-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G0RWC29X86eXNobBdLSfVIfFersxl9AaWdiNaPY/dwNwMxXe6z3/t+qnmfJcR0On f65bPZmkrveo6pb61ubLKQ== 0000950152-96-004850.txt : 19960925 0000950152-96-004850.hdr.sgml : 19960925 ACCESSION NUMBER: 0000950152-96-004850 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19960924 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN FINANCIAL GROUP INC /OH/ CENTRAL INDEX KEY: 0000933537 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 311422526 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-12537 FILM NUMBER: 96633492 BUSINESS ADDRESS: STREET 1: ONE E FOURTH ST STREET 2: SUITE 919 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5135796600 MAIL ADDRESS: STREET 1: ONE EAST FOURTH STREET STREET 2: SUITE 919 CITY: CINCINNATI STATE: OH ZIP: 45202 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN PREMIER GROUP INC DATE OF NAME CHANGE: 19941208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN FINANCIAL CAPITAL TRUST I CENTRAL INDEX KEY: 0001023285 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 316538554 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-12537-01 FILM NUMBER: 96633493 BUSINESS ADDRESS: STREET 1: ONE EAST FOURTH STREET STREET 2: SUITE 919 CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5135792540 MAIL ADDRESS: STREET 1: ONE EAST FOURTH STREET STREET 2: SUITE 919 CITY: CINCINNATI STATE: OH ZIP: 45202 S-3 1 AMERICAN FINANCIAL GROUP 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ AMERICAN FINANCIAL GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO (State or other jurisdiction of incorporation or 31-1422526 organization) (IRS Employer Identification Number)
ONE EAST FOURTH STREET CINCINNATI, OHIO 45202 (513) 579-2121 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) AMERICAN FINANCIAL CAPITAL TRUST I (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE (State or other jurisdiction of incorporation or 31-6538554 organization) (IRS Employer Identification Number)
ONE EAST FOURTH STREET CINCINNATI, OHIO 45202 (513) 579-2121 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ------------------------ JAMES C. KENNEDY, ESQ. Deputy General Counsel and Secretary with copies to: American Financial Group, Inc. with copies to: One East Fourth Street Gary P. Kreider, Esq. Cincinnati, Ohio 45202 Timothy E. Hoberg, Esq. Keating, Muething & Klekamp, P.L.L. (513) 579-2538 Taft, Stettinius & Holliser 1800 Provident Tower (Name, address, including zip code, 1800 Star Bank Center One East Fourth Street and telephone number, 425 Walnut Street Cincinnati, Ohio 45202 including area code, of agent for Cincinnati, Ohio 45202 (513) 579-6411 service) (513) 357-9308
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the date this registration statement becomes effective. ------------------------ If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.
CALCULATION OF REGISTRATION FEE PROPOSED MAXIMUM AGGREGATE OFFERING PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE AGGREGATE OFFERING REGISTRATION TO BE REGISTERED REGISTERED(1) PER SECURITY(2) PRICE(2) FEE(2) - --------------------------------------------------------------------------------------------------------------------------- % Trust Originated Preferred Securities of American Financial Capital Trust I(3).............. 4,600,000 $25.00 $115,000,000 $39,655 % Subordinated Debentures due , 2026, of American Financial Group, Inc.(3)............... Guarantee of Preferred Securities of American Financial Capital Trust I by American Financial Group, Inc.(4)..................................... - ---------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- (1) Includes 600,000 Preferred Securities subject to an Underwriter's over-allotment option. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457. (3) The % Subordinated Debentures will be purchased by American Financial Capital Trust I with the proceeds of the sale of the % Trust Originated Preferred Securities. No separate consideration will be received for the issuance of the % Subordinated Debentures. Pursuant to Rule 457(a), no separate fee is payable with respect to the % Subordinated Debentures. (4) Includes back-up undertakings, consisting of obligations of American Financial Group, Inc. to provide certain indemnities in respect of, and pay and be responsible for certain expenses and debts of, American Financial Capital Trust I. No separate consideration will be received for the Guarantee or any back-up undertakings. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED SEPTEMBER 24, 1996 PROSPECTUS 4,000,000 PREFERRED SECURITIES AMERICAN FINANCIAL CAPITAL TRUST I % TRUST ORIGINATED PREFERRED SECURITIES(SM) ("TOPRS (SM)") (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) GUARANTEED TO THE EXTENT SET FORTH HEREIN BY AMERICAN FINANCIAL GROUP, INC. ------------------------ The % Trust Originated Preferred Securities (the "Preferred Securities") offered hereby (the "Offering") represent preferred undivided beneficial interests in the assets of American Financial Capital Trust I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"). American Financial Group, Inc., an Ohio corporation ("AFG" or the "Company"), will directly or indirectly own all the common securities (the "Common Securities" and, (continued on next page) ------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL. Application will be made to list the Preferred Securities on the New York Stock Exchange, Inc. ("NYSE"). If approved, trading of the Preferred Securities on the NYSE is expected to commence within a 30-day period after the initial delivery of the Preferred Securities. See "Underwriting." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO OFFERING PRICE(1) COMMISSIONS(2) TRUST(3)(4) - --------------------------------------------- Per Preferred Security....................... $25.00 (3) $25.00 - --------------------------------------------- Total(5)..................................... $100,000,000 (3) $100,000,000
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) Plus accrued distributions, if any, from , 1996. (2) The Trust and the Company have each agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (3) As all of the proceeds of the sale of the Preferred Securities will be invested in Subordinated Debentures, the Company has agreed to pay to the Underwriters as compensation ("Underwriters' Compensation") for arranging the investment therein of such proceeds, $ per Preferred Security (or $ in the aggregate); provided, that such compensation for sales of 10,000 or more Preferred Securities to a single purchaser will be $ per Preferred Security. Therefore, to the extent of such sales, the actual amount of Underwriters' Compensation will be less than the aggregate amount specified in the preceding sentence. See "Underwriting." (4) Expenses of the Offering, which are payable by the Company, are estimated to be $ . (5) The Trust and the Company have granted to the Underwriters an option exercisable for 30 days to purchase up to an additional 600,000 Preferred Securities at the initial public offering price per Preferred Security solely to cover over-allotments, if any. The Company will pay to the Underwriters, as Underwriters' Compensation, the commission set forth above in footnote (3) with respect to such additional Preferred Securities. If such option is exercised in full, the Initial Public Offering Price, Underwriters' Compensation and Proceeds to the Trust will be $115,000,000, , , and $115,000,000, respectively. See "Underwriting." ------------------------ The Preferred Securities offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. It is expected that delivery of the Preferred Securities will be made only in book-entry form through the facilities of The Depository Trust Company, on or about , 1996. ------------------------ MERRILL LYNCH & CO. ------------------------ The date of this Prospectus is , 1996. (SM) "Trust Originated Preferred Securities" and "TOPrS" are service marks of Merrill Lynch & Co., Inc. 3 (continued from cover page) together with the Preferred Securities, the "Trust Securities") representing undivided beneficial interests in the assets of the Trust. The Trust exists for the sole purpose of issuing the Preferred Securities and Common Securities and investing the proceeds thereof in an equivalent amount of % Subordinated Debentures due , 2026 ("Subordinated Debentures") of the Company. Upon a Declaration Event of Default (as defined herein), the holders of the Preferred Securities will have a preference over the holders of the Common Securities with respect to payments in respect of distributions and payments upon redemption, liquidation and otherwise. Holders of the Preferred Securities are entitled to receive cumulative cash distributions at an annual rate of % of the liquidation amount of $25 per Preferred Security, accruing from the date of original issuance and payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing January 15, 1997 ("distributions"). The distribution rate and the distribution and other payment dates for the Preferred Securities will correspond to the interest rate and interest and other payment dates on the Subordinated Debentures, which, along with interest and principal payments received on the Subordinated Debentures, will be the only assets of the Trust. As a result, if principal or interest is not paid on the Subordinated Debentures, no amounts will be paid on the Preferred Securities. The payment of distributions out of moneys held by the Trust and payments on liquidation of the Trust or the redemption of Preferred Securities, as set forth below, are guaranteed by the Company (the "Trust Guarantee") if and to the extent the Trust has funds available therefor. The Company's obligations under the Trust Guarantee, taken together with its back-up undertakings, consisting of obligations of the Company as set forth in the Declaration of Trust (including the obligation to pay expenses of the Trust), the Indenture and any applicable supplemental indentures, and the Subordinated Debentures issued to the Trust, provide a full and unconditional guarantee by the Company of payments due on the Preferred Securities. See "Effect of Obligations Under the Subordinated Debentures and the Trust Guarantee" herein and "Description of Trust Guarantee." If the Company does not make principal or interest payments on the Subordinated Debentures as a result of the Company's election to extend the interest payment period on the Subordinated Debentures as described below, or otherwise, the Trust will not have sufficient funds to make distributions on the Preferred Securities, in which event the Trust Guarantee will not apply to such distributions until the Company has made such principal or interest payments. The obligations of the Company under the Subordinated Debentures are unsecured and will be subordinate and junior in right of payment, to the extent set forth herein, to all existing and future Senior Indebtedness (as defined herein) of the Company and will be structurally subordinated to all existing and future liabilities and obligations of the Company's subsidiaries. At June 30, 1996, the aggregate amount of Senior Indebtedness and liabilities and obligations of the Company's subsidiaries that would have effectively ranked senior to the Subordinated Debentures was approximately $13.4 billion. The Company has the right to defer payments of interest on the Subordinated Debentures by extending the interest payment period on the Subordinated Debentures, from time to time, for up to 20 consecutive quarters (each, an "Extension Period") provided that no Extension Period may extend beyond the Maturity Date (as defined herein). If interest payments are so deferred, distributions on the Preferred Securities will also be deferred. During any Extension Period, distributions will continue to accrue with interest thereon (to the extent permitted by applicable law) at an annual rate of % per annum compounded quarterly, and during any Extension Period, holders of Preferred Securities will be required to include deferred interest income in their gross income for United States federal income tax purposes in advance of receipt of the cash distributions with respect to such deferred interest payments. There could be multiple Extension Periods of varying lengths throughout the term of the Subordinated Debentures. See "Risk Factors -- Option to Extend Interest Payment Period or Change Maturity Date," "Risk Factors -- Tax Consequences of Extension of Interest Payment Period," "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period," and "United States Federal Income Taxation -- Interest Income and Original Issue Discount." (Continued on next page) 2 4 (continued from previous page) The Subordinated Debentures are redeemable prior to maturity at the option of the Company (i) in whole or in part, from time to time, on or after , 2001, or (ii) at any time in whole (but not in part) upon the occurrence and continuation of a Special Event (as defined herein). If the Company redeems Subordinated Debentures, the Trust must redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debentures so redeemed at $25 per Preferred Security plus accrued and unpaid distributions thereon to the date fixed for redemption (the "Redemption Price"). See "Description of the Preferred Securities -- Mandatory Redemption." The outstanding Preferred Securities will be redeemed upon maturity of the Subordinated Debentures. The Subordinated Debentures mature on , 2026, which date may be extended at any time at the election of the Company, but in no event to a date later than the earlier of (i) , 2045 or (ii) the "Interest Deduction Date" (as hereinafter defined under "Description of the Subordinated Debentures -- Option to Change Scheduled Maturity Date"), provided certain financial conditions are met, and may be shortened to a date not earlier than , 2001 if the Company exercises its right to liquidate the Trust and distribute the Subordinated Debentures. See "Description of the Subordinated Debentures -- Option to Change Scheduled Maturity Date." At any time, the Company will have the right to liquidate the Trust and cause the Subordinated Debentures to be distributed to the holders of the Trust Securities in liquidation of the Trust. If the Company elects to liquidate the Trust and thereby causes the Subordinated Debentures to be distributed to holders of the Trust Securities in liquidation of the Trust, the Company shall have the right to shorten the maturity of such Subordinated Debentures, to a date not earlier than , 2001, or extend the maturity of such Subordinated Debentures to a date not later than the earlier of (i) , 2045 or (ii) the Interest Deduction Date, provided that it can extend the maturity only if certain conditions are met. If the Subordinated Debentures are distributed to the holders of the Preferred Securities, the Company will use its best efforts to have the Subordinated Debentures listed on the NYSE or on such other exchange as the Preferred Securities are then listed. See "Description of the Preferred Securities -- Distribution of the Subordinated Debentures." In the event of the involuntary or voluntary liquidation, dissolution, winding up or termination of the Trust, the holders of the Preferred Securities will be entitled to receive for each Preferred Security a liquidation amount of $25 plus accrued and unpaid distributions thereon (including interest thereon) to the date of payment, unless, in connection with such dissolution, the Subordinated Debentures are distributed to the holders of the Preferred Securities. See "Description of the Preferred Securities -- Liquidation Distribution Upon Dissolution." ------------------------ FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA (THE "NORTH CAROLINA INSURANCE COMMISSIONER") NOR HAS THE NORTH CAROLINA INSURANCE COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 3 5 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files periodic reports, proxy and information statements and other information with the Securities and Exchange Commission (the "Commission"). The Company and the Trust have filed a Registration Statement on Form S-3 (the "Registration Statement") with the Commission under the Securities Act of 1933 (the "Securities Act") with respect to the Securities. This Prospectus does not contain all the information, exhibits and undertakings contained in the Registration Statement, to which reference is hereby made. Statements contained in this Prospectus as to the terms of any contract or other document are not necessarily complete with respect to each such contract or other document filed as an exhibit to the Registration Statement. Reference is made to the exhibits for a more complete description of the matter involved. Such reports, proxy and information statements, the Registration Statement and other information filed with the Commission by AFG may be inspected at and obtained from the Commission at its public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Suite 1400, 500 West Madison Avenue, Chicago, Illinois, and at 7 World Trade Center, 13th Floor, New York, New York. Copies of such material can also be obtained, at prescribed rates, by mail from the Public Reference Section of the Commission at its Washington, D.C. address set forth above. In addition, material filed by the Company can be obtained and inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005 on which AFG's Common Stock is listed. Such material may also be accessed electronically by means of the Commission's home page on the World Wide Web located at http://www.sec.gov. No separate financial statements of the Trust have been included or incorporated by reference herein. The Company does not believe such financial statements would be material to holders of the Preferred Securities because (i) all of the voting securities of the Trust will be owned, directly or indirectly, by the Company, a reporting company under the Exchange Act, (ii) the Trust has no independent operations but exists for the sole purpose of issuing securities representing undivided beneficial interests in its assets and investing the proceeds thereof in Subordinated Debentures issued by the Company, and (iii) the obligations of the Trust under the Preferred Securities are, to the extent that the Trust shall have funds available to meet such obligations, fully and unconditionally guaranteed by the Company. See "Description of Preferred Securities" and "Description of Trust Guarantees." INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE THIS PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS RELATING TO THE COMPANY WHICH ARE NOT DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN THE EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, ON ORAL OR WRITTEN REQUEST BY ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED. Written or telephone requests should be directed to Fred J. Runk, Senior Vice President and Treasurer, One East Fourth Street, Cincinnati, Ohio 45202, telephone (513) 579-2488. The following documents, which have been filed by the Company with the Commission, are hereby incorporated by reference in this Prospectus: American Financial Group, Inc. (File No. 1-11453): (i) Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (ii) Quarterly Reports on Form 10-Q for the periods ended March 31, 1996 4 6 and June 30, 1996; and (iii) Current Reports on Form 8-K dated February 12, 1996 and September 20, 1996. