred Securities, use reasonable efforts to cause such American General LLC to remain a Delaware limited liability company and otherwise continue to be treated as a partnership for United States federal income tax purposes. In each Guarantee, American General will further agree to honor all its obligations, if any, relating to the conversion or exchange of Preferred Securities subject to such Guarantee into or for shares of American General Common Stock or the related series of American General Preferred Stock. Such obligations, if any, will be described in the applicable Prospectus Supplement. STATUS OF THE GUARANTEES The Guarantees will constitute unsecured obligations of American General and will rank (i) subordinate and junior in right of payment to all other liabilities of American General other than the guarantees referred to in clauses (ii) and (iii) below, (ii) pari passu with the most senior preferred stock issued by American General and with any other guarantee executed by American General in respect of any preferred stock or interest of any affiliate of American General that provides that such guarantee is pari passu in right of payment with the Guarantees and (iii) senior to American General Common Stock, any other class or series of capital stock issued by American General which by its express terms ranks junior to the most senior preferred stock issued by American General as to the payment of dividends and the distribution of assets upon the liquidation, dissolution or winding-up of American General and any guarantee executed by American General that provides that such guarantee is junior in right of payment to the Guarantees. Upon the liquidation, dissolution or winding-up of American General, its obligations under the Guarantees will rank junior to all of its other liabilities (other than those guarantees referred to in clauses (ii) and (iii) above) and, therefore, funds may not be available for payment under the Guarantees. The LLC Agreement of each American General LLC provides that each holder of Preferred Securities issued by such American General LLC by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee relating thereto. AMENDMENTS AND ASSIGNMENT Except with respect to any changes which do not adversely affect the rights of holders of Preferred Securities (in which case no vote will be required), each Guarantee may be amended with 10 42 respect to each series of Preferred Securities subject to such Guarantee and affected by such amendment only with the prior approval of the holders of not less than 66 2/3% of the aggregate liquidation preference of the outstanding Preferred Securities of such series. The manner of obtaining any such approval of holders of such Preferred Securities will be as set forth in the applicable Prospectus Supplement. All provisions contained in a Guarantee will bind the successors, assigns, receivers, trustees and representatives of American General and will inure to the benefit of the holders of the Preferred Securities of the applicable American General LLC then outstanding. Except in connection with any merger or consolidation of American General into or with another entity as permitted under "Description of the Junior Subordinated Debentures -- Consolidation, Merger and Sale," American General may not assign its rights or delegate its obligations under a Guarantee without the prior approval of the holders of not less than 66 2/3% of the aggregate liquidation preference of the outstanding Preferred Securities of all series subject to such Guarantee voting as a single class. TERMINATION Each Guarantee will terminate as to the Preferred Securities of any particular series subject thereto upon (a) full payment of the Redemption Price of all outstanding Preferred Securities of such series, (b) if applicable, the conversion of all outstanding Preferred Securities of such series into shares of American General Common Stock or other property, (c) if applicable, the exchange of all outstanding Preferred Securities of such series for shares of the related series of American General Preferred Stock or (d) if applicable, the exchange of all outstanding Preferred Securities of such series for the related series of Junior Subordinated Debentures. In addition, each Guarantee will terminate completely upon full payment of the amounts payable with respect to all Preferred Securities subject to such Guarantee upon liquidation, dissolution or winding-up of such American General LLC. Notwithstanding the foregoing, each Guarantee will continue to be effective or (to the fullest extent permitted by law) will be reinstated, as the case may be, with respect to the applicable Preferred Securities of any holder who has been required to restore payment of any sums received on account of, or to redeliver any securities received on account of, such Preferred Securities or the Guarantee relating thereto. GOVERNING LAW The Guarantees will be governed by, and construed in accordance with, the laws of the State of New York. DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES Set forth below is a summary of information concerning the Junior Subordinated Debentures which will be issued from time to time in one or more series under an Indenture, dated as of May 15, 1995 (the "Junior Subordinated Indenture"), between American General and Chemical Bank, as trustee (the "Junior Subordinated Trustee"). Concurrently with the issuance of each series of Preferred Securities, the American General LLC issuing such Preferred Securities will invest the proceeds thereof, together with substantially all the proceeds from any related issuance of Common Securities, in a series of the Junior Subordinated Debentures. The following summary does not purport to be complete and is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the Junior Subordinated Indenture, a form of which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part. Whenever particular provisions or defined terms in the Junior Subordinated Indenture are referred to herein or in a Prospectus Supplement, it is intended that such provisions or defined terms are incorporated by reference herein or therein, as the case may be. 11 43 GENERAL The Junior Subordinated Debentures will be unsecured, subordinated obligations of American General as hereinafter described. The Junior Subordinated Indenture does not limit the aggregate principal amount of Junior Subordinated Debentures which may be issued thereunder and provides that the Junior Subordinated Debentures may be issued thereunder from time to time in one or more series pursuant to an indenture supplemental to the Junior Subordinated Indenture or a resolution of American General's Board of Directors or in a manner specified in or authorized by a Board resolution (each, a "Supplemental Junior Subordinated Indenture"). The aggregate principal amount of Junior Subordinated Debentures relating to the Preferred Securities of any series will be set forth in the Prospectus Supplement for such series of Preferred Securities and will be equal to 99% of the sum of the aggregate liquidation preference of the Preferred Securities for such series and the purchase price paid by American General and its subsidiaries for Common Securities of the applicable American General LLC, and any related capital contributions made, in connection with the issuance of such series of Preferred Securities. Reference is made to the Prospectus Supplement relating to the particular series of Preferred Securities being offered thereby for the specific terms of the series of Junior Subordinated Debentures relating to such series of Preferred Securities, including: (i) the specific title of such Junior Subordinated Debentures; (ii) any limit on the aggregate principal amount of such Junior Subordinated Debentures; (iii) the date or dates on which the principal of such Junior Subordinated Debentures is payable and the terms, if any, on which American General may reborrow the proceeds of such payment or exchange securities for such Junior Subordinated Debentures when a principal payment is due; (iv) the rate or rates at which such Junior Subordinated Debentures will bear interest or the method of determination of such rate or rates; (v) the date or dates from which such interest shall accrue, the interest payment dates on which such interest will be payable, or the manner of determination of such interest payment dates, the record dates for the determination of holders to whom interest is payable on any such interest payment dates, and the basis on which interest will accrue if other than that of a 360-day year of twelve 30-day months; (vi) the right, if any, of American General to extend the interest payment periods of such Junior Subordinated Debentures, the maximum duration of any such extension or extensions and the additional interest, if any, payable on such Junior Subordinated Debentures if an interest payment period is extended; (vii) the date or dates on which, the period or periods within which, the price or prices at which and the terms and conditions upon which, if any, such Junior Subordinated Debentures may be redeemed, in whole or in part, at the option of American General; (viii) the obligation, if any, of American General to redeem or repay such Junior Subordinated Debentures pursuant to any sinking fund or analogous provisions or at the option of the holder thereof or upon the occurrence of one or more specified events and the date or dates on which, the period or periods within which (or the event or events upon which), the price or prices at which and the terms and conditions upon which, if any, such Junior Subordinated Debentures shall be redeemed or repaid, in whole or part, pursuant to such obligation, and any provisions for the remarketing of such Junior Subordinated Debentures so redeemed or repaid; (ix) the terms and conditions, if