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this Offering shall be deemed to be incorporated by reference in this Prospectus and to be a part of this Prospectus from the date of filing thereof. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. 5 7 PROSPECTUS SUMMARY This summary is qualified by the more detailed information and financial statements appearing elsewhere, or incorporated by reference, in this Prospectus. Unless otherwise noted, the material set forth herein does not give effect to the exercise of the Underwriters' over-allotment option. THE COMPANY American Financial Group, Inc. ("AFG" or the "Company") is a holding company which, through its subsidiaries, is engaged primarily in specialty and multi-line property and casualty insurance businesses and in the sale of tax-deferred annuities and life and health insurance. AFG's property and casualty operations originated in 1872 and are the seventeenth largest property and casualty group in the United States based on 1995 statutory net premiums written of $3.1 billion. AFG was formed through the combination of American Premier Underwriters, Inc. ("APU") and American Financial Corporation ("AFC") in a merger transaction completed in April 1995 (the "Merger"). At June 30, 1996, the Company had total assets of $14.8 billion and shareholders' equity of $1.4 billion. THE TRUST The Trust is a statutory business trust formed under Delaware law pursuant to (i) a declaration of trust, as amended (the "Declaration"), executed by the Company as sponsor for such trust (the "Sponsor"), and the Trustees (as defined herein) of such trust and (ii) the filing of a certificate of trust with the Secretary of State of the State of Delaware on September 13, 1996. The Trust exists for the exclusive purposes of (i) issuing and selling the Preferred Securities and Common Securities (ii) using the gross proceeds from the sale of the Trust Securities to acquire the Subordinated Debentures and (iii) engaging in only those other activities necessary, appropriate or incidental thereto. All of the Common Securities will be directly or indirectly owned by the Company. The Common Securities will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities, except that, if a Declaration Event of Default (as defined herein) has occurred and is continuing, the rights of the holders of the Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. The Company will directly or indirectly acquire Common Securities in an aggregate liquidation amount equal to at least 3% of the total capital of the Trust. The Trust's affairs will be conducted by the trustees (the "Trustees") appointed by the Company as the direct or indirect holder of all of the Common Securities. The holder of the Common Securities will be entitled to appoint, remove or replace any of, or increase or reduce the number of, the Trustees. The duties and obligations of the Trustees shall be governed by the Declaration. The Trust will initially have four Trustees. Two Trustees (the "Regular Trustees") will be employees or officers of or otherwise affiliated with the Company. The third Trustee (the "Property Trustee") of the Trust will be a financial institution that is not affiliated with the Company and has a minimum amount of combined capital and surplus of not less than $50,000,000, which shall act as property trustee and as indenture trustee for the purposes of compliance with the provisions of Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The fourth Trustee of the Trust will be an entity having a principal place of business in, or a natural person resident of, the State of Delaware (the "Delaware Trustee"). The Company will pay all fees and expenses related to the Trust and the offering of the Trust Securities. The Property Trustee for the Trust is The Bank of New York and its principal corporate trust office is at 101 Barclay Street, 21st Floor, New York, New York 10286, Attention: Corporate Trust Trustee Administration. The Delaware Trustee for the Trust is The Bank of New York (Delaware) and its address in the State of Delaware is 23 White Clay Center, Route 273, Newark, Delaware 19711. The Delaware Trustee is an affiliate of the Property Trustee. The address for the Trust is c/o American Financial Group, Inc., the Sponsor of the Trust, at the Company's corporate headquarters located at One East Fourth Street, Cincinnati, Ohio 45202, telephone (513) 579-2121. 6 8 THE OFFERING Preferred Securities Offered. 4,000,000 % Trust Originated Preferred Securities evidencing preferred undivided beneficial interests in the assets of the Trust. Holders of the Preferred Securities will be entitled to receive cumulative cash distributions at an annual rate of % of the liquidation amount of $25 per Preferred Security, accruing from the date of original issuance and payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year commencing on January 15, 1997. The distribution rate and the distribution and other payment dates for the Preferred Securities will correspond to the interest rate and interest and other payment dates on the Subordinated Debentures, which, along with interest and principal payments received on the Subordinated Debentures, will be the only assets of the Trust. As a result, if principal or interest is not paid on the Subordinated Debentures, no amounts will be paid on the Preferred Securities. See "Risk Factors -- Ranking of Subordinate Obligations Under Trust Guarantee and Subordinated Debentures" and "Description of the Preferred Securities." Subordinated Debentures. The Trust will invest the proceeds from the issuance of the Preferred Securities and Common Securities in an equivalent amount of % Subordinated Debentures of the Company. The Subordinated Debentures will rank subordinate and junior in right of payment to all Senior Indebtedness of AFG. In addition, AFG's obligations under the Subordinated Debentures will be structurally subordinated to all existing and future liabilities and preferred stock obligations of its subsidiaries. See "Description of the Subordinated Debentures -- Subordination." Guarantee. Payment of distributions out of moneys held by the Trust, and payments on liquidation of the Trust or the redemption of Preferred Securities, are guaranteed by AFG to the extent the Trust has funds available therefor. If the Company does not make principal or interest payments on the Subordinated Debentures, the Trust will not have sufficient funds to make distributions on the Preferred Securities, in which event the guarantee shall not apply to such distribution until the Trust has sufficient funds available therefor. See "Description of Trust Guarantee" and "Effect of Obligations Under the Subordinated Debentures and the Trust Guarantee." The obligations of AFG under the Trust Guarantee are subordinate and junior in right of payment to all other liabilities of AFG. See "Risk Factors -- Holding Company Structure; Ranking of Subordinate Obligations Under the Guarantee and Subordinated Debentures" and "Description of Trust Guarantee." Right to Defer Interest. The Company has the right to defer payments of interest on the Subordinated Debentures by extending the interest payment period on the Subordinated Debentures, from time to time, for up to 20 consecutive quarters. If interest payments on the Subordinated Debentures are so deferred, distributions on the Preferred Securities will also be deferred. During any Extension Period, distributions will continue to accrue with interest thereon (to the extent permitted by applicable usury or similar law) as described herein. There could be multiple Extension Periods of varying lengths throughout the term of the Subordinated Debentures. During an Extension Period, holders of Preferred Securities will be required to include deferred interest income allocated to their Preferred Securities in their gross income (as Original Issue Discount ("OID")) even though the cash payments attributable thereto have not been made. See "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period" and "United States Federal Income Taxation -- Interest Income and Original Issue Discount." Redemption. The Subordinated Debentures are redeemable by the Company (in whole or, from time to time, in part) on or after , 2001, or at any time, in whole but not in part, upon the occurrence of a Special Event. If the Subordinated Debentures are redeemed, the Trust must redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debentures so redeemed. The Trust Securities will be redeemed upon maturity of the Subordinated Debentures. See "Description of the Preferred Securities -- Mandatory Redemption" and "-- Special Event Redemption." Option to Extend Maturity. The Subordinated Debentures mature on , 2026, but the maturity may be extended once only for up to an additional 19 years, provided certain financial covenants and conditions are met. If the maturity of the Subordinated Debentures is extended, the Preferred Securities will remain outstanding for the same time period. See "Description of the Subordinated Debentures -- Option to Change Scheduled Maturity Date." 7 9 Right to Liquidate the Trust. At any time, the Company will have the right to liquidate the Trust and cause the Subordinated Debentures to be distributed to the holders of the Trust Securities in liquidation of the Trust. If the Company elects to liquidate the Trust and thereby causes the Subordinated Debentures to be distributed to holders of the Trust Securities in liquidation of the Trust, the Company shall have the right to shorten the maturity of such Subordinated Debentures, to a date not earlier than , 2001, or extend the maturity of such Subordinated Debentures to a date not later than the earlier of (i) , 2045 or (ii) the Interest Deduction Date, provided that it can extend the maturity only if certain conditions are met. If the Subordinated Debentures are distributed to the holders of the Preferred Securities, the Company will use its best efforts to have the Subordinated Debentures listed on the NYSE or on such other exchange as the Preferred Securities are then listed. See "Description of the Preferred Securities -- Distribution of the Subordinated Debentures." Use Of Proceeds. The proceeds from the sale of Preferred Securities by the Trust will be invested in the Subordinated Debentures of the Company. The Company expects to use a portion of the net proceeds from the sale of such Subordinated Debentures to the Trust to retire $50 million of outstanding debt of subsidiaries and the remainder for general corporate purposes, which may include the retirement of additional fixed rate securities of Company subsidiaries and investment in insurance businesses. Until the net proceeds are used for these purposes, the Company will deposit them in interest-bearing accounts or invest them in short-term marketable securities. Offering by Subsidiary. American Annuity Group, Inc., an 81% owned subsidiary of the Company ("AAG") is planning an offering of up to $75 million of trust originated preferred securities similar to those being offered by the Company. This Offering is not conditioned on the offering by the trust to be established by a wholly-owned subsidiary of AAG. See "Capitalization." Ratings of Securities. The Preferred Securities have been assigned a rating of "BBB-" by Standard & Poor's Ratings Group, a division of McGraw-Hill ("S&P"). The Company has also sought a rating from Moody's Investors Service, Inc. ("Moody's"). An explanation of the significance of ratings may be obtained from S&P and Moody's. Generally, rating agencies base their ratings on such material and information and such of their own investigations, studies and assumptions as they deem appropriate. A credit rating of a security is not a recommendation to buy, sell or hold securities. There is no assurance that any rating will apply for any given period of time or that a rating may not be adjusted or withdrawn. RECENT DEVELOPMENTS On September 20, 1996, the Company announced in a news release the following three third quarter actions which will result in a significant net gain to be recorded in the quarter. Citicasters Gain. AFG reported that its subsidiaries had received approximately $220 million in gross cash proceeds and expect to realize a pretax gain of approximately $160 million from the closing of the merger involving Jacor Communications, Inc. and Citicasters Inc. on September 18, 1996. In the merger, each Citicasters shareholder, including AFG's subsidiaries, received $29.50 per share in cash plus warrants to purchase Jacor common stock. See "The Company -- Investments." Reserve Strengthening. AFG also reported that it had decided to strengthen its insurance reserves relating to asbestos and other environmental matters ("A&E"). Based upon recent insurance industry studies of A&E exposure and revised standards for reserving such claims, AFG has determined that an increase of its A&E reserves is appropriate. AFG estimates that its reserves for A&E at September 30, 1996 will be about $340 million, an amount expected to be approximately 11 times the preceding three years' average claim payments. This action with respect to A&E reserves will result in a third quarter, non-cash, pretax charge of approximately $80 million. See "Risk Factors -- Adequacy of Insurance Loss Reserves." Hurricane Fran. While it is too soon to report the ultimate loss, AFG estimated that its loss from Hurricane Fran will be between $30 million and $40 million, net of reinsurance. However, third quarter underwriting results, aside from Hurricane Fran, are expected to be improved from the second quarter. See "Risk Factors -- Cyclicality of the Insurance Industry; Impact of Catastrophes." 8 10 SUMMARY FINANCIAL INFORMATION (UNAUDITED) The summary pro forma financial information set forth below gives effect to (i) the Merger assuming it was consummated on January 1, 1995 for purposes of the income statement data and (ii) the AFG Offering and the offering being planned by AAG for purposes of the balance sheet data. The pro forma effect of the Offering on AFG's net earnings is not expected to be material. This information should be read in conjunction with the separate historical financial statements and related Management's Discussion and Analysis of Financial Condition and Results of Operations of AFG, which are incorporated herein by reference. The pro forma financial information does not necessarily reflect the Company's results of operations which would have actually resulted had the Merger occurred as of the dates indicated above, nor should it be taken as indicative of the future results of operations of the Company.
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER ------------------------ 31, 1995 1995 1996 PRO FORMA PRO FORMA HISTORICAL FOR MERGER FOR MERGER ---------- ---------- ----------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Property and casualty premiums......................... $1,443.8 $1,484.7 $ 3,030.6 Total revenues......................................... 2,063.7 1,978.2 4,048.7 Property and casualty loss, loss adjustment and underwriting expense and policyholder dividends...... 1,448.4 1,526.0 3,064.7 Interest on borrowed money............................. 43.4 60.3 116.3 Earnings from continuing operations before income taxes................................................ 204.8 115.6 280.1 Net earnings from continuing operations (a)............ 122.0 86.3 216.5 Net earnings per common share from continuing operations(a)........................................ $ 2.01 $ 1.65 $ 4.03
- --------------- (a) Includes gains and losses on sales of investments. Management believes that reported results which include these transactions are not indicative of future results of operations. Excluding these transactions, pro forma earnings from continuing operations were as follows (in millions, except per share amounts).