any, upon which such Junior Subordinated Debentures may be converted into shares of American General Common Stock or exchanged for shares of a series of American General Preferred Stock, including the conversion or exchange price and the circumstances under which any such conversion or exchange right shall expire; (x) the form of such Junior Subordinated Debentures, including whether such Junior Subordinated Debentures are issuable as a global security, and in such case, the identity of the depositary; (xi) the denominations in which such Junior Subordinated Debentures shall be issuable if other than denominations of $25 and any integral multiple thereof; (xii) any modifications to the Events of Default or covenants of the Company with respect to such series of Junior Subordinated Debentures and any change in rights to declare the principal of such series of Junior Subordinated Debentures to be immediately due and payable; (xiii) the terms and conditions, if any, under which the Junior Subordinated Indenture may be defeased with respect to such Junior Subordinated Debentures; (xiv) whether and under what circumstances additional amounts on such Junior 12 44 Subordinated Debentures shall be payable, and, if so, whether American General has the option to redeem such Junior Subordinated Debentures rather than pay such additional amounts; (xv) any restrictions on the transferability of such Junior Subordinated Debentures; and (xvi) any other terms of such Junior Subordinated Debentures. (Section 301) The Junior Subordinated Indenture does not contain any provisions that limit American General's ability to incur indebtedness or impose liens on its assets or that afford holders of Junior Subordinated Debentures protection in the event of a highly leveraged or similar transaction involving American General. SUBORDINATION The Junior Subordinated Indenture provides that the Junior Subordinated Debentures are subordinate and junior in right of payment to all Senior Indebtedness of American General in the manner described below. (Article Thirteen) Upon any payment or distribution of assets of American General to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors, marshalling of assets or liabilities or any bankruptcy, insolvency or similar proceedings of American General, the holders of Senior Indebtedness will be entitled to receive payment in full in cash of all amounts due on or to become due on or in respect of all Senior Indebtedness (including any interest accruing thereon after commencement of such proceedings), before the holders of the Junior Subordinated Debentures will be entitled to receive any payment (other than payment in shares of stock or other subordinated securities issued in a reorganization proceeding or payments from funds previously deposited in trust to defease one or more series of Junior Subordinated Debentures under the Junior Subordinated Indenture) on account of the principal of, premium, if any, or interest on the Junior Subordinated Debentures or on account of any purchase, redemption or other acquisition of the Junior Subordinated Debentures by American General. (Section 1302) The holders of the Junior Subordinated Debentures of each series will be subrogated to the rights of the holders of the Senior Indebtedness to the extent of payments made to the holders of Senior Indebtedness out of the distributive share of such series of Junior Subordinated Debentures. (Section 1305) American General may not make any payments in respect of the Junior Subordinated Debentures or on account of the purchase, redemption or other acquisition of the Junior Subordinated Debentures (other than payment in shares of stock or other subordinated securities issued in a reorganization proceeding or payments from funds previously deposited in trust to defease one or more series of Junior Subordinated Debentures under the Junior Subordinated Indenture), if there has occurred and is continuing a default in the payment of the principal of (or premium, if any) or interest on any Senior Indebtedness (a "Senior Payment Default"). In addition, if any event of default (other than a Senior Payment Default), or any event which after notice or lapse of time (or both) would become an event of default, with respect to Senior Indebtedness, permitting the holders thereof (or a trustee or agent on behalf of the holders thereof) to accelerate the maturity thereof has occurred and is continuing (a "Senior Nonmonetary Default"), and American General or the Junior Subordinated Trustee have received written notice thereof from a holder of such Senior Indebtedness or a trustee on behalf of a holder of such Senior Indebtedness, then American General may not make any payments in respect of the Junior Subordinated Debentures or on account of the purchase, redemption or other acquisition of the Junior Subordinated Debentures (other than payment in shares of stock or other subordinated securities issued in a reorganization proceeding or payments from funds previously deposited in trust to defease one or more series of Junior Subordinated Debentures under the Junior Subordinated Indenture), for a period (a "blockage period") commencing on the date American General or the Junior Subordinated Trustee receive such written notice and ending on the earlier of (i) 179 days after such date and (ii) the date, if any, on which the Senior Indebtedness to which such default relates is discharged or such 13 45 default is waived in writing or otherwise cured or ceases to exist and any acceleration of Senior Indebtedness to which such Senior Nonmonetary Default relates is rescinded or annulled. In any event, not more than one blockage period may be commenced during any period of 360 consecutive days, and there must be a period of at least 181 consecutive days in each period of 360 consecutive days when no blockage period is in effect. Following the commencement of a blockage period, the holders of Senior Indebtedness will be precluded from commencing a subsequent blockage period until the conditions set forth in the preceding sentence are satisfied. No Senior Nonmonetary Default that existed or was continuing on the date of commencement of any blockage period with respect to the Senior Indebtedness initiating such blockage period will be, or can be, made the basis for the commencement of a subsequent blockage period, unless such default has been cured for a period of not less than 90 consecutive days. (Section 1303) The term "Senior Indebtedness" shall mean the principal of, and any premium and interest on, and any other payment due pursuant to, any of the following, whether outstanding at the date of execution of the Junior Subordinated Indenture or thereafter incurred, created or assumed: (a) all obligations of American General for money borrowed; (b) all obligations of American General evidenced by notes, debentures, bonds or other securities, including, without limitation, American General's 13 1/2% Restricted Subordinated Notes Due 2002 and any obligations incurred, created or assumed in connection with the acquisition of property, assets or businesses; (c) all Capitalized Lease Obligations of American General; (d) all reimbursement obligations of American General with respect to letters of credit, bankers acceptances or similar facilities issued for the account of American General; (e) all obligations of American General issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (f) all payment obligations of American General under any interest rate, currency or commodity swap agreement, option agreement, hedge agreement, forward contract, or similar agreement designed to protect American General or another person against fluctuations in interest rates, exchange rates or commodity prices; (g) all obligations of the type referred to in clauses (a) through (f) above of another person and all dividends of another person, the payment of which, in either case, American General has assumed or guaranteed, or for which American General is responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise; and (h) all amendments, modifications, renewals, extensions, refinancings, replacements and refundings by American General of any such indebtedness referred to in clauses (a) through (g) above (and of any such amended, modified, renewed, extended, refinanced, replaced or refunded indebtedness or obligations); other than (i) any indebtedness, renewal, extension, refinancing, replacement, refunding, assumption, guarantee or other obligation which expressly provides, or in the instrument creating or evidencing the same or the assumption or guarantee of the same it is expressly provided, that such indebtedness, renewal, extension, refinancing, replacement, refunding, assumption, guarantee or other obligation is junior in right of payment to or is pari passu with the Junior Subordinated Debentures; and (ii) each Guarantee. Such Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. By reason of such subordination, in the event of an insolvency, creditors of American General who are holders of Senior Indebtedness, as well as certain general creditors of American General, 14 46 may recover more, ratably, than the holders of the Junior Subordinated Debentures. Additionally, American General currently conducts substantially all of its operations through subsidiaries, and the holders of Junior Subordinated Debentures will be structurally subordinated to the creditors of American General's subsidiaries. See "American General." The Junior Subordinated Indenture does not limit the aggregate amount of Senior Indebtedness which may be issued. As of March 31, 1995, Senior Indebtedness of American General aggregated approximately $2.8 billion. CERTAIN COVENANTS OF AMERICAN GENERAL In the Junior Subordinated Indenture, American General will covenant for the benefit of the holders of each series of Junior Subordinated Debentures that American General shall not declare or pay any dividend on, and American General shall not, and American General shall not permit any of its majority-owned subsidiaries to, redeem, purchase, acquire or make a liquidation payment with respect to, any of American General's capital stock (other than (i) acquisitions of shares of American General Common Stock in connection with the satisfaction by American General or any of its majority-owned subsidiaries of its obligations under any employee benefit plans or the satisfaction by American General of its obligations pursuant to any put contract requiring American General to purchase shares of American General Common Stock, (ii) as a result of a reclassification of capital stock or the exchange or conversion of one class or series of capital stock for another class or series of capital stock, (iii) redemptions of any share purchase rights issued by American General pursuant to the Rights Agreement (see "Description of American General Common Stock -- Preferred Share Purchase Rights") or the declaration and payment of a dividend of similar share purchase rights in the future, or (iv) the purchase of fractional interests in shares of capital stock pursuant to conversion or exchange provisions of such capital stock or the security being converted or exchanged) or make any guarantee payments with respect to the foregoing, if at such time American General has exercised its option to extend the interest payment period on such series of Junior Subordinated Debentures and such extension is continuing, American General is in default with respect to its payment or other obligations under the Guarantee with respect to any outstanding series of Preferred Securities related to such series of Junior Subordinated Debentures or there has occurred and is continuing any Event of Default under the Junior Subordinated Indenture with respect to such series of Junior Subordinated Debentures. American General is required to take all actions necessary to ensure the compliance of its majority-owned subsidiaries with the above covenant. (Section 1006) In the Junior Subordinated Indenture, American General also will covenant for the benefit of the holders of each series of Junior Subordinated Debentures that, so long as the related series of Preferred Securities remains outstanding, it will (a) not cause or permit any Common Securities to be transferred (other than, in the case of American General, in connection with a merger or consolidation permitted under the Junior Subordinated Indenture as described under "-- Consolidation, Merger and Sale" or, in the case of the Manager, in connection with any merger or consolidation involving the Manager), (b) maintain direct or indirect ownership of all outstanding Common Securities and other limited liability company interests in the applicable American General LLC other than any series of Preferred Securities (except as permitted in the applicable LLC Agreement), (c) cause at least 21% of all interests in the capital, income, gain, loss, deduction and credit of such American General LLC to be represented by Common Securities, (d) not voluntarily liquidate, dissolve or wind-up itself (other than in connection with a merger or consolidation permitted under the Junior Subordinated Indenture as described under "-- Consolidation, Merger and Sale"), or permit the Manager (other than in connection with any merger or consolidation involving the Manager) or such American General LLC (other than in connection with or after an exchange of all outstanding series of Preferred Securities of such American General LLC for the related series of Junior Subordinated Debentures, if so provided in the applicable Declaration), to liquidate, dissolve or wind-up, (e) cause American General Delaware Management Corporation or 15 47 any successor thereto by merger or consolidation to remain the Manager and to timely perform all of its duties as Manager of such American General LLC (including the duty to cause such American General LLC to declare and pay dividends on such Preferred Securities to the extent set forth in the applicable LLC Agreement and Declaration) and (f) if so provided in the Prospectus Supplement pertaining to such Preferred Securities, to deliver American General Preferred Stock or American General Common Stock, as the case may be, upon an election by the holders of such Preferred Securities to exchange or convert such series of Junior Subordinated Debentures. (Section 1007) Compliance by the Company with any of the covenants described above can be waived by the holders of a majority of the aggregate principal amount of the related series of Junior Subordinated Debentures then outstanding and, so long as the Preferred Securities of the related series are outstanding, the consent or approval of at least 66 2/3% of the aggregate liquidation preference of the Preferred Securities of such series. (Section 1009) FORM, EXCHANGE, REGISTRATION AND TRANSFER Junior Subordinated Debentures of each series will be issued in registered form and in either certificated form or will be represented by one or more global securities. If any Junior Subordinated Debentures of a series are represented by one or more global securities, the applicable Prospectus Supplement will describe the circumstances, if any, under which beneficial owners of interests in any such global securities may exchange such interests for Junior Subordinated Debentures of such series in certificated form and of like tenor and principal amount in any authorized denomination. Principal of and any premium and interest on a global security will be payable in the manner described in the Prospectus Supplement. If not represented by one or more global securities, Junior Subordinated Debentures may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed) or exchange, at the office of the Debenture Registrar or at the office of any transfer agent designated by American General for such purpose with respect to any series of Junior Subordinated Debentures and referred to in the applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental charges as described in the Junior Subordinated Indenture. Such transfer or exchange will be effected upon the Debenture Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request and subject to such reasonable regulations as American General may prescribe. American General has appointed the Junior Subordinated Trustee as Debenture Registrar with respect to the Junior Subordinated Debentures. If a Prospectus Supplement refers to any transfer agents (in addition to the Debenture Registrar) initially designated by American General with respect to any series of Junior Subordinated Debentures, American General may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that American General will be required to maintain a transfer agent in each Place of Payment for such series. American General may at any time designate additional transfer agents with respect to any series of Junior Subordinated Debentures. (Sections 305 and 1002) In the event of any redemption of a series of Junior Subordinated Debentures in part, American General shall not be required to (i) issue, register the transfer of or exchange Junior Subordinated Debentures of any series during a period beginning at the opening of business 15 days before any selection for redemption of such Junior Subordinated Debentures of like tenor and of the same series and ending at the close of business on the day of the mailing of the relevant notice of redemption or (ii) register the transfer of or exchange any such Junior Subordinated Debentures so selected for redemption, in whole or in part, except the unredeemed portion of any such Junior Subordinated Debentures being redeemed in part. Similarly, if a Junior Subordinated Debenture is subject to repayment at the option of the holder, American General shall not be required to register the transfer or exchange of any Junior Subordinated Debenture so surrendered for repayment. (Section 305) 16 48 PAYMENT AND PAYING AGENTS Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of and premium (if any) on any series of Junior Subordinated Debentures will be made only against surrender to the Paying Agent of such Junior Subordinated Debentures. Unless otherwise indicated in the applicable Prospectus Supplement, principal of and any premium, if any, and interest on Junior Subordinated Debentures will be payable, subject to any applicable laws and regulations, at the office of such Paying Agent or Paying Agents as American General may designate from time to time, except that at the option of American General payment of any interest may be made by check mailed to the address of the person entitled thereto as such address shall appear in the Debenture Register with respect to such Junior Subordinated Debentures or by wire transfer to an account maintained at a bank located in the United States or by any other means described in the Prospectus Supplement. Unless otherwise indicated in the applicable Prospectus Supplement, payment of interest on a Junior Subordinated Debenture on any interest payment date will be made to the person in whose name such Junior Subordinated Debenture (or Predecessor Security) is registered at the close of business on the record date for such interest payment. (Section 307) Unless otherwise specified in the applicable Prospectus Supplement, the Junior Subordinated Trustee will act as Paying Agent with respect to the Junior Subordinated Debentures. American General may at any time designate additional Paying Agents or rescind the designation of any Paying Agents or approve a change in the office through which any Paying Agent acts, except that American General will be required to maintain a Paying Agent in each Place of Payment for each series of Junior Subordinated