SIX MONTHS ENDED JUNE YEAR ENDED 30, DECEMBER ----------------------- 31, 1996 1995 1995 ---------- --------- ----------- Net earnings from continuing operations............ $108.0 $ 75.9 $ 146.3 Net earnings per common share from continuing operations............................ $ 1.78 $ 1.44 $ 2.72
JUNE 30, 1996 ------------------------------------------ ADJUSTED PRO FORMA HISTORICAL FOR OFFERING HISTORICAL (B) (C) ---------- ----------- ------------- (DOLLARS IN MILLIONS) BALANCE SHEET DATA: Total assets......................................... $14,820.9 $14,958.4 $15,030.5 Long-term debt....................................... 678.0 665.3 565.3 Minority interest.................................... 301.9 307.9 307.9 Preferred securities of trust subsidiaries........... -- -- 175.0 Shareholders' equity................................. 1,395.5 1,539.7 1,536.8 Long-term debt as a percentage of total capitalization..................................... 21.9 % 26.5% 21.9%
- --------------- (b) Adjusted to reflect the retirement of $12.7 million in debt during July and August 1996, and a net gain of approximately $145 million on AFG's sale of Citicasters Inc. in September 1996. (c) Assumes $52.9 million of the proceeds from this Offering are used to retire $50 million of AFC debt and $50 million of the proceeds from AAG's planned sale of $75 million of Trust Originated Preferred Securities are used to retire its debt and the balance of proceeds from the offerings are used for general corporate purposes. See "Capitalization." 9 11 RISK FACTORS Prospective purchasers of Preferred Securities should consider carefully all of the information contained in this Prospectus including the information in the documents incorporated by reference and, in particular, should evaluate the specific factors set forth below for risks involved with an investment of the Preferred Securities. RANKING OF SUBORDINATE OBLIGATIONS UNDER THE TRUST GUARANTEE AND SUBORDINATED DEBENTURES The Company's obligations under the Trust Guarantee are unsecured and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company except those made pari passu or subordinate by their terms, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company, and with any guarantee now or hereafter issued by the Company in respect of any preferred stock or preference stock of any affiliate of the Company, and (iii) senior to the Company's common stock. The obligations of the Company under the Subordinated Debentures are unsecured and will rank subordinate and junior in right of payment, to the extent set forth herein, to all present and future Senior Indebtedness of the Company and will be structurally subordinated to all existing and future liabilities and obligations of the Company's subsidiaries. The obligations of the Company under the Subordinated Debentures will at all times be senior to common and preferred equity of the Company. At June 30, 1996, the aggregate amount of Senior Indebtedness and liabilities and obligations of the Company's subsidiaries that would have effectively ranked senior to the Subordinated Debentures was approximately $13.4 billion. There are no terms in the Preferred Securities, the Subordinated Debentures or the Trust Guarantee that limit the ability of the Company or any of its subsidiaries to incur additional indebtedness, liabilities or obligations, including indebtedness, liabilities or obligations that rank senior to the Subordinated Debentures and the Trust Guarantee. See "Description of Trust Guarantee -- Status of the Trust Guarantee" and "Description of the Subordinated Debentures -- Subordination." ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES If a Declaration Event of Default (as defined herein) occurs and is continuing, then the holders of Preferred Securities would rely on the enforcement by the Property Trustee of its rights as a holder of the Subordinated Debentures against the Company. The holders of a majority in liquidation amount of the Preferred Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee or to direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee to exercise the remedies available to it as a holder of the Subordinated Debentures. If the Property Trustee fails to enforce its rights with respect to the Subordinated Debentures held by the Trust, any record holder of Preferred Securities may institute legal proceedings directly against the Company to enforce the Property Trustee's rights under such Subordinated Debentures without first instituting any legal proceedings against such Property Trustee or any other person or entity. In addition, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest, principal or other required payments on the Subordinated Debentures issued to the Trust on the date such interest, principal or other payment is otherwise payable, then a record holder of Preferred Securities may institute a proceeding directly against the Company for enforcement of payment of the Subordinated Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities held by such holder (a "Direct Action") on or after the respective due dates specified in the Subordinated Debentures. In connection with such Direct Action, the Company will be subrogated to the rights of such record holder of Preferred Securities to the extent of any payment made by the Company to such record holder of Preferred Securities. The record holder in the case of the issuance of one or more global Preferred Securities certificates will be The Depository Trust Company acting at the direction of the beneficial owners of the Preferred Securities. The holders of Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Subordinated Debentures unless the Property Trustee fails to do so. See "Description of the Preferred Securities -- Declaration Events of Default" and "Description of the Subordinated Debentures -- Indenture Events of Default." 10 12 TRUST DISTRIBUTIONS DEPENDENT ON THE COMPANY'S PAYMENTS ON SUBORDINATED DEBENTURES The Trust's ability to make distributions and other payments on the Preferred Securities is entirely dependent upon the Company making interest and other payments on the Subordinated Debentures. If the Company were not to make payments on the Subordinated Debentures for any reason, including as a result of the Company's election to defer the payment of interest on the Subordinated Debentures by extending the interest payment period on the Subordinated Debentures, the Trust will not make payments on the Trust Securities. In such an event, holders of the Preferred Securities would not be able to rely on the Trust Guarantee because distributions and other payments on the Preferred Securities are subject to such Trust Guarantee only if and to the extent that the Trust has funds available therefor. See "Description of Trust Guarantee -- General" and "Effect of Obligations Under the Subordinated Debentures and the Trust Guarantee." OPTION TO EXTEND INTEREST PAYMENT PERIOD OR CHANGE MATURITY DATE The Company has the right under the Indenture to (a) defer payments of interest on the Subordinated Debentures by extending the interest payment period at any time, and from time to time, on the Subordinated Debentures or (b) extend or shorten the maturity date of the Subordinated Debentures. See "Description of the Subordinated Debentures -- Option to Change Scheduled Maturity Date" and "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." As a consequence of an extension of the interest payment period, quarterly distributions on the Preferred Securities would be deferred (but despite such deferral, to the extent permitted by law, would continue to accrue with interest thereon compounded quarterly) by the Trust during any such Extension Period. The Company has the right to defer payments of interest on the Subordinated Debentures, from time to time, but no Extension Period may be more than 20 consecutive quarters or extend beyond the Maturity Date (as defined herein) of the Subordinated Debentures. There could be multiple Extension Periods of varying lengths during the term of the Subordinated Debentures. In the event that the Company exercises this right to defer interest payments, then, prior to the payment of all accrued interest on outstanding Subordinated Debentures, (a) the Company shall not declare or pay dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock and (b) the Company shall not, directly or indirectly, and will not allow any of its subsidiaries to, make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to the Subordinated Debentures; provided, however, that the restriction in clause (a) above does not apply to any stock dividends paid by the Company where the dividend stock is the same stock as that on which the dividend is being paid. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period; provided that each Extension Period, if any, may not exceed 20 consecutive quarters or extend beyond the Maturity Date of the Subordinated Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. Consequently, there could be multiple Extension Periods of varying lengths prior to the Maturity Date of the Subordinated Debentures. The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Subordinated Debentures. However, should the Company determine to exercise such right in the future, the market price of the Preferred Securities is likely to be adversely affected. See "Description of the Preferred Securities -- Distributions" and "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." TAX CONSEQUENCES OF EXTENSION OF INTEREST PAYMENT PERIOD Should the Company exercise its right to defer payments of interest by extending the interest payment period, each holder of Preferred Securities will accrue income (as original issue discount ("OID")) in respect of the deferred interest allocable to its Preferred Securities for United States federal income tax purposes. Such income will be allocated but not distributed to holders of the Preferred Securities. As a result, each such holder of the Preferred Securities will recognize income for United States federal income tax purposes in advance of the receipt of cash and will not receive the cash from the Trust related to such income if such holder disposes of its Preferred Securities prior to the record date for the date on which distributions of such 11 13 amounts are made. A holder that disposes of its Preferred Securities during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its Preferred Securities. In addition, as a result of the existence of the Company's right to defer interest payments, the market price of the Preferred Securities (which represent an undivided beneficial interest in the Subordinated Debentures) may be more volatile than other securities that do not have such feature. See "United States Federal Income Taxation -- Interest Income and Original Issue Discount." SPECIAL EVENT REDEMPTION Upon the occurrence of a Special Event, the Company will have the right to redeem the Subordinated Debentures, in whole (but not in part), in which event the Trust will redeem all outstanding Trust Securities. See "Description of the Preferred Securities -- Special Event Redemption." DISTRIBUTION OF THE SUBORDINATED DEBENTURES At any time, the Company will have the right to terminate the Trust and, after satisfaction of the liabilities to creditors of the Trust as provided by applicable law, cause the Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of the Trust. Under current United States federal income tax law and interpretation and assuming, as expected, the Trust is treated as a grantor trust, a distribution of the Subordinated Debentures should not be a taxable event to holders of the Preferred Securities. Should there be a change in law, a change in legal interpretation, a Special Event or other circumstances, however, the distribution could be a taxable event to the holders of the Preferred Securities. In addition, a dissolution of the Trust in which holders of the Preferred Securities receive cash would be a taxable event to such holders. See "United States Federal Income Taxation -- Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust." If the Company elects to liquidate the Trust and thereby causes the Subordinated Debentures to be distributed to holders of the Preferred Securities in liquidation of the Trust, the Company shall have the right to shorten the maturity of such Subordinated Debentures to a date not earlier than , 2001 or extend the maturity of such Subordinated Debentures to a date which is not later than the earlier of (i) , 2045 or (ii) the Interest Deduction Date, provided that it can extend the maturity only if certain conditions are met. See "Description of the Subordinated Debentures -- Option to Change Scheduled Maturity Date." There can be no assurance as to the market prices for the Preferred Securities or the Subordinated Debentures that may be distributed in exchange for Preferred Securities if a dissolution or liquidation of the Trust were to occur. Accordingly, the Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Subordinated Debentures that a holder of Preferred Securities may receive on dissolution and liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. In addition, because the Company has the right to shorten or extend the maturity of the Subordinated Debentures upon the termination of the Trust and the distribution of the Subordinated Debentures to the holders of the Preferred Securities, there can be no assurance that the Company will not exercise its option to change the maturity of the Subordinated Debentures upon such an event. Because holders of Preferred Securities may receive Subordinated Debentures upon any election by the Company to liquidate the Trust and cause the Subordinated Debentures to be distributed to the holders of the Preferred Securities, prospective purchasers of Preferred Securities are also making an investment decision with regard to the Subordinated Debentures and should review carefully all the information regarding the Subordinated Debentures and the Company contained herein and in the accompanying Prospectus. See "Description of the Preferred Securities -- Distribution of the Subordinated Debentures" and "Description of the Subordinated Debentures." PROPOSED TAX LAW CHANGES On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the revenue portion of President Clinton's fiscal 1997 budget proposal, was released. The Bill would, among other things, generally 12 14 deny interest deductions for interest or OID on an instrument issued by a corporation that has a maximum weighted average maturity of more than 40 years. The Bill would also treat as equity, instruments issued by a corporation that have a maximum term of more than 20 years and that are not shown as indebtedness on the consolidated balance sheet of the issuer. For purposes of determining the weighted average maturity or the term of an instrument, any right to extend would be treated as exercised. The above-described provisions of the Bill were proposed to be effective generally for instruments issued on or after December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees issued a joint statement (the "Joint Statement") to the effect that it was their intention that the effective date of the President's legislative proposals, if adopted, would be no earlier than the date of appropriate Congressional action. In addition, subsequent to the publication of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury Department officials concurring with the views expressed in the Joint Statement. Under current law, it is likely that the Subordinated Debentures will be treated as indebtedness of the Company and the Company will be able to deduct interest on the Subordinated Debentures beneficially held by the holders of the Preferred Securities. The terms of the Subordinated Debentures limit the Company's right to extend the maturity of the Subordinated Debentures to a date which is six months shorter than any legislative limit on the length of debt securities for which interest is deductible. Based on the advice of tax counsel, the Company believes this will allow it an interest deduction if the 40-year weighted average maturity component of the Bill is enacted. However, if the provision of the Bill regarding a 20-year term is enacted with retroactive effect with regard to the Subordinated Debentures, the Company will not be entitled to an interest deduction with respect to the Subordinated Debentures. There can be no assurance that current or future legislative proposals, adverse judicial decisions, final legislation or official administrative pronouncements will not affect the ability of the Company to deduct interest on the Subordinated Debentures, giving rise to a Tax Event (as defined below) which would permit the Company to cause the redemption of the Preferred Securities prior to , 2001 (the first date on which the Company would otherwise be able to cause a redemption of the Preferred Securities). See "Description of the Preferred Securities -- Special Event Redemption" and "United States Federal Income Taxation." PREPAYMENT CONSIDERATIONS; OPTION TO CHANGE SCHEDULED MATURITY DATE At the option of the Company, the Subordinated Debentures may be redeemed, in whole or in part, at any time on or after , 2001, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest to the redemption date. See "Description of the Subordinated Debentures -- Optional Redemption." Investors in the Preferred Securities should assume that the Company will exercise its redemption option if the Company is able to refinance at a lower interest rate or it is otherwise in the interest of the Company to redeem the Subordinated Debentures. If Subordinated Debentures are redeemed, the Trust must redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of Subordinated Debentures so redeemed. See "Description of the Preferred Securities -- Mandatory Redemption." The Company also has the option to extend the maturity date of the Subordinated Debentures for one or more periods, but in no event to a date later than the earlier of (i) , 2045 or (ii) the Interest Deduction Date, provided certain financial conditions are met. See "Description of the Subordinated Debentures -- Option to Change Scheduled Maturity Date." Investors in the Preferred Securities should assume that the Company will exercise its option to extend the term if the Company is unable to refinance at a lower interest rate or it is otherwise in the interest of the Company to defer the maturity of the Subordinated Debentures. The Preferred Securities will not be redeemed until the Subordinated Debentures have been repaid or redeemed. See "Description of the Preferred Securities -- Mandatory Redemption." 