Debentures. (Section 1002) All monies paid by American General to a Paying Agent for the payment of the principal of or any premium or interest on any Junior Subordinated Debenture of any series which remain unclaimed at the end of two years after such principal, premium or interest shall have become due and payable will be repaid to American General and the holder of such Junior Subordinated Debenture will thereafter look only to American General for payment thereof. (Section 1003) MODIFICATION OF THE JUNIOR SUBORDINATED INDENTURE The Junior Subordinated Indenture may be amended by American General and the Junior Subordinated Trustee, with the consent of the holders of a majority in aggregate principal amount of the Junior Subordinated Debentures of each series affected thereby, to modify the Junior Subordinated Indenture or any Supplemental Junior Subordinated Indenture affecting that series or the rights of the holders of that series of Junior Subordinated Debentures; provided, that no such modification or amendment may, without the consent of the holder of each outstanding Junior Subordinated Debenture affected thereby, (a) change the maturity of the principal of, or any installment of the principal of or interest on, any Junior Subordinated Debenture or change any obligation of American General to pay certain Additional Amounts described in a Prospectus Supplement, (b) reduce the principal amount of, or any premium payable upon the redemption of or the rate or amount of interest on, any Junior Subordinated Debenture, (c) change the place (except as otherwise permitted when additional paying agents are selected or removed) or currency of payment of principal of, or any premium or interest on, any Junior Subordinated Debenture, (d) impair the right to institute suit for the enforcement of any payment on or with respect to any Junior Subordinated Debenture or for the conversion or exchange of any Junior Subordinated Debenture in accordance with its terms, (e) adversely affect any right to convert or exchange any Junior Subordinated Debenture, (f) modify the subordination provisions in a manner adverse to the holder of any Junior Subordinated Debenture, (g) reduce the above-stated percentage of outstanding Junior Subordinated Debentures of a series necessary to modify or amend the Junior Subordinated Indenture with respect to such series of Junior Subordinated Debentures or (h) reduce the percentage of aggregate principal amount of outstanding Junior Subordinated Debentures of a series necessary for waiver of compliance with certain provisions of the Junior Subordinated Indenture applicable to such series of Junior Subordinated Debentures or for waiver of certain 17 49 defaults with respect to such series of Junior Subordinated Debentures or reduce certain requirements relating to quorums and voting at meetings. (Section 902) So long as an American General LLC holds the Junior Subordinated Debentures of any series, it may not waive compliance with the provisions of the Junior Subordinated Indenture benefiting the related series of Preferred Securities or modify or amend the Junior Subordinated Indenture without the approval of the same percentage of the aggregate liquidation preference of the holders of Preferred Securities of the related series as would be required if the holders of such Preferred Securities then held such Junior Subordinated Debentures. (Section 903) In addition, American General and the Junior Subordinated Trustee may execute, without the consent of any holder of Junior Subordinated Debentures, any Supplemental Junior Subordinated Indenture (a) to evidence the succession of another corporation to American General and the assumption of the covenants of American General; (b) to add to the covenants of American General for the benefit of the holders of all or any series of Junior Subordinated Debentures or to surrender any right or power conferred upon American General; (c) to add any additional Events of Default with respect to all or any series of Junior Subordinated Debentures; (d) to change or eliminate any restrictions on the payment of the principal of or any premium or interest on Junior Subordinated Debentures, to modify the provisions relating to global Junior Subordinated Debentures, or to permit the issuance of Junior Subordinated Debentures in bearer or uncertificated form, provided any such action does not adversely affect the interests of the holders of the Junior Subordinated Debentures of any series in any material respect; (e) to add to, change or eliminate any provision of the Junior Subordinated Indenture, provided that such Supplemental Junior Subordinated Indenture shall become effective only if there is no outstanding Junior Subordinated Debentures of any series then entitled to the benefit of such provision or such amendment does not apply to any then Outstanding Junior Subordinated Debentures; (f) to secure the Junior Subordinated Debentures; (g) to establish the form or terms of the Junior Subordinated Debentures of any series; (h) to provide for the acceptance of appointment by a successor Trustee with respect to the Junior Subordinated Debentures of one or more series and to add to or change any of the provisions as shall be necessary to provide for or facilitate the administration of the trusts under the Junior Subordinated Indenture by more than one Junior Subordinated Trustee; (i) to provide for the discharge of the Junior Subordinated Indenture with respect to the Junior Subordinated Debentures of any series by the deposit of monies or government obligations in trust; (j) to change the conditions, limitations and restrictions on the authorized amount, terms or provisions of issuance, authentication and delivery of the Junior Subordinated Debentures as set forth in the Junior Subordinated Indenture and the Prospectus Supplement relating thereto; (k) to provide for conversion or exchange rights of any series of Junior Subordinated Debentures pursuant to the requirements of the instrument authorizing such series; (l) to limit or terminate the benefit to the holders of Senior Indebtedness of the subordination provisions contained in the Junior Subordinated Indenture; or (m) to cure any ambiguity, defect or inconsistency in the Junior Subordinated Indenture, or to make other provisions with respect to matters or questions arising under the Junior Subordinated Indenture, provided such action does not adversely affect the interests of the holders of the Junior Subordinated Debentures of any series in any material respect. (Section 901) EVENTS OF DEFAULT The Junior Subordinated Indenture provides that, unless a Prospectus Supplement relating to a particular series of Junior Subordinated Debentures provides otherwise, any one or more of the following events, which has occurred and is continuing, constitutes an "Event of Default" with respect to any particular series of Junior Subordinated Debentures: (a) failure to pay any interest (including any Additional Interest (as defined in the Junior Subordinated Indenture)) on the Junior Subordinated Debentures of that series when due and such failure continues for a period of 10 days; provided that (i) a valid extension of the interest payment period by American General shall not constitute a default in the payment of interest for 18 50 this purpose, and (ii) no such default shall be deemed to exist if, on or prior to the date on which such interest became due, American General shall have made a payment, sufficient to pay such interest pursuant to the Guarantee with respect to the series of Preferred Securities related to such series of Junior Subordinated Debentures; or (b) failure to pay principal of (or premium, if any, on) the Junior Subordinated Debentures of that series when due, whether at maturity, upon redemption, by declaration of acceleration or otherwise, or to make any sinking fund payment with respect to that series; provided that (i) no such default shall be deemed to exist if, on or prior to the date on which such principal or premium, if any became due, American General shall have made a payment, sufficient to pay such principal or premium, if any, pursuant to the Guarantee related to such series of Junior Subordinated Debentures and (ii) a valid exchange of a Junior Subordinated Debenture for a Junior Subordinated Debenture of another series pursuant to the provisions permitting such exchange shall not constitute a default in the payment of the principal of the Junior Subordinated Debenture being exchanged; or (c) if applicable, failure by American General to deliver shares of the applicable series of American General Preferred Stock or American General Common Stock upon an appropriate election by holders of the related series of Preferred Securities to exchange or convert such Preferred Securities; or (d) failure by American General to observe or perform in any material respect any other covenant (other than those specifically relating to another series) contained in the Junior Subordinated Indenture or the Junior Subordinated Debentures of that series continued for 90 days after written notice to American General from the Junior Subordinated Trustee or to American General and the Junior Subordinated Trustee from the holders of at least 25% in aggregate outstanding principal amount of the Junior Subordinated Debentures of such series or the holders of at least 25% in aggregate liquidation preference of the Preferred Securities of the series related to such series of Junior Subordinated Debentures; or (e) the liquidation, dissolution or winding-up of the American General LLC that holds such series of Junior Subordinated Debentures, except in connection with or after the exchange of Preferred Securities for Junior Subordinated Debentures or American General Preferred Stock or in connection with certain mergers or consolidations permitted by the applicable LLC Agreement; or (f) certain events of bankruptcy, insolvency or reorganization of American General; or (g) any other Event of Default with respect to such series of Junior Subordinated Debentures described in the applicable Prospectus Supplement. If an Event of Default under the Junior Subordinated Indenture shall occur and be continuing with respect to a particular series of Junior Subordinated Debentures (other than an Event of Default described in clause (f) above, which shall result in the immediate acceleration of the maturity of such series of Junior Subordinated Debentures), then the Junior Subordinated Trustee or the holders of not less than 25% in aggregate outstanding principal amount of such series of Junior Subordinated Debentures may declare the principal thereof due and payable immediately. The holders of a majority in aggregate outstanding principal amount of such series (with the consent of the holders of at least 66 2/3% of the aggregate liquidation preference of the related series of Preferred Securities if such series is then outstanding), however, may annul such declaration if such Event of Default has been cured and a sum sufficient to pay all matured principal, premium, if any, and interest has been deposited with the Junior Subordinated Trustee. (Section 502) The holders of a majority in aggregate outstanding principal amount of any series of Junior Subordinated Debentures will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Junior Subordinated Trustee or the exercise of any trust 19 51 or power conferred on the Junior Subordinated Trustee with respect to the Junior Subordinated Debentures of such series. (Section 512) The holders of a majority in aggregate outstanding principal amount of the Junior Subordinated Debentures of any series may, on behalf of the holders of all the Junior Subordinated Debentures of such series, waive any past default with respect to such Junior Subordinated Debentures and its consequences, except a default in the payment of principal, premium, if any, or interest. (Section 513) As long as the related series of Preferred Securities is outstanding, such a waiver cannot be granted without the approval of 66 2/3% in aggregate liquidation preference of such series of Preferred Securities. (Section 1007) American General is required to file annually with the Junior Subordinated Trustee a certificate as to whether or not American General is in compliance with all the conditions and covenants under the Junior Subordinated Indenture. (Section 1008) No holder of a Junior Subordinated Debenture of any series may institute any proceeding against American General under the Junior Subordinated Indenture (except actions for payment of overdue principal of, or premium, if any, or interest on, such Junior Subordinated Debenture or for the conversion of exchange of any Junior Subordinated Debenture in accordance with its terms) unless the holders of not less than 25% in aggregate principal amount of the Junior Subordinated Debentures of that series then outstanding shall have requested the Junior Subordinated Trustee to institute such proceeding and offered to the Junior Subordinated Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request and the Junior Subordinated Trustee shall not have instituted such proceeding within 60 calendar days of such request. (Sections 507 and 508) To the extent described in the applicable Prospectus Supplement, upon the occurrence and continuance of an Event of Default with respect to a series of Junior Subordinated Debentures, the holders of the related series of Preferred Securities will have the right to appoint a Special Trustee to exercise certain of the rights the applicable American General LLC has as holder of such series of Junior Subordinated Debentures. (Section 516) CONSOLIDATION, MERGER AND SALE American General, without the consent of the holder or holders of any Junior Subordinated Debentures, may consolidate with or merge with or into, or, if no Preferred Securities are then outstanding, convey, transfer or lease its assets as an entirety or substantially as an entirety to, any corporation, partnership, trust or other entity organized and validly existing under the laws of the United States of America or a state thereof, provided that, in the case of a merger, American General survives the merger or, in the case of a merger in which American General is not the survivor and in the case of a consolidation or conveyance, transfer or lease of assets, the successor assumes American General's obligations under the Junior Subordinated Debentures, the Junior Subordinated Indenture and the Guarantees and, in each case, that, after giving effect to the transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing. (Section 801) DEFEASANCE AND DISCHARGE American General may discharge its indebtedness and its obligations under the Junior Subordinated Indenture with respect to a series of Junior Subordinated Debentures by depositing funds or obligations issued or guaranteed by the United States of America if certain conditions are satisfied. Such conditions include a condition that such funds or government obligations be sufficient to pay and discharge the indebtedness evidenced by the Junior Subordinated Debentures of such series and that all Junior Subordinated Debentures of such series issued under the Junior Subordinated Indenture either shall have been delivered to the Junior Subordinated Trustee for cancellation or shall be due, or will be called for redemption, within one year. If American General has any other right to defease the Junior Subordinated Indenture with respect to a particular series of Junior 20 52 Subordinated Debentures by depositing with the Junior Subordinated Trustee, in trust, monies or government obligations in an amount sufficient to pay, when due, the principal of, premium, if any, and interest on the Junior Subordinated Debentures of that series, then the applicable Prospectus Supplement with respect to the Preferred Securities relating to that series of Junior Subordinated Debentures will describe such provisions. (Article Four) MEETINGS The Junior Subordinated Indenture contains provisions for convening meetings of the holders of a series of Junior Subordinated Debentures which would apply if the applicable Prospectus Supplement provides that the Junior Subordinated Trustee shall call a meeting of such holders. A meeting may be called by the Junior Subordinated Trustee for the purposes specified in such Prospectus Supplement, and, upon the conditions described in such Prospectus Supplement, by American General or the holders of at least 10% in aggregate principal amount of the outstanding Junior Subordinated Debentures of such series. Except for any consent which, under the Junior Subordinated Indenture, must be given by the holder of each outstanding Junior Subordinated Debenture affected thereby and any particular instance in which less than a majority vote is required, any resolution presented at a meeting or adjourned meeting at which a quorum is present may be adopted by the affirmative vote of the holders of a majority in principal amount of the Junior Subordinated Debentures of that series. Any resolution passed or decision taken at any meeting of holders of Junior Subordinated Debentures of any series duly held in accordance with the Junior Subordinated Indenture will be binding on all holders of Junior Subordinated Debentures of that series. The quorum at any meeting, and at any reconvened meeting, will be persons holding or representing a majority in aggregate principal amount of the outstanding Junior Subordinated Debentures of a series, unless a higher vote requirement is specified in the applicable Prospectus Supplement. (Article Fourteen) GOVERNING LAW The Junior Subordinated Indenture and the Junior Subordinated Debentures will be governed by, and construed in accordance with, the laws of the State of New York. (Section 112) INFORMATION CONCERNING THE JUNIOR SUBORDINATED TRUSTEE The Junior Subordinated Trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the Junior Subordinated Indenture and, after default, is required to exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Junior Subordinated Trustee is under no obligation to exercise any of the powers vested in it by the Junior Subordinated Indenture at the request of any holder of Junior Subordinated Debentures, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The Junior Subordinated Trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the Junior Subordinated Trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. The Junior Subordinated Indenture contains other provisions limiting the responsibilities and liabilities of the Junior Subordinated Trustee. The Junior Subordinated Trustee does not have any fiduciary duty to the holders of the Preferred Securities. (Article Six) American General may appoint a separate trustee for any series of Junior Subordinated Debentures. American General and certain of its affiliates from time to time borrow money from, and maintain deposit accounts and conduct certain banking transactions with, the Junior Subordinated Trustee in the ordinary course of their business. The Junior Subordinated Trustee and one of its affiliates also serve as trustees under other indentures maintained by American General. 