13 15 LIMITED VOTING RIGHTS Holders of Preferred Securities will have only limited voting rights, primarily in connection with directing the activities of the Property Trustee as the holder of the Subordinated Debentures. Such holders will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, the Trustees (as defined herein). Voting rights with respect to Trustee matters are vested exclusively in the holder of the Common Securities. See "Description of the Preferred Securities -- Voting Rights." TRADING PRICE The Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Subordinated Debentures. If the Company exercises its right to defer payments of interest, a holder who disposes of Preferred Securities between record dates for payments of distributions thereon will be required to include as ordinary income OID on the Subordinated Debentures accrued through the date of disposition, and to add such amount to its adjusted tax basis in its pro rata share of the underlying Subordinated Debentures deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include, in the form of OID, all accrued but unpaid interest), a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. Accrual basis taxpayers would be subjected to similar treatment without regard to the Company's election to defer. See "United States Federal Income Taxation -- Interest Income and Original Issue Discount" and "United States Federal Income Taxation -- Sales of Preferred Securities." ABSENCE OF PUBLIC MARKET FOR SECURITIES Since the Preferred Securities will be newly issued, there is no current market for them. The Company has applied for listing of the Preferred Securities on the NYSE, but there can be no assurance that the applicable listing requirements of any such exchange will be met. There can be no assurance that there will be an active trading market for the Preferred Securities. HOLDING COMPANY STRUCTURE; DIVIDEND RESTRICTIONS The Company and two of its direct subsidiaries, APU and AFC, are organized as holding companies with almost all of their operations being conducted by subsidiaries. These parent corporations, however, have continuing expenditures for administrative expenses, corporate services, the payment of principal and interest on borrowings and, with respect to AFC, for dividends on AFC preferred stock. The Company, AFC and APU rely primarily on dividends and tax payments from their subsidiaries for funds to meet their obligations. Payments of dividends by the insurance subsidiaries of AFC and APU are subject to various laws and regulations which limit the amount of dividends that can be paid without prior approval from the applicable state Department of Insurance. In June 1996, AFC received a dividend from GAI of $120 million. Without prior Department of Insurance approval, no additional dividends may be paid by GAI during 1996. The maximum dividend that can be paid in 1996 by insurance subsidiaries of APU is approximately $80 million of which $4 million was paid through June 30, 1996. The maximum dividend permitted by law is not necessarily indicative of an insurer's actual ability to pay dividends, which may be further affected by business and regulatory considerations, such as the impact of dividends on surplus, which could affect an insurer's ratings, competitive position, the amount of premiums that can be written and the ability to pay future dividends. Furthermore, each state Department of Insurance has broad discretion to limit the payment of dividends by insurance companies domiciled in that state. The Company believes that the amounts currently available through dividends and tax payments without approval are sufficient to meet the expenses of the Company, AFC and APU, including the interest the Company will pay on the Subordinated Debentures. A prolonged material decline in insurance subsidiary profits or materially adverse insurance regulatory developments, however, could subject the Company, AFC or APU to shortages of cash because of their inability to receive dividends from subsidiaries. 14 16 CYCLICALITY OF THE INSURANCE INDUSTRY; IMPACT OF CATASTROPHES The Company's insurance subsidiaries operate in a highly competitive industry that is affected by many factors which can cause significant fluctuations in their results of operations. The Company's insurance operations are subject to operating cycles and losses from catastrophes. The property and casualty insurance industry has historically been subject to pricing cycles characterized by periods of intense competition and lower premium rates (a "downcycle") followed by periods of reduced competition, reduced underwriting capacity and higher premium rates (an "upcycle"). The property and casualty insurance industry is currently in an extended downcycle, which has lasted approximately nine years. The underwriting results for the Company's property and casualty operations have been adversely affected by this downcycle, particularly resulting in unfavorable pricing in certain standard commercial lines of business. As with other property and casualty insurers, the Company's operating results can be adversely affected by unpredictable catastrophe losses. The Company's insurance subsidiaries generally seek to reduce their exposure to such events through individual risk selection and the purchase of reinsurance. Major catastrophes in recent years have included Hurricane Fran in September 1996, hailstorms in Texas in the second quarter of 1995; the Northridge earthquake in Southern California and the winter storms in the South and Northeast in 1994; winter storms and flooding in the Midwest in 1993; Hurricanes Andrew and Iniki, Chicago flooding and Los Angeles civil disorder in 1992. Total net losses to the Company's insurance operations from catastrophes were $44 million during the first six months of 1996; $70 million in 1995; $56 million in 1994; $30 million in 1993; and $45 million in 1992. While it is too soon to determine the ultimate loss from Hurricane Fran, the Company estimates that its loss will be between $30 million and $40 million, net of reinsurance. REGULATION AFG's insurance subsidiaries are regulated under the insurance and insurance holding company laws of their states of domicile and other states in which they operate. These laws, in general, require approval of the particular insurance regulators prior to certain actions by the insurance companies, such as the payment of dividends in excess of statutory limitations (as discussed above under "Holding Company Structure; Dividend Restrictions") and certain transactions and continuing service arrangements with affiliates. Regulation and supervision of each insurance subsidiary is administered by a state insurance commissioner who has broad statutory powers with respect to the granting and revoking of licenses, approvals of premium rates, forms of insurance contracts and types and amounts of business which may be conducted in light of the policyholders' surplus of the particular company. The statutes of most states provide for the filing of premium rate schedules and other information with the insurance commissioner, either directly or through rating organizations. The commissioner generally has powers to disapprove such filings or make changes to the rates if they are found to be excessive, inadequate or unfairly discriminatory. The determination of rates is based on various factors, including loss and loss adjustment expense experience. The failure to obtain, or delay in obtaining, the required approvals could have an adverse impact on the operations of the Company's insurance subsidiaries. The National Association of Insurance Commissioners ("NAIC") has adopted the Risk Based Capital For Insurers Model Act (the "Model Act") which applies to both life and property and casualty companies. The risk-based capital formulas determine the amount of capital that an insurance company needs to ensure that it has an acceptably low expectation of becoming financially impaired. The Model Act provides for increasing levels of regulatory intervention as the ratio of an insurer's total adjusted capital and surplus decreases relative to its risk-based capital, culminating with mandatory control of the operations of the insurer by the domiciliary insurance department at the so-called "mandatory control level." The risk-based capital formulas became effective in 1993 for life companies and in 1994 for property and casualty companies. 15 17 RATINGS; COMPETITION A.M. Best, publisher of Best's Insurance Reports, Property-Casualty, has given AFC's principal insurance subsidiary, Great American Insurance Company ("GAI"), a rating of A (Excellent). Although some of the large insurance companies against which GAI competes have higher ratings, management believes that the current rating is adequate to enable GAI to compete successfully. A downgrade in the A.M. Best rating below A (Excellent) could adversely affect the competitive position of GAI. The four major operating units in the Company's Non-Standard Automobile Insurance Group ("NSA Group") are Atlanta Casualty Company ("Atlanta Casualty"), Windsor Insurance Company ("Windsor"), Infinity Insurance Company ("Infinity") and Leader National Insurance Company ("Leader National") and their respective subsidiaries. In November 1995, A.M. Best downgraded its ratings of Atlanta Casualty, Windsor and Republic Indemnity Company of America, an APU subsidiary which writes principally workers compensation insurance in California ("Republic Indemnity") from A+ (Superior) to A (Excellent) and affirmed its ratings of A (Excellent) for Infinity and A- (Excellent) for Leader National. In announcing the rating adjustments of these companies, A.M. Best expressed its opinion that each of these new ratings primarily reflects the significant financial leverage of AFG. A further downgrade in the A.M. Best rating for any of these companies could adversely affect the competitive position of such companies. Great American Life Insurance Company ("GALIC"), the principal insurance subsidiary of AAG, is rated A (Excellent). Management believes that a rating in the "A" category is necessary to market successfully tax-deferred annuities to public education employees and other not-for-profit groups, the markets in which GALIC competes. A downgrade in the A.M. Best rating below the "A" category could materially and adversely affect the competitive position of GALIC. American Memorial Life Insurance Company (formerly Prairie States Life Insurance Company) and Loyal American Life Insurance Company, which have recently become subsidiaries of GALIC, are rated B+ (Very Good) and A- (Excellent) by A.M. Best, respectively. A downgrade in the A.M. Best rating for either of these companies could adversely affect the competitive position of such companies. CALIFORNIA WORKERS' COMPENSATION MARKET Republic Indemnity's insurance activities are regulated by the California Department of Insurance for the benefit of policyholders. Prior to January 1, 1995, minimum premium rates for workers' compensation insurance were determined by the California Insurance Commissioner based in part upon recommendations of the Workers' Compensation Insurance Rating Bureau of California. In July 1993, California enacted legislation effecting an immediate overall 7% reduction in workers' compensation insurance premium rates and replaced the workers' compensation insurance minimum rate law, effective January 1, 1995, with a procedure permitting insurers to use any rate within 30 days after its filing with the California Insurance Commissioner unless the rate is disapproved by the California Insurance Commissioner. Since December 1, 1993 and before the "open rating" policy went into effect on January 1, 1995, the California Insurance Commissioner ordered rate decreases totaling more than 25%. Republic Indemnity's net written premiums declined 40% for 1995 and 30% during the first six months of 1996. Republic Indemnity has encountered extremely competitive pricing in the marketplace. Republic Indemnity has continued to operate on a profitable basis, but no assurance can be given that it can continue to do so in light of adverse conditions in the California workers' compensation market. INVESTMENT PORTFOLIO; EFFECTS OF CHANGES IN INTEREST RATES The Company's investment portfolio consists primarily of fixed maturity securities, such as investment grade, publicly traded corporate debt securities and mortgage-backed securities, including collateralized mortgage obligations ("CMOs"). At June 30, 1996, 94% of the Company's marketable securities was invested in fixed maturity securities, of which approximately 25% was invested in mortgage-backed securities. Certain risks are inherent in connection with fixed maturity securities, including loss upon default and price volatility in reaction to changes in interest rates and general market factors. Certain additional risks are inherent with 16 18 mortgage-backed securities, including the risks associated with reinvestment of proceeds due to prepayments of such obligations in a period of declining interest rates. ANNUITY PRODUCT CONCENTRATION; POTENTIAL IMPACT OF CHANGES IN FEDERAL INCOME TAX TREATMENT OF ANNUITY PRODUCTS GALIC's business is primarily the sale of flexible premium deferred annuities ("FPDAs") and single premium deferred annuities ("SPDAs"). The majority of the FPDAs issued by GALIC are to employees of qualified not-for-profit organizations under Section 403(b) of the Internal Revenue Code of 1986, as amended (the "Code"). These employees are eligible to save for retirement through tax deductible contributions. The majority of SPDAs issued by GALIC have resulted from rollovers of tax-deferred funds previously maintained by policyholders with other insurers. Current federal income tax laws generally permit the tax-deferred accumulation of earnings on the premiums paid by an annuitant. Taxes are payable on the accumulated tax-deferred earnings when those earnings are paid to the annuitant. If the federal income tax laws were to change so that accumulated earnings on annuity products do not enjoy the tax deferral described above, or such that other savings and investment products were to achieve similar tax deferral status, or such that tax rates were significantly lowered so that the annuitant's ability to deduct contributions and to defer income tax on annuity earnings were no longer significant factors for the policyholder, consumer demand for the affected annuity products could decline materially. From time to time, proposals to one or more of these effects have been made in Congress and no assurance can be given that a tax law change will not occur in the future. If the demand for its annuity products were to decrease significantly for any reason, GALIC's operations and financial condition could be materially and adversely affected. In August 1996, a new federal law became effective which expanded the ability of not-for-profit organizations to offer non-qualified deferred compensation plans to their employees. The full impact of this change is impossible to predict. However, if the increased availability of these plans reduces the demand for annuities qualified under Section 403(b) of the Code, the Company's business could be adversely affected. ADEQUACY OF INSURANCE LOSS RESERVES The insurance subsidiaries of AFG establish reserves to cover their estimated liability for losses and loss adjustment expense with respect to both reported and unreported claims as of the end of each accounting period. By their nature, such reserves do not represent an exact calculation of liabilities. Rather, except for reserves related to environmental and asbestos type claims, such reserves are estimates involving management's projections as to the ultimate settlement and administration of claims. These expectations are, in turn, based on facts and circumstances known at the time, predictions of future events, estimates of future trends in the severity and frequency of claims and judicial theories of liability as well as inflation. In recent years, AFG's insurance subsidiaries have increased their premium writings in specialty commercial lines of business. Estimation of loss reserves for many specialty commercial lines of business is more difficult than for certain standard commercial lines because claims may not become apparent for a number of years (such period of time being referred to as the "tail"). Consequently, in these specialty lines a higher proportion of ultimate losses is considered incurred but not reported, and fluctuations in loss development are more likely than in standard commercial lines of business. Certain of AFG's insurance subsidiaries face liabilities for asbestos and environmental claims arising out of general liability and commercial multi-peril policies issued by GAI prior to the early 1980's when providing coverage for such exposures was not specifically contemplated by GAI's policies ("A&E"). The insurance industry typically includes only claims relating to polluted waste sites and asbestos in defining environmental exposures. GAI extends its definition of A&E claims to include claims relating to breast implants, repetitive stress on keyboards, DES (a drug used in pregnancies years ago alleged to cause cancer and birth defects) and other latent injuries. 17 19 Establishing reserves for A&E claims is subject to uncertainties that are greater than those presented by other types of claims. Factors contributing to those uncertainties include a lack of sufficiently detailed historical data, long reporting delays, uncertainty as to the number and identity of insureds with potential exposure, unresolved legal issues regarding policy coverage and the extent and timing of any such contractual liability. Courts have reached different and sometimes inconsistent conclusions as to when a loss is deemed to have occurred, what policies provide coverage, what claims are covered, whether there is an insured obligation to defend, how policy limits are determined and other policy provisions. Management believes these issues are not likely to be resolved in the near future and that, as a result, a reasonable estimate of ultimate liability for A&E exposure is not possible at this time. GAI's A&E reserves (net of reinsurance recoverable) at December 31, 1995 were approximately $220 million. In September 1996, AFG reported that it had decided to strengthen its A&E reserves. Based upon recent insurance industry studies of A&E exposure and revised standards for reserving such claims, the Company has determined that an increase of its A&E reserves is appropriate. AFG estimates that its reserves for A&E at September 30, 1996 will be about $340 million, an amount expected to be approximately 11 times the preceding three years' average claim payments. This action with respect to A&E reserves will result in a third quarter, non-cash, pretax charge of approximately $80 million. AFG regularly reviews its reserving techniques and reserve positions and believes that adequate provision has been made for loss reserves. Nevertheless, there can be no assurance that currently established reserves will prove adequate in light of subsequent actual experience. Future earnings could be adversely impacted should future loss development require increases in reserves previously established for prior periods. REINSURANCE AFG relies to a certain extent on the use of reinsurance to limit the amount of risk it retains. The availability and cost of reinsurance are subject to prevailing market conditions which are beyond the Company's control and which may affect its level of business and profitability. AFG is subject to credit risk with respect to its reinsurers, as the ceding of risk to reinsurers does not relieve AFG of its liability to insureds. As of December 31, 1995, AFG had reinsurance recoverables of approximately $788 million, representing estimated amounts recoverable from reinsurers pertaining to paid and unpaid claims, claims incurred but not reported and prepaid reinsurance premiums. USX LITIGATION In May 1994, lawsuits were filed against APU by USX Corporation ("USX") and its former subsidiary, Bessemer and Lake Erie Railroad Company ("B&LE"), seeking contribution by APU, as the successor to the railroad business conducted by Penn Central Transportation Company, APU's predecessor ("PCTC") prior to 1976, for all or a portion of the approximately $600 million that USX paid in satisfaction of a judgment against B&LE in 1991 for its participation in an unlawful antitrust conspiracy among certain railroads commencing in the 1950's and continuing through the 1970's. The lawsuits argue that USX's liability for that payment was attributable to PCTC's alleged activities in furtherance of the conspiracy. APU argued that the lawsuits were barred by an order issued in connection with PCTC's 1978 bankruptcy reorganization. In May 1996, the U.S. Supreme Court declined to hear APU's petition with respect to the bankruptcy bar issue, thereby permitting USX's lawsuits to proceed. APU and its outside counsel continue to believe that APU has substantial defenses and should not suffer a material loss as a result of this litigation. CONCENTRATION OF CERTAIN EQUITY INVESTMENTS Because of its significant ownership percentage of the voting stock of Chiquita Brands International, Inc. ("Chiquita") and Citicasters Inc. ("Citicasters"), AFG utilizes the equity method of accounting for these companies. Under this method, AFG has included in its results its proportionate share of the investees' earnings and losses. At June 30, 1996, the carrying values of AFG's investments in Chiquita and Citicasters were $252.3 million and $75.5 million, respectively. In September 1996, the Company sold its entire 18 20 investment in Citicasters to Jacor Communications, Inc. ("Jacor") for approximately $222 million in cash and certain warrants to purchase Jacor common stock, resulting in a net gain of approximately $145 million. From 1984 to 