21 53 MISCELLANEOUS American General will have the right at all times to assign any of its rights or obligations under the Junior Subordinated Indenture to a direct or indirect wholly-owned subsidiary of American General; provided, that, in the event of any such assignment, American General will remain liable for all such obligations. The Junior Subordinated Indenture may also be assigned in connection with the merger, consolidation or transfer of all or substantially all of the assets of American General, but is not otherwise assignable. Subject to the foregoing, the Junior Subordinated Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The subordination provisions of the Junior Subordinated Indenture are also for the benefit of the holders of Senior Indebtedness. A holder of a series of Preferred Securities shall not have the right, as such a holder, to enforce any provision of the Junior Subordinated Indenture except for the covenants described above under the caption "-- Certain Covenants of American General" and certain provisions of the Junior Subordinated Indenture requiring the approval of the holders of a specified percentage of Preferred Securities in certain events. DESCRIPTION OF AMERICAN GENERAL PREFERRED STOCK If so indicated in a Prospectus Supplement relating to a particular series of Preferred Securities, such series may, in certain events, be exchangeable for shares of a series of American General Preferred Stock. The following sets forth certain general terms and provisions of the American General Preferred Stock. Certain other terms of any series of American General Preferred Stock that may be issued upon exchange of a series of Preferred Securities offered by a Prospectus Supplement will be specified in such Prospectus Supplement. If so specified in the applicable Prospectus Supplement, the terms of any series of American General Preferred Stock may differ from the terms set forth below. The description of the terms of the American General Preferred Stock set forth below and in an applicable Prospectus Supplement does not purport to be complete and is subject to and qualified in its entirety by reference to the Statement of Resolution Establishing a Series of Shares relating to the applicable series of American General Preferred Stock, which will be filed as an exhibit to, or incorporated by reference in, the Registration Statement of which this Prospectus forms a part. GENERAL Pursuant to the Restated Articles of Incorporation of American General, as amended (the "Articles"), the Bylaws of American General, and applicable Texas law, the Board of Directors of American General, or an authorized committee thereof, has the authority, without further shareholder action, to issue up to 60,000,000 shares of American General Preferred Stock, par value $1.50 per share, in one or more series and in such amounts and for such consideration, as may be determined from time to time by resolution of the Board of Directors of American General, or an authorized committee thereof, and to fix before the issuance of any shares of American General Preferred Stock of a particular series, the number of shares constituting that series and the distinctive designation of that series; the dividend rate (or method of determining the same); the voting rights; conversion or exchange provisions; redemption provisions; repurchase obligations; sinking fund availability; rights upon liquidation, dissolution or winding-up; restrictions upon American General with respect to the creation of debt or the issuance of additional Preferred Stock or other stock ranking senior with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding-up; restrictions on American General with respect to the issuance of, payment of dividends upon, or the making of other distributions with respect to, or the acquisition or redemption of, shares of stock ranking pari passu with or junior to such series of American General Preferred Stock; the priority of such series of American General Preferred Stock in relation to other series of American General Preferred Stock; and any other designations, powers, preferences and rights, including, without limitation, any qualifications, limitations or restrictions thereof. The holders of any series of American General Preferred Stock shall not have any 22 54 preemptive rights to acquire any shares or securities of any class which may at any time be issued, sold or offered for sale by American General. As of May 23, 1995, American General had no Preferred Stock outstanding. As of such date, the Company did have Preferred Share Purchase Rights outstanding. A description of these rights is provided under "Description of American General Common Stock -- Preferred Share Purchase Rights." DIVIDENDS The holders of American General Preferred Stock of each series will be entitled to receive, when, as and if declared by the Board of Directors of American General, out of funds legally available therefor, dividends at such rates and on such dates as shall be specified in the applicable Prospectus Supplement. Such rates may be fixed or variable or both. If variable, the formula used for determining the dividend rate for each dividend period will be specified in the applicable Prospectus Supplement. Dividends will be payable to the holders of record as they appear on the stock books of American General on such record dates as shall be fixed by the Board of Directors of American General. Unless otherwise indicated in an applicable Prospectus Supplement, all series of American General Preferred Stock are senior in right as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding-up to the American General Common Stock and any other class of stock of American General ranking junior to the American General Preferred Stock. VOTING RIGHTS Except as indicated in the applicable Prospectus Supplement or as expressly required by applicable law, the holders of American General Preferred Stock will not be entitled to vote. In the event American General issues a series of American General Preferred Stock with voting rights, unless otherwise specified in the applicable Prospectus Supplement, each such share will be entitled to one vote on matters on which holders of such series of the American General Preferred Stock are entitled to vote. Since each full share of any series of American General Preferred Stock shall be entitled to one vote, the voting power of such series, on matters on which holders of such series and holders of other series of American General Preferred Stock are entitled to vote as a single class, shall depend on the number of shares in such series, not the aggregate stated value, liquidation preference or initial offering price of the shares of such series of American General Preferred Stock. CONVERSION AND EXCHANGE The applicable Prospectus Supplement will set forth the conditions or terms, if any, upon which the series of American General Preferred Stock described in such Prospectus Supplement will be convertible or exchangeable, and the terms of the securities into which such series will be convertible or exchangeable. REDEMPTION RIGHTS A series of American General Preferred Stock may be redeemable, in whole or in part, at the option of American General or any holder thereof, and may be subject to mandatory redemption pursuant to a sinking fund or otherwise, in each case upon terms, at the times and at the redemption prices specified in the applicable Prospectus Supplement and subject to the rights of holders of other securities of American General. American General Preferred Stock redeemed by American General will be restored to the status of authorized but unissued shares of Preferred Stock, without series designation. 23 55 If less than all outstanding shares of a series of American General Preferred Stock are to be redeemed, the shares to be redeemed will be selected ratably or by lot in such manner as may be prescribed by resolution of the Board of Directors of American General. The notice of redemption will set forth the designation of the series or part of the series of shares to be redeemed, the date fixed for redemption, the redemption price, the place at which the shareholders may obtain payment of the redemption price upon surrender of their respective share certificates, that dividends will cease to accrue on such shares on the date fixed for redemption and a statement with respect to the existence of any right of conversion with respect to the shares to be redeemed and the period within which such right may be exercised. Such notice will be given to each holder of shares being called, by first class mail, not less than 30 nor more than 60 calendar days before the date fixed for redemption. Such notice will be deemed to be delivered when deposited in the United States mail addressed to the shareholder at such shareholder's address as it appears on the stock transfer book of American General, with postage thereon prepaid. Unless otherwise indicated in the applicable Prospectus Supplement, American General may, on or prior to the date fixed for redemption of a series of American General Preferred Stock, deposit with any bank or trust company in Texas, or any bank or trust company in the United States duly appointed and acting as transfer agent for American General, as a trust fund, a sum sufficient to redeem all of the shares called for redemption, with irrevocable instructions and authority to such bank or trust company to give or complete the notice of redemption thereof and to pay, on and after the date fixed for such redemption, to the respective holders of shares, as evidenced by a list of holders of such shares certified by an officer of American General, the redemption price upon surrender of their respective share certificates. If notice of redemption is duly given and funds irrevocably deposited as required, then from and after the date fixed for redemption, such shares shall be deemed to be redeemed, dividends thereon shall cease to accrue, such shares shall no longer be deemed to be outstanding, and the holders thereof shall cease to be shareholders with respect to such shares and shall have no rights with respect thereto except the right to receive payment of the redemption price of such shares, without interest (and, in the case of holders of certificated shares, upon the surrender of their respective certificates therefor). In case the holders of such shares shall not, within six years after such deposit, claim the amount deposited for redemption thereof, such bank or trust company shall upon demand pay over to American General the balance of such amount so deposited to be held in trust and such bank or trust company shall thereupon be relieved of all responsibility to the holders thereof. REPURCHASE OBLIGATION The applicable Prospectus Supplement will state the conditions and terms, if any, upon which the series of American General Preferred Stock described in the Prospectus Supplement shall be subject to repurchase by American General. RIGHTS UPON LIQUIDATION In the event of any voluntary or involuntary liquidation, dissolution or winding-up of American General, the holders of each series of American General Preferred Stock shall be entitled to receive out of the net assets of American General legally available for distribution to shareholders, before any distribution of assets is made to holders of American General Common Stock or any other class or series of securities ranking junior to such American General Preferred Stock upon liquidation, dissolution or winding-up, a liquidating distribution in the amount per share as set forth in the applicable Prospectus Supplement plus accumulated and unpaid dividends. If, upon any voluntary or involuntary liquidation, dissolution or winding-up of American General, the amounts payable with respect to American General Preferred Stock of any series and any other securities of American General ranking as to any such distribution pari passu with such American General Preferred Stock of such series are not paid in full, the holders of such American General Preferred Stock of such series and of such other securities will share ratably in any such distribution of assets of American 24 56 General in proportion to the full respective preferential amounts to which they are entitled. Neither the sale of all or substantially all of the property or business of American General nor the merger or consolidation of American General into or with any other corporation shall be deemed to be a liquidation, dissolution or winding-up, voluntary or involuntary, of American General. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of American General Preferred Stock of any series will not be entitled to any further participation in any distribution of assets by American General. CONDITIONS AND RESTRICTIONS UPON AMERICAN GENERAL The applicable Prospectus Supplement will describe any conditions or restrictions upon American General which are for the benefit of the series of American General Preferred Stock described in the Prospectus Supplement, including any restrictions upon the creation of debt or other series of American General Preferred Stock, the payment of dividends, or the distribution, acquisition or redemption of shares ranking junior to such series. DESCRIPTION OF AMERICAN GENERAL COMMON STOCK GENERAL American General is authorized to issue 300,000,000 shares of American General Common Stock, par value $.50 per share. As of March 31, 1995, there were outstanding 204,820,775 shares of American General Common Stock. Holders of American General Common Stock are entitled to receive dividends when, as and if declared by the Board of Directors of American General out of any funds legally available therefor, and are entitled upon liquidation, after claims of creditors and preferences of any series of American General Preferred Stock, to receive pro rata the net assets of American General. The holders of American General Common Stock are entitled to one vote for each share held. Directors of American General are elected for a one-year term expiring upon the annual meeting of stockholders of American General. The holders of American General Common Stock do not have cumulative voting rights. The holders of American General Common Stock do not have any preemptive rights to acquire any shares or other securities of any class which may at any time be issued, sold or offered for sale by American General. The holders of American General Common Stock have no conversion rights and the American General Common Stock is not subject to redemption by either American General or a stockholder. The American General Common Stock is listed on the New York, Pacific, London and Swiss Stock Exchanges. First Chicago Trust Company of New York is the transfer agent, registrar and dividend disbursing agent for the American General Common Stock. PREFERRED SHARE PURCHASE RIGHTS On July 27, 1989, the Board of Directors of American General authorized the issuance of one preferred share purchase right (a "Right") for each share of American General Common Stock outstanding on August 7, 1989 and for each share of American General Common Stock issued thereafter but prior to the earlier of the Distribution Date and the Termination Date (as each such term is defined below). A Right is attached to each share of American General Common Stock and entitles the registered holder to purchase from American General one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $1.50 per share, of American General (the "American General Junior Preferred Shares") at a price of $120 per one one-hundredth of an American General Junior Preferred Share, subject to certain adjustments. 25 57 The Rights will expire on August 7, 1999, unless the expiration date is extended or the Rights are redeemed earlier (any such date being the "Termination Date"). The Rights are not exercisable or transferable separately from the shares of American General Common Stock until the "Distribution Date" which will occur on the earlier of (i) 10 business days following the first public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired beneficial ownership of 15% or more of the outstanding American General Common Stock and any other shares of capital stock of American General entitled to vote generally in the election of directors or entitled to vote in respect of any merger, consolidation, sale of all or substantially all of American General's assets, liquidation, dissolution or winding up of American General (the "Voting Stock") or (ii) 10 business days following the commencement of, or the first public announcement of an intention to commence, a tender or exchange offer the consummation of which would result in the beneficial ownership by a person or group of affiliated or associated persons of 25% or more of the then outstanding Voting Stock. In the event American General is acquired in a merger or other business combination transaction or 50% or more of its consolidated assets or earnings power should be sold or otherwise transferred, each holder of a Right will have the right to receive, upon payment of the Right's then current exercise price, common stock of the acquiring company which has a market value of two times the exercise price of the Right. In the event that any person becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive upon exercise thereof that number of shares of American General Common Stock (or under certain circumstances, Common Stock-equivalent American General Junior Preferred Shares) having a market value of two times the exercise price of the Rights. At any time 10 business days after a person or group of affiliated or associated persons has become an Acquiring Person and prior to the acquisition by any person or group of 50% or more of the outstanding Voting Stock, the Board of Directors of American General may exchange the Rights (other than Rights acquired or beneficially owned by such Acquiring Person, which Rights held by such Acquiring Person shall then be null and void), in whole or in part, at an exchange ratio of one share of Common Stock (or one one-hundredth of a share of American General Junior Preferred Stock), appropriately adjusted to reflect any stock split, stock dividend or similar transaction, for each two shares of Common Stock for which the Right is then exercisable. At any time prior to the close of business on the tenth day following the first public announcement that a person or group of affiliated or associated persons has become an Acquiring Person, the Board of Directors of American General may redeem the then outstanding Rights in whole, but not in part, at a price of $.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction (the "Rights Redemption Price"). Any such redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors of American General in its sole discretion may establish. The purchase price payable, and the number of American General Junior Preferred Shares or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution in the event of a stock dividend on, or a subdivision, combination or reclassification of, the American General Junior Preferred Shares. The number of outstanding Rights and the number of one one-hundredths of an American General Junior Preferred Share issuable upon exercise of each Right are also subject to adjustment in the event of reclassification of securities, or recapitalization or reorganization of American General or other transaction involving American General which has the effect, directly or indirectly, of increasing by more than one percent the proportionate share of the outstanding shares of any class of equity securities of American General or any of its subsidiaries beneficially owned by any Acquiring Person, in any such case, prior to an exchange by American General as described above. 