1991, Chiquita reported a continuous record of growth in annual earnings. In 1992, 1993 and 1994, however, Chiquita reported net losses. In 1995, Chiquita reported net income of $9 million. The following factors relate to Chiquita's business. Approximately 60% of Chiquita's consolidated net sales comes from the sale of bananas. Banana marketing is highly competitive. Prices which sellers receive for bananas are significantly affected by fluctuations in the available supplies of bananas and other fresh fruit in each market and by the relative quality and wholesaler and retailer acceptance of bananas offered by competitors. Excess supplies may result in increased price competition. Although production of bananas tends to be relatively stable throughout the year, competition in the sale of bananas comes not only from bananas sold by others, but also from other fresh fruit which may be seasonal in nature. The resulting seasonal variations in demand cause banana pricing to be seasonal. As a result, quarterly results of Chiquita, and therefore AFG's equity in Chiquita's earnings, are subject to significant seasonal variations with stronger quarterly results occurring in the first six months of the calendar year. Chiquita reported net income of $62.0 million for the six months ended June 30, 1996. On July 1, 1993, the European Union ("EU") implemented a new quota restricting the volume of Latin American bananas imported into the EU, which had the effect of decreasing Chiquita's volume and market share in Europe. The quota regime grants preferred status to producers and importers within the EU and its former colonies, while imposing quotas and tariffs on bananas imported from other sources, including Latin America, Chiquita's primary source of fruit. In March 1994, four countries which had previously filed actions against the EU banana policy (Costa Rica, Colombia, Nicaragua and Venezuela) reached a settlement with the EU by signing a "Framework Agreement." The Framework Agreement authorizes the imposition of additional restrictive and discriminatory quotas and export licenses on U.S. banana marketing firms, while leaving certain EU firms exempt. Costa Rica and Colombia began implementing the Framework Agreement in early 1995, resulting in increased costs to Chiquita to export bananas from these sources. Several challenges to the EU regime have resulted in findings that its practices and regulations are illegal and discriminatory. In February 1996, the United States Government, joined by Equador, Guatemala, Honduras and Mexico, commenced a new international trade challenge against the EU regime using the procedures of the World Trade Organization ("WTO"). A WTO panel is reviewing the matter and is expected to render its decision by late January, 1997. Subject to limited appeal procedures, any ruling by the WTO must be implemented within a "reasonable" time. However, there can be no assurance as to the outcome of these proceedings or their impact, if any, on the EU quota regime or the Framework Agreement. A significant portion of Chiquita's operations are conducted in foreign countries, and are subject to risks that are inherent in operating in such foreign countries, including government regulation, fluctuations in exchange rates, currency restrictions and other restraints, risks of expropriation and burdensome taxes. THE TRUST The Trust is a statutory business trust formed under Delaware law pursuant to the Declaration and the filing of a certificate of trust with the Secretary of State of Delaware on September 13, 1996. The Declaration will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance of the Preferred Securities, the Company will directly or indirectly acquire Common Securities which will represent at least 3% of the total capital of the Trust and will own all of the issued and outstanding Common Securities. The Trust exists for the exclusive purposes of (i) issuing the Trust Securities representing undivided beneficial interests in the assets of the Trust, (ii) investing the gross proceeds of the Trust Securities in the Subordinated Debentures and (iii) engaging in only those other activities necessary or incidental thereto. Pursuant to the Declaration, the number of the Trustees will initially be four. The two Regular Trustees will be persons who are employees or officers of, or who are affiliated with, the Company. The Property Trustee will be a financial institution unaffiliated with the Company that will serve as property trustee under 19 21 the Declaration and as indenture trustee for the purposes of the Trust Indenture Act. The Delaware Trustee will be a natural person who is a resident of the State of Delaware or a legal entity which maintains its principal place of business in the State of Delaware. The Bank of New York will act as the Property Trustee and The Bank of New York (Delaware), an affiliate of the Property Trustee, will act as the Delaware Trustee, in each case until removed or replaced by the holder of the Common Securities. The Bank of New York will also act as indenture trustee under the Trust Guarantee (the "Preferred Securities Guarantee Trustee"). See "Description of Trust Guarantee." The Property Trustee will hold title to the Subordinated Debentures for the benefit of the Trust and the holders of the Trust Securities and, so long as the Subordinated Debentures are held by the Trust, the Property Trustee will have the power to exercise all rights, powers, and privileges of a holder of Subordinated Debentures under the Indenture (as defined in "Description of the Subordinated Debentures" herein). In addition, the Property Trustee will maintain exclusive control of a segregated non-interest bearing bank account (the "Property Account") to hold all payments made in respect of the Subordinated Debentures for the benefit of the holders of the Trust Securities. The Property Trustee will make payments of distributions and payments on liquidation, redemption and otherwise to the holders of the Trust Securities out of funds from the Property Account. The Preferred Securities Guarantee Trustee will hold the Trust Guarantee for the benefit of the holders of the Preferred Securities. The Company, as the direct or indirect holder of all the Common Securities, will have the right to appoint, remove or replace any Trustee (subject to the limitations set forth in the Declaration) and to increase or decrease the number of the Trustees. The Company will pay all fees, expenses, debts and obligations (other than with respect to the Trust Securities) related to the Trust and the offering of the Trust Securities. See "Description of the Preferred Securities." The rights of the holders of the Preferred Securities, including economic rights, rights to information and voting rights, are set forth in the Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"), the Indenture and the Trust Indenture Act. See "Description of the Preferred Securities." THE COMPANY OVERVIEW American Financial Group, Inc. is a holding company which, through its subsidiaries, is engaged primarily in specialty and multi-line property and casualty insurance businesses and in the sale of tax-deferred annuities. AFG's property and casualty operations originated in 1872 and are the seventeenth largest property and casualty group in the United States based on 1995 statutory net premiums written of $3.1 billion. At June 30, 1996, the Company had total assets of $14.8 billion and shareholders' equity of $1.4 billion. The Company's strategy is to build shareholder value as a property and casualty insurance and annuity specialist by: - Concentrating on specialty insurance lines. Approximately 35% of 1995 property and casualty statutory net premiums written were from lines of business which the Company considers to be specialty insurance lines. Management believes that such lines offer greater profit potential for AFG and added value for its customers. The Company's annuity business similarly concentrates on specialty business, marketing annuities principally to employees of primary and secondary educational institutions and hospitals, and recently has expanded by acquisition into the financial institution, payroll deduction and pre-need funeral markets. - Achieving superior underwriting results. AFG's property and casualty insurance operations have operated at a lower combined ratio than the property and casualty insurance industry in each of the last ten years. Management believes that its record of producing superior underwriting results can be attributed to its concentration on specialty insurance lines, pricing discipline, focus on profitability rather than premium growth and management compensation plans that reward unit managers based primarily on underwriting results. 20 22 - Operating on a decentralized basis. The Company's insurance business is conducted through approximately 30 separate business units. Each unit has independent management with significant operating autonomy to oversee the important operational functions of the business unit, including underwriting, pricing, marketing, policy processing and claims service. Management believes that operating on a decentralized basis promotes creativity and entrepreneurship within the Company, enhances its ability to act quickly and opportunistically in each of its insurance markets, enables the Company to provide a high level of service to its insureds and, as a result, has contributed to the Company's record of superior underwriting performance. - Continuing to strengthen its balance sheet. Since the Merger, the Company has reduced its debt to capital ratio from 58.4% to 28.5% at June 30, 1996. See "Capitalization." PROPERTY AND CASUALTY INSURANCE OPERATIONS The Company manages and operates its property and casualty insurance business in three major business segments: Non-Standard Automobile Insurance; Specialty Lines; and Commercial and Personal Lines. Each segment is comprised of multiple business units which operate autonomously but with strong central financial controls and full accountability. Decentralized control allows each unit the autonomy necessary to respond to local and specialty market conditions while capitalizing on the efficiencies of centralized investment, actuarial, financial and legal support functions. Management's focus on underwriting profitability has resulted in a statutory combined ratio averaging 100.9% for the period 1991 to 1995, as compared to 109.3% for the property and casualty industry over the same period (Source: A.M. Best Company, Inc. ("A.M. Best")). The Company's statutory combined ratio for the first six months of 1996 was 99.8%. NON-STANDARD AUTOMOBILE INSURANCE AFG's Non-Standard Automobile Insurance group (the "NSA Group") writes automobile insurance policies for drivers who may represent higher-than-normal risks due to a record of prior accidents, traffic violations or other factors. AFG believes that it is the second largest writer of this coverage through independent agents and the fifth largest overall in the U.S. Management believes that its careful selection of risks and pricing has contributed to its underwriting success compared to industry averages. The NSA Group writes business in 42 states and the United Kingdom. SPECIALTY LINES AFG's Specialty Lines insurance operations include a highly diversified group of over 25 specialty business units offering a wide range of commercial and specialty coverages. Major lines in this group include California workers' compensation, executive liability, ocean and inland marine, agricultural-related coverages, non-profit liability, umbrella and excess and surplus lines. Specialization is the key element to the underwriting success of these business units. These specialty lines are opportunistic, and their premium volume will vary by product based on current market conditions. COMMERCIAL AND PERSONAL LINES The Company's Commercial and Personal Lines insurance business consists primarily of standard automobile and homeowners' insurance and commercial multi-peril, workers' compensation, umbrella, excess and general liability insurance. In the Commercial Lines businesses, the Company emphasizes underwriting profitability by intensely targeting specific customer groups and markets that have adequate rate level potential and by stressing customer service and retention of business. In the Personal Lines businesses, the Company emphasizes the use of market segmentation data to price its products more accurately for different insureds. In order to improve its underwriting results in standard personal automobile insurance, the Company is focused on further refining its market segmentation techniques and implementing selective premium rate increases where needed. The Company has aggressively reduced exposure to catastrophes in homeowners' insurance by reducing the number of policies written in geographic areas that are known to be susceptible to weather-related events and by increasing policy deductibles. 21 23 ANNUITY OPERATIONS As a complement to its property and casualty insurance business, the Company operates an annuity business through its 81% owned subsidiary, American Annuity Group, Inc. The remaining common stock of AAG is publicly held and trades on the NYSE. At June 30, 1996, the market capitalization of AAG was approximately $560 million. AAG's principal insurance subsidiary, GALIC, issues and services tax-deferred annuities, principally to employees of primary and secondary educational institutions and hospitals, and, through a subsidiary, began marketing variable annuities in the fourth quarter of 1995. GALIC had over $5.6 billion in assets at June 30, 1996, and ranked among the top 5% of all U.S. stock life insurance companies based on total assets at December 31, 1995. AAG broadened its distribution channels and product offerings by acquiring Laurentian Capital Corporation in November 1995. The acquired operations sell life, accident and health insurance and annuities to the financial institution and payroll deduction markets and sell individual life insurance and annuity policies in the pre-need funeral market through AAG's subsidiaries, Loyal American Life Insurance Company and American Memorial Life Insurance Company (formerly Prairie States Life Insurance Company). INVESTMENTS The Company invests its insurance portfolios in a mix of securities to balance strong total returns with prudent asset preservation. Investments in fixed income securities constituted approximately 94% of the Company's marketable securities at June 30, 1996. Approximately 94% of the bonds and redeemable preferred stocks held by AFG at that date were rated "investment grade" (credit rating of AAA to BBB-) by at least one nationally recognized rating agency. The Company has generally followed a practice of concentrating its equity investments in a relatively limited number of issues rather than maintaining relatively limited positions in a larger number of issues. This practice permits concentration of attention on a limited number of companies in relatively few industries. A large equity position is often considered attractive to persons seeking to control or influence the policies of a company and AFG believes that a concentration in a relatively small number of companies may permit it to identify investments with above average potential to increase in value. Because of its significant ownership percentage of the voting stock of certain companies, AFG utilizes the equity method of accounting in those companies, which results in AFG including in its results its proportionate share of the investee's earnings and losses. At June 30, 1996, AFG utilized the equity method of accounting with respect to its investments of $252.3 million in Chiquita, a world leader in marketing, processing and producing fresh fruit and vegetables, and $75.5 million in Citicasters, an owner and operator of radio and television stations in major metropolitan markets in the United States. In September 1996, the Company sold its entire investment in Citicasters to Jacor for approximately $222 million in cash and warrants to purchase Jacor common stock, leaving Chiquita as the Company's sole investment accounted for utilizing the equity method of accounting. As of September 13, 1996, the market value of AFG's investment in Chiquita on the NYSE was $297 million. 22 24 CAPITALIZATION The following table sets forth the historical capitalization of the Company at June 30, 1996, as adjusted to give effect to certain third quarter transactions discussed below and as further adjusted to give pro forma effect to the sale of Preferred Securities by AFG and the assumed sale of $75 million of Trust Originated Preferred Securities by AAG.
JUNE 30, 1996 ------------------------------------------- HISTORICAL HISTORICAL ADJUSTED(A) PRO FORMA(B) ---------- ----------- ------------ (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Long-term debt: Direct obligations of AFG..................... $ -- $ -- $ -- Obligations of AFG subsidiaries: American Financial Corporation (parent only).................................... 175,324 173,365 123,365 American Premier Underwriters (parent only).................................... 267,888 267,560 267,560 American Annuity Group, Inc................ 170,397 160,022 110,022 Other subsidiaries......................... 64,366 64,366 64,366 ---------- ---------- ---------- Total long-term debt..................... 677,975 665,313 565,313 Minority interest(c)............................ 301,871 307,871 307,871 Preferred securities of trust subsidiaries...... -- -- 175,000 Shareholders' equity: Common Stock, $1.00 par value................. 60,940 60,940 60,940 Capital surplus............................... 755,336 755,336 755,336 Retained earnings............................. 478,937 623,136 620,236 Net unrealized gain on marketable securities, net of deferred income taxes............... 100,300 100,300 100,300 ---------- ---------- ---------- Total shareholders' equity............... 1,395,513 1,539,712 1,536,812 ---------- ---------- ---------- Total capitalization............................ $2,375,359 $2,512,896 $2,584,996 ========== ========== ========== Long-term debt as a percentage of total capitalization................................ 28.5% 26.5% 21.9% ========== ========== ==========
- --------------- (a) Adjusted to reflect the retirement of $12.7 million in debt during July and August, 1996 and a net gain of approximately $145 million on AFG's sale of Citicasters in September 1996. (b) Assumes that $52.9 million of the proceeds from this Offering are used to retire $50 million of AFC debt and $50 million of the proceeds from the separate AAG offering of Trust Originated Preferred Securities are used to retire its debt and the balance of the proceeds from the offerings are used for general corporate purposes. If the AAG offering is not made, pro forma amounts would be as follows (dollars in thousands): Total long-term debt................................ $ 615,313 Preferred securities of trust subsidiaries.......... 100,000 Total capitalization................................ 2,559,996 Long-term debt as a percentage of total capitalization.................................... 24.0%
(c) Minority interest represents the interests of noncontrolling shareholders in AFG subsidiaries and includes AFC preferred stock. ACCOUNTING TREATMENT The financial statements of the Trust will be consolidated with the Company's financial statements with the Preferred Securities accounted for and captioned in the consolidated balance sheet directly above shareholders' equity. 23 25 RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the historical ratios of earnings to fixed charges for the Company and its subsidiaries. Fixed charges are computed on a "total enterprise" basis. For purposes of calculating the ratios, "earnings" have been computed by adding to pretax earnings (excluding discontinued operations) the fixed charges and the minority interest in earnings of subsidiaries having fixed charges and deducting (adding) the undistributed equity in earnings (losses) of investees. Fixed charges include interest (excluding interest on annuity benefits), amortization of debt discount and expense, preferred dividend requirements of subsidiaries and a portion of rental expense deemed to represent the interest factor.
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------- ---------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- ---- Ratio of earnings to fixed charges.... 3.77 2.01 2.60 1.69 2.62 2.15 1.54
Assuming the Merger and related transactions occurred at the beginning of each of the following periods, the earnings to fixed charges ratios would have been as follows:
YEAR ENDED DECEMBER SIX MONTHS 31, ENDED ---------------------- JUNE 30, 1995 1995 1994 1993 ------------- ---- ---- ---- Pro forma ratio of earnings to fixed charges............................. 2.24 2.93 2.07 3.09
USE OF PROCEEDS The proceeds from the sale of Preferred Securities by the Trust will be invested in the Subordinated Debentures of the Company. The Company expects to use a portion of the net proceeds from the sale of such Subordinated Debentures to the Trust to retire $50 million of outstanding debt of subsidiaries and the remainder for general corporate purposes, which may include the retirement of additional fixed rate securities of Company subsidiaries and investment in insurance businesses. Until the net proceeds are used for these purposes, the Company will deposit them in interest-bearing accounts or invest them in short-term marketable securities. DESCRIPTION OF THE PREFERRED SECURITIES The Preferred Securities will be issued pursuant to the terms of the Declaration. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Property Trustee, The Bank of New York, will act as the indenture trustee for purposes of compliance with the provisions of the Trust Indenture Act. The terms of the Preferred Securities will include those stated in the Declaration, including those required to be made part of the Declaration by the Trust Indenture Act. The following summary of the principal terms and provisions of the Preferred Securities does not purport to be complete and is subject to, and qualified in its entirety by reference to, the Declaration, a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part, the Trust Act and the Trust Indenture Act. GENERAL The Declaration authorizes the Regular Trustees to issue, on behalf of the Trust, the Trust Securities, which represent undivided beneficial interests in the assets of the Trust. All of the Common Securities will be owned by the Company. The Common Securities will have equivalent terms to and will rank pari passu, and payments will be made thereon on a pro rata basis, with the Preferred Securities, except that upon the occurrence and during the continuance of a Declaration Event of Default (as defined herein), the rights of the holders of the Common Securities to receive payment of periodic distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of the Preferred Securities. In addition, holders of the Common Securities have the exclusive right (subject to the terms of the Declaration) to appoint, replace or remove the Trustees and to increase or decrease the number of the Trustees. The Declaration does not permit the issuance by the Trust of any securities other than the Trust Securities or the 24 26 incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee will hold the Subordinated Debentures purchased by the Trust for the benefit of the holders of the Trust Securities. The payment of distributions out of money held by the Trust, and payments upon redemption of the Preferred Securities or liquidation of the Trust, are guaranteed by the Company to the extent described under "Description of Trust Guarantee." The Trust Guarantee, when taken together with the back-up undertakings, consisting of obligations of the Company as set forth in the Declaration of Trust (including the obligation to pay expenses of the Trust), the Indenture and the Subordinated Debentures issued to the Trust, provide a full and unconditional guarantee by the Company of the Preferred Securities. The Trust Guarantee will be held by The Bank of New York, the Preferred Securities Guarantee Trustee, for the benefit of the holders of the Preferred Securities. The Trust Guarantee only covers payment of distributions when the Company has made the corresponding payment of interest or principal on the Subordinated Debentures held by the Trust. In the absence of such payment of interest or principal, the remedy of a holder of Preferred Securities is to direct the Property Trustee to enforce the Property Trustee's rights as the holder of the Subordinated Debentures except in the limited circumstances where the holder may take direct action against the Company. See -- "Declaration Events of Default." DISTRIBUTIONS Distributions on the Preferred Securities will be fixed at a rate per annum of % of the stated liquidation amount of $25 per Preferred Security. Distributions in arrears for more than one quarter will (to the extent permitted by applicable law) bear interest thereon from and including the last day of such quarter at the rate per annum of % thereof compounded quarterly. The term "distributions" as used herein includes any such interest payable unless otherwise stated. The amount of distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarter, on the basis of the actual number of days elapsed in such 90-day quarter. Distributions on the Preferred Securities will be cumulative, will accrue from , 1996 and will be payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing January 15, 1997, when, as and if available for payment by the Property Trustee, except as otherwise described below. The Company has the right under the Indenture to defer payments of interest on the Subordinated Debentures by extending the interest payment period from time to time on the Subordinated Debentures, which right, if exercised, would defer quarterly distributions on the Preferred Securities (although to the extent permitted by law, such distributions would continue to accrue with interest since interest would continue to accrue on the Subordinated Debentures) during any such Extension Period. The Company has the right to defer payments of interest on the Subordinated Debentures, from time to time, for up to 20 consecutive quarters, provided that no Extension Period may extend beyond the Maturity Date of the Subordinated Debentures. There could be multiple Extension Periods of varying lengths during the term of the Subordinated Debentures. In the event that the Company exercises this right, then during any Extension Period (a) the Company shall not declare or pay dividends on, make distributions with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock and (b) the Company shall not, directly or indirectly, and will not allow any of its subsidiaries to, make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to the Subordinated Debentures; provided, however, that the restriction in clause (a) above does not apply (i) to repurchases or acquisitions of shares of common stock of the Company as contemplated by any employment arrangement, benefit plan or similar contract with or for the benefit of employees, officers or directors entered into in the ordinary course of business, (ii) as a result of an exchange or conversion of any class or series of the Company's capital stock for common stock, (iii) to the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) to the payment of any stock dividend by the Company payable in common stock. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period; provided that each Extension Period, if any, may not exceed 20 consecutive quarters and may not extend beyond the Maturity Date of the 25 27 Subordinated Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. See "Description of the Subordinated Debentures -- Interest" and "Description of the Subordinated Debentures -- Option to Extend Interest Payment Period." If distributions are deferred, the deferred distributions and accrued interest thereon shall be paid to holders of record of the Preferred Securities as they appear on the books and records of the Trust on the record date for distributions due at the end of such deferral period. Distributions on the Preferred Securities must be paid on the dates payable to the extent that the Trust has funds available for the payment of such distributions in the Property Account. The Trust's funds available for distribution to the holders of the Preferred Securities will be limited to payments received from the Company under the Subordinated Debentures. See "Description of the Subordinated Debentures." The payment of distributions out of moneys held by the Trust is guaranteed by the Company to the extent set forth under "Description of Trust Guarantee." The Trust Guarantee, when taken together with the back-up undertakings, consisting of obligations of the Company as set forth in the Declaration of Trust of the Trust (including the obligation to pay expenses of the Trust), the Indenture and the Subordinated Debentures issued to the Trust, provides a full and unconditional guarantee by the Company of the Preferred Securities. Distributions on the Preferred Securities will be payable to the holders thereof as they appear on the books and records of the Trust on the relevant record dates, which, as long as the Preferred Securities remain in global form, will be one Business Day (as defined below) prior to the relevant payment dates. Such distributions will be paid through the Property Trustee, which will hold amounts received in respect of the Subordinated Debentures in the Property Account for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the provisions of the Declaration, each such payment will be made as described under "-- Book-Entry Issuance -- The Depository Trust Company" below. In the event that the Preferred Securities do not continue to remain in global form, the relevant record dates for the Preferred Securities shall conform to the rules of any securities exchange on which the Preferred Securities are listed and, if none, shall be selected by the Regular Trustees, which dates shall be at least one Business Day but less than 60 Business Days prior to the relevant payment dates. Distributions payable on any Preferred Securities that are not punctually paid on any distribution payment date will cease to be payable to the person in whose name such Preferred Securities are registered on the relevant record date, and such defaulted distribution will instead be payable to the person in whose name such Preferred Securities are registered on the special record date or other specified date determined in accordance with the Indenture. In the event that any date on which distributions are to be made on the Preferred Securities is not a Business Day, then payment of the distributions payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such record date. A "Business Day" shall mean any day other than a day on which banking institutions in New York, New York are authorized or required by law to close. MANDATORY REDEMPTION Upon the repayment of the Subordinated Debentures, whether at maturity or upon redemption, the proceeds from such repayment or redemption shall simultaneously be applied to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Subordinated Debentures so repaid or redeemed at the Redemption Price; provided that, holders of Trust Securities shall be given not less than 30 nor more than 60 days notice of such redemption. The Subordinated Debentures will mature on , 2026 unless the maturity date is changed at the option of the Company (provided in the case of an extension of the maturity date that certain financial conditions are met), and may be redeemed, in whole or in part, at any time on or after , 2001 or at any time, in whole (but not in part), upon the occurrence of a Special Event. See "Description of the Subordinated Debentures -- Optional Redemption." In the event that fewer than all of the outstanding Trust Securities are to be redeemed, the Trust Securities will be redeemed pro rata to each holder according to the aggregate liquidation amount of Trust Securities held by the relevant holder in relation to the aggregate liquidation amount of all Trust Securities outstanding. 26 28 See "-- Book-Entry Issuance -- The Depository Trust Company" below for a description of DTC's (as hereinafter defined) procedures in the event of redemption. SPECIAL EVENT REDEMPTION "Tax Event" means that the Regular Trustees shall have received an opinion of an independent tax counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such pronouncement or decision is announced on or after the date of original issuance of the Preferred Securities, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Subordinated Debentures, (ii) the Trust is, or will be within 90 days after the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest payable to the Trust on the Subordinated Debentures is not, or within 90 days of the date thereof, will not be deductible, in whole or in part, by the Company for United States federal income tax purposes. "Investment Company Event" means that the Regular Trustees shall have received an opinion of an independent counsel experienced in practice under the Investment Company Act of 1940, as amended (the "1940 Act"), to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), there is more than insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities. If, at any time, a Tax Event or an Investment Company Event (each, as defined above, a "Special Event") shall occur and be continuing, the Company shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Subordinated Debentures, in whole (but not in part), for cash within 90 days following the occurrence of such Special Event, and, following such redemption, all Trust Securities shall be redeemed by the Trust at the Redemption Price. DISTRIBUTION OF THE SUBORDINATED DEBENTURES At any time, the Company will have the right to terminate the Trust and, after satisfaction of the liabilities of creditors of the Trust as provided by applicable law, cause the Subordinated Debentures to be distributed to the holders of the Trust Securities in liquidation of the Trust. Under current United States federal income tax law and interpretation and assuming, as expected, the Trust is treated as a grantor trust, a distribution of the Subordinated Debentures should not be a taxable event to holders of the Preferred Securities. Should there be a change in law, a change in legal interpretation, a Special Event or other circumstances, however, the distribution could be a taxable event to the holders of the Preferred Securities. In addition, a dissolution of the Trust in which holders of the Preferred Securities receive cash would be a taxable event to such holders. See "United States Federal Income Taxation -- Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust." If the Subordinated Debentures are distributed to the holders of the Preferred Securities, the Company will use its best efforts to cause the Subordinated Debentures to be listed on the NYSE or on such other exchange as the Preferred Securities are then listed. After the date for any distribution of Subordinated Debentures upon dissolution of the Trust, (i) the Preferred Securities will no longer be deemed to be outstanding and (ii) the record holders of the Preferred Securities will receive a registered global certificate or certificates representing the Subordinated Debentures to be delivered upon such distribution in exchange for the Preferred Securities held by such holders. If the Company elects to liquidate the Trust and thereby causes the Subordinated Debentures to be distributed to holders of the Preferred Securities in liquidation of the Trust, the Company shall have the right 27 29 to shorten the maturity of such Subordinated Debentures to a date not earlier than , 2001 or extend the maturity of such Subordinated Debentures to a date not later than the earlier of (a) , 2045 or (b) the Interest Deduction Date (as defined herein), provided that it can extend the maturity only if certain conditions are met. See "Description of the Subordinated Debentures -- Option to Change Scheduled Maturity Date." There can be no assurance as to the market prices for either the Preferred Securities or the Subordinated Debentures that may be distributed in exchange for the Preferred Securities if a dissolution and liquidation of the Trust were to occur. Accordingly, the Preferred Securities that an investor may purchase, whether pursuant to the offer made hereby or in the secondary market, or the Subordinated Debentures that an investor may receive if a dissolution and liquidation of the Trust were to occur, may trade at a discount to the price that the investor paid to purchase the Preferred Securities offered hereby. On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the revenue portion of President Clinton's fiscal 1997 budget proposal, was released. The Bill would, among other things, generally deny interest deductions for interest or OID on an instrument issued by a corporation that has a maximum weighted average maturity of more than 40 years. The Bill would also treat as equity, instruments issued by a corporation that have a maximum term of more than 20 years and that are not shown as indebtedness on the consolidated balance sheet of the issuer. For purposes of determining the weighted average maturity or the term of an instrument, any right to extend would be treated as exercised. The above-described provisions of the Bill were proposed to be effective generally for instruments issued on or after December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees issued a joint statement (the "Joint Statement") to the effect that it was their intention that the effective date of the President's legislative proposals, if adopted, would be no earlier than the date of appropriate Congressional action. In addition, subsequent to the publication of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury Department officials concurring with the views expressed in the Joint Statement. Under current law, it is likely that the Subordinated Debentures will be treated as indebtedness of the Company and the Company likely will be able to deduct interest on the Subordinated Debentures beneficially held by the holders of the Preferred Securities. The terms of the Subordinated Debentures limit the Company's right to extend the maturity of the Subordinated Debentures to a date which is six months shorter than any legislative limit on the length of debt securities for which interest is deductible. Based on the advice of tax counsel, the Company believes this will allow it an interest deduction if the 40-year weighted average maturity component of the Bill is enacted. However, if the provision of the Bill regarding a 20-year term is enacted with retroactive effect with regard to the Subordinated Debentures, the Company will not be entitled to an interest deduction with respect to the Subordinated Debentures. There can be no assurance that current or future legislative proposals, adverse judicial decisions, final legislation or official administrative pronouncements will not affect the ability of the Company to deduct interest on the Subordinated Debentures, giving rise to a Tax Event (as defined below) which would permit the Company to cause the redemption of the Preferred Securities prior to , 2001 (the first date on which the Company would otherwise be able to cause a redemption of the Preferred Securities). See "Description of the Preferred Securities -- Special Event Redemption" and "United States Federal Income Taxation." REDEMPTION PROCEDURES The Trust may not redeem any Preferred Securities unless all accrued and unpaid distributions have been paid on all Preferred Securities for all quarterly distribution periods terminating on or prior to the date of redemption. If the Trust gives a notice of redemption in respect of Preferred Securities (which notice will be irrevocable), then, by 12:00 noon, New York City time, on the redemption date, provided that the Company has paid to the Property Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Subordinated Debentures, the Trust will irrevocably deposit with the depository funds sufficient to pay the applicable Redemption Price and will give the depository irrevocable instructions to pay the Redemption Price to the holders of the Preferred Securities. If notice of redemption shall have been given 28 30 and funds deposited as required, then immediately prior to the close of business on the date of such deposit, distributions will cease to accrue and all rights of holders of such Preferred Securities so called for redemption will cease, except the right of the holders of such Preferred Securities to receive the Redemption Price, but without interest on such Redemption Price. In the event that any date fixed for redemption of Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day. In the event that the Company fails to repay the Subordinated Debentures on maturity or payment of the Redemption Price in respect of Preferred Securities is improperly withheld or refused and not paid either by the Trust or by the Company pursuant to the Trust Guarantee, distributions on such Preferred Securities will continue to accrue at the then applicable rate from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. In the event that fewer than all of the outstanding Preferred Securities are to be redeemed, the Preferred Securities will be redeemed as described below under "-- Book-Entry Issuance -- The Depository Trust Company." If a partial redemption of the Preferred Securities would result in the delisting of the Preferred Securities by a national securities exchange or other organization on which the Preferred Securities are then listed, the Company pursuant to the Indenture will only redeem the Subordinated Debentures in whole and, as a result, the Trust may only redeem the Preferred Securities in whole. Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or its subsidiaries may at any time, and from time to time, purchase outstanding Preferred Securities by tender, in the open market or by private agreement. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary liquidation, dissolution, winding-up or termination of the Trust (each a "Liquidation"), the then holders of the Preferred Securities will be entitled to receive on a pro rata basis solely out of the assets of the Trust, after satisfaction of liabilities to creditors, distributions in an amount equal to the aggregate of the stated liquidation amount of $25 per Preferred Security plus accrued and unpaid distributions thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such Liquidation, Subordinated Debentures in an aggregate stated principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accrued and unpaid distributions on, the Preferred Securities have been distributed on a pro rata basis to the holders of the Preferred Securities. If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Preferred Securities shall be paid on a pro rata basis. The holders of the Common Securities will be entitled to receive distributions upon any such dissolution pro rata with the holders of the Preferred Securities, except that if a Declaration Event of Default has occurred and is continuing, the Preferred Securities shall have a preference over the Common Securities with regard to such distributions. The Trust Guarantee, when taken together with the back-up undertakings, consisting of obligations of the Company as set forth in the Declaration (including the obligation to pay expenses of the Trust), the Indenture and the Subordinated Debentures issued to the Trust, provide a full and unconditional guarantee by the Company of the Preferred Securities. TERMINATION Pursuant to the Declaration, the Trust shall terminate upon the earliest of (i) , 2051, (ii) the bankruptcy of the Company, (iii) the filing of a certificate of dissolution or its equivalent with respect to the Company, the filing of a certificate of cancellation with respect to the Trust after obtaining the consent of the 29 31 holders of at least a majority in liquidation amount of the Trust Securities affected thereby voting together as a single class to file such certificate of cancellation, or the revocation of the charter of the Company and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iv) the distribution of all of the Subordinated Debentures from the Trust, (v) the entry of a decree of a judicial dissolution of the Company or the Trust, or (vi) the redemption of all the Trust Securities. DECLARATION EVENTS OF DEFAULT An Event of Default under the Indenture (an "Indenture Event of Default") constitutes an event of default under the Declaration with respect to the Trust Securities (a "Declaration Event of Default"), provided that pursuant to the Declaration, the holder of the Common Securities will be deemed to have waived any Declaration Event of Default with respect to the Common Securities until all Declaration Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until such Declaration Event of Default with respect to the Preferred Securities has been so cured, waived or otherwise eliminated, the Property Trustee will be deemed to be acting solely on behalf of the holders of the Preferred Securities and only the holders of the Preferred Securities will have the right to direct the Property Trustee with respect to certain matters under the Declaration, and therefore the Indenture. Upon the occurrence of a Declaration Event of Default, the Indenture Trustee (as defined herein) or the Property Trustee as the holder of the Subordinated Debentures will have the right under the Indenture to declare the principal of and interest on the Subordinated Debentures to be immediately due and payable. Each of the Company and the Trust is required to file annually with the Property Trustee an officer's certificate as to its compliance with all conditions and covenants under the Declaration. If the Property Trustee fails to enforce its rights with respect to the Subordinated Debentures held by the Trust, any record holder of Preferred Securities may institute legal proceedings directly against the Company to enforce the Property Trustee's rights under such Subordinated Debentures without first instituting any legal proceedings against such Property Trustee or any other person or entity. In addition, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest, principal or other required payments on the Subordinated Debentures issued to the Trust on the date such interest, principal or other payment is otherwise payable, then a record holder of Preferred Securities may institute a proceeding directly against the Company for enforcement of payment on the Subordinated Debentures on or after the respective due dates specified in the Subordinated Debentures having a principal amount equal to the aggregate liquidation amount of the Preferred Securities held by such holder. In connection with such Direct Action, the Company will be subrogated to the rights of such record holder of Preferred Securities to the extent of any payment made by the Company to such record holder of Preferred Securities. The record holder in the case of the issuance of one or more global Preferred Securities certificates will be The Depository Trust Company acting at the direction of the beneficial owners of the Preferred Securities. VOTING RIGHTS Except as described herein, under the Trust Act, the Trust Indenture Act and under "Description of Trust Guarantee -- Modification of the Trust Guarantee; Assignment," and as otherwise required by law and the Declaration, the holders of the Preferred Securities will have no voting rights. Subject to the requirement of the Property Trustee obtaining a tax opinion in certain circumstances set forth in the last sentence of this paragraph, the holders of a majority in aggregate liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Property Trustee, or direct the exercise of any trust or power conferred upon the Property Trustee under the Declaration, including the right to direct the Property Trustee, as holder of the Subordinated Debentures, to (i) exercise the remedies available under the Indenture with respect to the Subordinated Debentures, (ii) waive any past Indenture Event of Default that is waivable under the Indenture (as defined herein), or (iii) exercise any right to rescind or annul a declaration that the principal of all the Subordinated Debentures shall be due and payable, or consent to any amendment, modification or termination 30 32 of the Indenture or the Subordinated Debentures, where such consent should be required; provided, however, that, where a consent or action under the Indenture would require the consent or act of the holders of greater than a majority in principal amount of Subordinated Debentures affected thereby (a "Super-Majority"), the Property Trustee may only give such consent or take such action at the written direction of the holders of at least the proportion in liquidation amount of the Preferred Securities which the relevant Super-Majority represents of the aggregate principal amount of the Subordinated Debentures outstanding. The Property Trustee shall notify all holders of the Preferred Securities of any notice of default received from the Indenture Trustee with respect to the Subordinated Debentures. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Property Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Property Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. In the event the consent of the Property Trustee, as the holder of the Subordinated Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Subordinated Debentures, the Property Trustee shall request the direction of the holders of the Trust Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in liquidation amount of the Trust Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super-Majority, the Property Trustee may only give such consent at the direction of the holders of at least the proportion in liquidation amount of the Trust Securities which the relevant Super-Majority represents of the aggregate principal amount of the Subordinated Debentures outstanding. The Property Trustee shall not take any such action in accordance with the directions of the holders of the Trust Securities unless the Property Trustee has obtained an opinion of tax counsel to the effect that the Trust will not be classified as other than a grantor trust for United States federal income tax purposes on account of such action. A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Declaration Event of Default. Any required approval or direction of holders of Preferred Securities may be given at a separate meeting of holders of Preferred Securities convened for such purpose, at a meeting of all of the holders of Trust Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Preferred Securities. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or distribute Subordinated Debentures in accordance with the Declaration. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Preferred Securities that are owned at such time by the Company or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Company, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such Preferred Securities were not outstanding. The procedures by which holders of Preferred Securities may exercise their voting rights are described below. See "--Book-Entry Issuance -- The Depository Trust Company" below. Holders of the Preferred Securities will have no rights to appoint or remove the Trustees, who may be appointed, removed or replaced solely by the Company as the indirect or direct holder of all of the Common Securities. 31 33 MODIFICATION OF THE DECLARATION The Declaration may be modified and amended if approved by a majority of the Regular Trustees (and in certain circumstances the Property Trustee), provided that, if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the holders of the Trust Securities voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority in liquidation amount of the Trust Securities affected thereby; provided that, if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a majority in liquidation amount of such class of Trust Securities. Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified as other than a grantor trust for United States federal income tax purposes, (ii) reduce or otherwise adversely affect the powers of the Property Trustee or (iii) cause the Trust to be deemed an "investment company" which is required to be registered under the 1940 Act. MERGERS, CONSOLIDATIONS OR AMALGAMATIONS The Trust may not consolidate, amalgamate, merge with or into or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety, to any corporation or other body, except as described below. The Trust may, with the consent of a majority of the Regular Trustees and without the consent of the holders of the Trust Securities, the Property Trustee or the Delaware Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any State; provided that, (i) such successor entity either (x) expressly assumes all of the obligations of the Trust under the Trust Securities or (y) substitutes for the Trust Securities other securities having substantially the same terms as the Trust Securities (the "Successor Securities"), so long as the Successor Securities rank the same as the Trust Securities rank with respect to distributions and payments upon liquidation, redemption and otherwise, (ii) the Company expressly acknowledges a trustee of such successor entity possessing the same powers and duties as the Property Trustee as the holder of the Subordinated Debentures, (iii) the Preferred Securities or any Successor Securities with respect to the Preferred Securities are listed, or any such Successor Securities will be listed upon notification of issuance, on any national securities exchange or with another organization on which the Preferred Securities are then listed or quoted, (iv) such merger, consolidation, amalgamation or replacement does not cause the Preferred Securities (including any Successor Securities with respect to the Preferred Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (vi) such successor entity has a purpose identical to that of the Trust, (vii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of an independent counsel to the Trust experienced in such matters to the effect that, (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act and (C) the Trust will continue to be classified as a grantor trust for federal income tax purposes, and (viii) the Company guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Trust Guarantee. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in liquidation amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or 32 34 replace it, if such consolidation, amalgamation, merger or replacement would cause the Trust or the Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes and each holder of the Trust Securities not to be treated as owning an undivided interest in the Subordinated Debentures. EXPENSES AND TAXES In the Indenture, the Company has agreed to pay all debts and other obligations (other than with respect to the Trust Securities) and all costs and expenses of the Trust (including costs and expenses relating to the organization of the Trust, the fees and expenses of the Trustees and the costs and expenses relating to the operation of the Trust) and to pay any and all taxes and all costs and expenses with respect thereto (other than United States withholding taxes) to which the Trust might become subject. The foregoing obligations of the Company under the Indenture are for the benefit of, and shall be enforceable by, any person to whom any such debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice thereof. Any such Creditor may enforce such obligations of the Company directly against the Company, and the Company has irrevocably waived any right or remedy to require that any such Creditor take any action against the Trust or any other person before proceeding against the Company. The Company has also agreed in the Indenture to execute such additional agreements as may be necessary or desirable to give full effect to the foregoing. BOOK-ENTRY ISSUANCE -- THE DEPOSITORY TRUST COMPANY The Depository Trust Company ("DTC") will act as securities depository for the Preferred Securities. The Preferred Securities initially will be issued only as fully-registered securities registered in the name of Cede & Co. (DTC's nominee). One or more fully-registered global Preferred Securities certificates, representing the total aggregate number of Preferred Securities, will be issued and will be delivered to DTC. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the global Preferred Securities as represented by a global certificate. DTC has advised the Company and the Trust that DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the NYSE, the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers and dealers, banks and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a Direct Participant ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the Commission. Purchases of Preferred Securities within the DTC system must be made by or through Direct Participants, which will receive a credit for the Preferred Securities on DTC's records. The ownership interest of each actual purchaser of each Preferred Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchases, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners purchased Preferred Securities. Transfers of ownership interests in the Preferred Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial 33 35 Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Preferred Securities, except in the event that use of the book-entry system for the Preferred Securities is discontinued. To facilitate subsequent transfers, all the Preferred Securities deposited by Participants with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of Preferred Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's records reflect only the identity of the Direct Participants to whose accounts such Preferred Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of Beneficial Owners that are their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements that may be in effect from time to time. Redemption notices shall be sent to Cede & Co. If less than all of the Preferred Securities are being redeemed, DTC will reduce pro rata the amount of the interest of each Direct Participant in such Preferred Securities to be redeemed in accordance with its procedures. Although voting with respect to the Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede & Co. will itself consent or vote with respect to Preferred Securities. Under its usual procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Preferred Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). The Company and the Trust believe that the arrangements among DTC, Direct and Indirect Participants, and Beneficial Owners will enable the Beneficial Owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a beneficial interest in the Trust. Distribution payments on the Preferred Securities will be made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the account of customers in bearer form or registered in "street name," and such payments will be the responsibility of such Participant and not of DTC, the Trust or the Company, subject to any statutory or regulatory requirements that may be in effect from time to time. Payment of distributions to DTC is the responsibility of the Trust, disbursement of such payments to Direct Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. Except as provided herein, a Beneficial Owner in a global Preferred Security certificate will not be entitled to receive physical delivery of Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under the Preferred Securities. DTC may discontinue providing its services as securities depository with respect to the Preferred Securities at any time by giving reasonable notice to the Trust. Under such circumstances, in the event that a successor securities depository is not obtained, Preferred Securities certificates are required to be printed and delivered. Additionally, the Regular Trustees (with the consent of the Company) may decide to discontinue use of the system of book-entry transfers through DTC (or any successor depository) with respect to the Preferred Securities. In that event, certificates for the Preferred Securities will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company and the Trust believe to be reliable, but neither the Company nor the Trust takes responsibility for the accuracy thereof. Unless the context otherwise requires, the term "holder of Preferred Securities" shall