26 58 The terms of the Rights may be amended, including extending the expiration date, by the Board of Directors of American General without the consent of the holders of the Rights, except in certain circumstances. The Rights have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire American General on terms not approved by the Board of Directors of American General. The Rights should not interfere with any merger or other business combination approved by the Board of Directors of American General since the Rights may be redeemed by American General at the Rights Redemption Price prior to the time that a person or group has acquired beneficial ownership of 50% or more of the Voting Stock. The American General Junior Preferred Shares will be non-redeemable and rank junior to all other series of American General Preferred Stock. Each whole American General Junior Preferred Share will be entitled to receive a quarterly preferential dividend in an amount equal to the greater of (i) $0.25 or (ii) subject to certain adjustments, 100 times the dividend declared on each share of American General Common Stock. In the event of the liquidation, dissolution or winding up of American General, each whole American General Junior Preferred Share will be entitled to receive a preferential liquidation payment in an amount equal to the greater of (i) $1.50, or (ii) 100 times the aggregate amount to be distributed per share to holders of American General Common Stock, plus, in either case, an amount equal to all accrued and unpaid dividends thereon. In the event of any merger, consolidation or other transaction in which American General Common Stock is exchanged for or changed into other stock or securities, cash or other property, each whole American General Junior Preferred Share will be entitled to receive 100 times the amount received per each share of American General Common Stock. Each whole American General Junior Preferred Share will be entitled to 100 votes on all matters submitted to a vote of the shareholders of American General, and American General Junior Preferred Shares will generally vote together as one class with the American General Common Stock and any other voting capital stock of American General on all matters submitted to a vote of shareholders of American General. If such registration is then required by applicable law, American General will use its best efforts to cause the offer and sale of American General Junior Preferred Shares issuable upon exercise of the Rights to be registered pursuant to the Securities Act at any such time as the Rights become exercisable. The foregoing description of the Rights and the American General Junior Preferred Shares does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, as amended, which is an exhibit to the Registration Statement of which this Prospectus forms a part, and the Statement of Resolution Establishing Series of Shares of American General Junior Preferred Shares. PLAN OF DISTRIBUTION The American General LLCs may sell Preferred Securities to or through underwriters or dealers; directly to other purchasers; through agents; or through a combination of any such methods of sale. Any such underwriter, dealer or agent involved in the offer and sale of the offered Preferred Securities will be named in an applicable Prospectus Supplement or Prospectus Supplements. The distribution of the Preferred Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. In connection with the sale of Preferred Securities, underwriters may receive compensation from American General or the American General LLC issuing the Preferred Securities or from purchasers of Preferred Securities for whom they may act as agents, in the form of discounts, concessions or commissions. Underwriters may sell Preferred Securities to or through dealers, and such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agent. Underwriters, dealers and agents that participate in the distribution of Preferred Securities may be 27 59 deemed to be underwriters, and any discounts or commissions received by them from American General or an American General LLC, and any profit on the resale of Preferred Securities by them may be deemed to be underwriting discounts and commissions, under the Securities Act. Any compensation paid by American General or an American General LLC to underwriters, dealers or agents in connection with the offering of the Preferred Securities, and any discounts, concessions or commissions allowed by underwriters to participating dealers, will be described in an applicable Prospectus Supplement. Under agreements which may be entered into by American General and an American General LLC, underwriters, dealers and agents who participate in the distribution of Preferred Securities may be entitled to indemnification by American General and such American General LLC against, and/or contribution by American General and such American General LLC toward, certain liabilities, including liabilities under the Securities Act, and to reimbursement for certain expenses. Certain of the underwriters, dealers or agents and their associates may be customers of, engage in transactions with and perform services for American General or one or more of its affiliates in the ordinary course of business. The specific terms and manner of sale, including the place and time of delivery, of the Preferred Securities in respect of which this Prospectus is being delivered will be set forth or summarized in the applicable Prospectus Supplement. LEGAL OPINIONS Unless otherwise indicated in a Prospectus Supplement, the validity of each series of Preferred Securities, the related Guarantee and the related series of Junior Subordinated Debentures, as well as the validity of any American General Common Stock and American General Preferred Stock issuable upon conversion or exchange of such Junior Subordinated Debentures, will be passed upon for American General by Vinson & Elkins L.L.P., Houston, Texas. Unless otherwise indicated in a Prospectus Supplement, certain legal matters relating to such securities will be passed upon for any underwriters, dealers or agents by Brown & Wood, New York, New York. Brown & Wood may rely as to matters of Texas law on the opinion of Vinson & Elkins L.L.P. J. Evans Attwell, a partner in the firm of Vinson & Elkins L.L.P., is a director of American General. EXPERTS The consolidated financial statements and schedules of American General and its subsidiaries appearing in or incorporated by reference in American General's Annual Report on Form 10-K for the year ended December 31, 1994 have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon included therein and incorporated herein by reference. See "Incorporation of Certain Documents by Reference." Such financial statements and schedules are, and audited financial statements and schedules to be included in subsequently filed documents will be, incorporated herein by reference in reliance upon the reports of Ernst & Young LLP pertaining to such financial statements (to the extent covered by consents filed with the Commission) given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of American Franklin Company and Subsidiaries as of December 31, 1993, and for the year then ended, appearing in American General's Current Report on Form 8-K dated February 14, 1995, and the consolidated financial statements of American Franklin Company and Subsidiaries as of December 31, 1994 and 1993, and for the years ended December 31, 1994 and 1993, appearing in American General's Current Report on Form 8-K dated April 14, 1995, have been audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in their reports thereon included therein and incorporated herein by reference. See "Incorporation of Certain Documents by Reference." Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 28 60 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AMERICAN GENERAL CAPITAL, L.L.C., AMERICAN GENERAL CORPORATION OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AMERICAN GENERAL CAPITAL, L.L.C. OR AMERICAN GENERAL CORPORATION SINCE SUCH DATE. --------------------- TABLE OF CONTENTS
PAGE ------ PROSPECTUS SUPPLEMENT American General Corporation......... S-3 American General Capital, L.L.C...... S-5 Investment Considerations............ S-5 Capitalization....................... S-8 Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.......................... S-9 Use of Proceeds...................... S-9 Summary Financial Information of American General................... S-10 Description of the Series A Preferred Securities......................... S-11 Description of the Series A Junior Subordinated Debentures............ S-21 Certain Federal Income Tax Considerations..................... S-26 Underwriting......................... S-30 PROSPECTUS Available Information................ 2 Incorporation of Certain Documents by Reference.......................... 2 American General..................... 3 American General LLCs................ 3 Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.......................... 4 Use of Proceeds...................... 4 Description of the Preferred Securities......................... 4 Description of the Guarantees........ 8 Description of the Junior Subordinated Debentures............ 11 Description of American General Preferred Stock.............................. 22 Description of American General Common Stock.............................. 25 Plan of Distribution................. 27 Legal Opinions....................... 28 Experts.............................. 28
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 10,000,000 PREFERRED SECURITIES AMERICAN GENERAL CAPITAL 8.45% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES, SERIES A GUARANTEED TO THE EXTENT SET FORTH HEREIN BY AMERICAN GENERAL CORPORATION --------------------- [AMERICAN GENERAL LOGO] --------------------- GOLDMAN, SACHS & CO. MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED CS FIRST BOSTON DEAN WITTER REYNOLDS INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION KEMPER SECURITIES, INC. LEHMAN BROTHERS PRUDENTIAL SECURITIES INCORPORATED SALOMON BROTHERS INC SMITH BARNEY INC. REPRESENTATIVES OF THE UNDERWRITERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----