refer to Beneficial Owners rather than to DTC. 34 36 INFORMATION CONCERNING THE PROPERTY TRUSTEE The Property Trustee, prior to the occurrence of a default with respect to the Trust Securities, undertakes to perform only such duties as are specifically set forth in the Declaration and the Indenture, in the terms of the Trust Securities or in the Trust Indenture Act and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Property Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Preferred Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred thereby. The holders of Preferred Securities will not be required to offer such indemnity in the event such holders, by exercising their voting rights, direct the Property Trustee to take any action following a Declaration Event of Default. The Property Trustee also serves as Preferred Securities Guarantee Trustee. PAYING AGENT In the event that the Preferred Securities do not remain in book-entry form, the following provisions would apply: Securities Transfer Company, Cincinnati, Ohio, will act as the initial paying agent. The Company may designate an additional or substitute paying agent at any time. Registration of transfers of Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust or the Company may require) in respect of any tax or other government charges that may be imposed in relation to it. The Trust will not be required to register or cause to be registered the transfer of Preferred Securities after such Preferred Securities have been called for redemption. GOVERNING LAW The Declaration and the Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware. MISCELLANEOUS The Regular Trustees are authorized and directed to operate the Trust in such a way so that the Trust will not be required to register as an "investment company" under the 1940 Act or be characterized as other than a grantor trust for United States federal income tax purposes. The Company is authorized and directed to conduct its affairs so that the Subordinated Debentures will be treated as indebtedness of the Company for United States federal income tax purposes. In this connection, the Company and the Regular Trustees are authorized to take any action, not inconsistent with applicable law, the certificate of trust of the Trust or the articles of incorporation of the Company, that each of the Company and the Regular Trustees determines in their discretion to be necessary or desirable to achieve such end, as long as such action does not adversely affect the interests of the holders of the Preferred Securities or vary the terms thereof. Holders of the Preferred Securities have no preemptive rights. DESCRIPTION OF TRUST GUARANTEE Set forth below is a summary of information concerning the Trust Guarantee that will be executed and delivered by the Company for the benefit of the holders, from time to time, of Preferred Securities. The Trust Guarantee will be qualified as an indenture under the Trust Indenture Act. The Bank of New York will act as independent indenture trustee for Trust Indenture Act purposes under the Trust Guarantee (the "Preferred Securities Guarantee Trustee"). The terms of the Trust Guarantee will be those set forth in such Trust Guarantee and those made part of such Trust Guarantee by the Trust Indenture Act. The summary of certain provisions of the Trust Guarantee does not purport to be complete and is subject to and qualified in its entirety by reference to the provisions of the form of Trust Guarantee, a copy of which has been filed as an exhibit to 35 37 the Registration Statement of which this Prospectus is a part, and the Trust Indenture Act. The Trust Guarantee will be held by the Preferred Securities Guarantee Trustee for the benefit of the holders of the Preferred Securities of the Trust. GENERAL Pursuant to the Trust Guarantee, the Company will agree, to the extent set forth therein, to pay in full to the holders of the Preferred Securities, the Trust Guarantee Payments (as defined below) (except to the extent paid by the Trust), as and when due, regardless of any defense, right of set-off or counterclaim which the Trust may have or assert. The following payments or distributions with respect to the Preferred Securities (the "Trust Guarantee Payments"), to the extent not paid by the Trust, will be subject to the Trust Guarantee (without duplication): (i) any accrued and unpaid distributions that are required to be paid on such Preferred Securities, to the extent the Trust shall have funds available therefor, (ii) the redemption price, including all accrued and unpaid distributions to the date of redemption (the "Redemption Price"), to the extent the Trust has funds available therefor, with respect to any Preferred Securities called for redemption by the Trust and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Subordinated Debentures to the holders of Preferred Securities or the redemption of all of the Preferred Securities upon maturity or redemption of the Subordinated Debentures) the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid distributions on such Preferred Securities to the date of payment, to the extent the Trust has funds available therefor or (b) the amount of assets of the Trust remaining for distribution to holders of such Preferred Securities in liquidation of the Trust. The Company's obligation to make a Trust Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Preferred Securities or by causing the Trust to pay such amounts to such holders. The Trust Guarantee will not apply to any payment of distributions except to the extent the Trust shall have funds available therefor. If the Company does not make interest or principal payments on the Subordinated Debentures purchased by the Trust, the Trust will not pay distributions on the Preferred Securities issued by the Trust and will not have funds available therefor. The Company has also agreed to guarantee the obligations of the Trust with respect to the Common Securities (the "Trust Common Guarantee") to the same extent as the Trust Guarantee, except that, if an Event of Default under the Indenture has occurred and is continuing, holders of Preferred Securities under the Trust Guarantee shall have priority over holders of the Common Securities under the Trust Common Guarantee with respect to distributions and payments on liquidation, redemption or otherwise. CERTAIN COVENANTS OF THE COMPANY In the Trust Guarantee, the Company will covenant that, so long as any Preferred Securities remain outstanding, if there shall have occurred any event of default under the Trust Guarantee or a Declaration Event of Default, then (a) the Company will not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock; (b) the Company shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Company which rank pari passu with or junior to the Subordinated Debentures issued to the Trust and (c) the Company shall not make any guarantee payments with respect to the foregoing (other than pursuant to the Trust Guarantee); provided, however, that the Company may declare and pay a stock dividend where the dividend is paid in the form of the same stock as that on which the dividend is being paid. MODIFICATION OF THE TRUST GUARANTEE; ASSIGNMENT Except with respect to any changes that do not adversely affect the rights of holders of Preferred Securities (in which case no consent of such holders will be required), the Trust Guarantee may be amended only with the prior approval of the holders of not less than a majority in liquidation amount of the outstanding Preferred Securities. The manner of obtaining any such approval of holders of such Preferred Securities is set 36 38 forth above under "Description of the Preferred Securities -- Voting Rights." All guarantees and agreements contained in the Trust Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the holders of the Preferred Securities then outstanding. EVENTS OF DEFAULT An event of default under the Trust Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of a majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Securities Guarantee Trustee in respect of the Trust Guarantee or to direct the exercise of any trust or power conferred upon the Preferred Securities Guarantee Trustee under the Trust Guarantee. If the Preferred Securities Guarantee Trustee fails to enforce the Trust Guarantee, any record holder of Preferred Securities may institute a legal proceeding directly against the Company to enforce the Preferred Securities Guarantee Trustee's rights under the Trust Guarantee without first instituting a legal proceeding against the Trust, the Preferred Securities Guarantee Trustee or any other person or entity. Notwithstanding the foregoing, if the Company has failed to make a Trust Guarantee Payment, a record holder of Preferred Securities may directly institute a proceeding against the Company for enforcement of the Trust Guarantee for such payment to the record holder of the Preferred Securities of the principal of or interest on the Subordinated Debentures on or after the respective due dates specified in the Subordinated Debentures, and the amount of the payment will be based on the holder's pro rata share of the amount due and owing on all of the Preferred Securities. The Company has waived any right or remedy to require that any action be brought first against the Trust or any other person or entity before proceeding directly against the Company. The record holder in the case of the issuance of one or more global Preferred Securities certificates will be DTC acting at the direction of its Direct Participants, who in turn will be acting at the direction of the beneficial owners of the Preferred Securities. The Company will be required to provide annually to the Preferred Securities Guarantee Trustee a statement as to the performance by the Company of certain of its obligations under the Trust Guarantee and as to any default in such performance. INFORMATION CONCERNING THE PREFERRED SECURITIES GUARANTEE TRUSTEE The Preferred Securities Guarantee Trustee, prior to the occurrence of a default, undertakes to perform only such duties as are specifically set forth in the Trust Guarantee and, after default with respect to the Trust Guarantee, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the Preferred Securities Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Trust Guarantee at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. TERMINATION OF THE TRUST GUARANTEE The Trust Guarantee will terminate as to the Preferred Securities upon full payment of the Redemption Price of all Preferred Securities, upon distribution of the Subordinated Debentures held by the Trust to the holders of all of the Preferred Securities or upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust. The Trust Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of Preferred Securities must restore payment of any sums paid under such Preferred Securities or the Trust Guarantee. STATUS OF THE TRUST GUARANTEE The Trust Guarantee will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company, including the Subordinated Debentures, except those liabilities of the Company made pari passu or subordinate by their 37 39 terms, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company and (iii) senior to the Company's Common Stock. The terms of the Preferred Securities provide that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Trust Guarantee. The Trust Guarantee will constitute a guarantee of payment and not of collection (that is, the guaranteed party may institute a legal proceeding directly against the Company to enforce its rights under the Trust Guarantee without instituting a legal proceeding against any other person or entity). GOVERNING LAW The Trust Guarantee will be governed by and construed in accordance with the law of the State of Ohio. DESCRIPTION OF THE SUBORDINATED DEBENTURES Set forth below is a description of the specific terms of the Subordinated Debentures in which the Trust will invest the proceeds from the issuance and sale of the Trust Securities. The following description does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the description in the Indenture, dated as of September , 1996 (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Indenture Trustee"), the form of which is filed as an Exhibit to the Registration Statement of which this Prospectus is a part, and the Trust Indenture Act. Certain capitalized terms used herein are defined in the Indenture. At any time, the Company will have the right to liquidate the Trust and cause the Subordinated Debentures to be distributed to the holders of the Preferred Securities in liquidation of the Trust. See "Description of the Preferred Securities -- Distribution of the Subordinated Debentures." If the Subordinated Debentures are distributed to the holders of the Preferred Securities, the Company will use its best efforts to have the Subordinated Debentures listed on the NYSE or on such other exchange on which the Preferred Securities are then listed. GENERAL The Subordinated Debentures will be issued as unsecured subordinated debt securities under the Indenture. The Subordinated Debentures will be limited in aggregate principal amount to approximately $ million, such amount being the sum of the aggregate stated liquidation amount of the Preferred Securities and the capital contributed by the Company in exchange for the Common Securities (the "Company Payment"). The Subordinated Debentures are not subject to a sinking fund provision. The entire principal amount of the Subordinated Debentures will mature and become due and payable, together with any accrued and unpaid interest thereon including Compounded Interest (as hereinafter defined), if any, on , 2026, subject to the election of the Company to shorten or extend the scheduled maturity date of the Subordinated Debentures, which election in the case of an extension of the scheduled maturity date is subject to the Company's satisfying certain financial conditions. See "-- Option to Change Scheduled Maturity Date." If Subordinated Debentures are distributed to holders of Preferred Securities in liquidation of such holders' interests in the Trust, it is presently anticipated that such Subordinated Debentures will initially be issued in the form of one or more Global Securities (as defined below). As described herein, under certain limited circumstances, Subordinated Debentures may be issued in definitive certificated form in exchange for a Global Security. See "-- Book-Entry and Settlement" below. In the event that Subordinated Debentures are issued in definitive certificated form, such Subordinated Debentures will be in denominations of $25 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Subordinated Debentures issued as a Global Security will be made to DTC or its nominee, a successor depository or its nominee. In the event Subordinated Debentures are issued in definitive certificated form, 38 40 principal and interest will be payable, the transfer of the Subordinated Debentures will be registrable and Subordinated Debentures will be exchangeable for Subordinated Debentures of other denominations of a like aggregate principal amount at the principal corporate trust office of the Indenture Trustee in New York, New York; provided that payment of interest may be made at the option of the Company by check mailed to the address of the persons entitled thereto. The Indenture does not contain provisions that afford the holders of the Subordinated Debentures protection in the event of a highly leveraged transaction involving the Company or other similar transaction that may adversely affect such holders. SUBORDINATION The Indenture provides that the Subordinated Debentures are subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company whether now existing or hereafter incurred. In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default, then in either case, no payment will be made by the Company with respect to the principal (including redemption payments) of or interest on the Subordinated Debentures. Upon any distribution of assets of the Company to creditors upon any dissolution, winding-up, liquidation or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and interest due or to become due on all Senior Indebtedness of the Company (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding) must be paid in full before the holders of Subordinated Debentures are entitled to receive or retain any payment. In the event that the Subordinated Debentures are declared due and payable before the Maturity Date, then all amounts due or to become due on all Senior Indebtedness shall have been paid in full (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding) before holders of the Subordinated Debentures are entitled to receive or retain any payment. Upon satisfaction of all claims of all Senior Indebtedness then outstanding, the rights of the holders of the Subordinated Debentures will be subrogated to the rights of the holders of Senior Indebtedness of the Company to receive payments or distributions applicable to Senior Indebtedness until all amounts owing on the Subordinated Debentures are paid in full. The term "Senior Indebtedness" shall include (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise, including under all support agreements or guarantees by the Company of debentures, notes and other securities issued by its subsidiaries; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company); except in each case for (1) any such indebtedness that is by its terms subordinated to or pari passu with the Subordinated Debentures, and (2) any indebtedness in respect of debt securities issued to any trust, or a trustee of such trust, partnership or other entity affiliated with the Company that is a financing entity for such obligor (a "financing entity") in connection with the issuance by such financing entity of securities that are similar to the Preferred Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. 39 41 The Indenture does not limit the aggregate amount of Senior Indebtedness that may be issued by the Company. OPTIONAL REDEMPTION The Company shall have the right to redeem the Subordinated Debentures, (i) at any time, in whole or in part, from time to time, on or after , 2001 or (ii) at any time in whole (but not in part) upon the occurrence of a Special Event as described under "Description of the Preferred Securities -- Special Event Redemption," upon not less than 30 nor more than 60 days notice, at a redemption price equal to 100% of the principal amount to be redeemed plus any accrued and unpaid interest to the redemption date. If a partial redemption of the Preferred Securities resulting from a partial redemption of the Subordinated Debentures would result in the delisting of the Preferred Securities, the Company may only redeem the Subordinated Debentures in whole. The Company may not redeem any Subordinated Debentures if there is accrued and unpaid interest on the Subordinated Debentures as of the Interest Payment Date (as defined below) next preceding the redemption date. INTEREST Each Subordinated Debenture shall bear interest at the rate of % per annum from the original date of issuance, or from the most recent interest payment date to which interest has been paid or provided for, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year (each an "Interest Payment Date"), commencing January 15, 1997, to the person in whose name such Subordinated Debenture is registered, subject to certain exceptions, at the close of business on the Business Day next preceding such Interest Payment Date. In the event the Subordinated Debentures shall not continue to remain in book-entry form, the Company shall have the right to select record dates, which shall be more than one Business Day but less than 60 Business Days prior to the Interest Payment Date. Any installment of interest not punctually paid will cease to be payable to the holders of the Subordinated Debentures on the regular record date and may be paid to the person in whose name the Subordinated Debentures are registered at the close of business on a special record date to be fixed by the Indenture Trustee for the payment of such defaulted interest, notice of which shall be given to the holders of the Subordinated Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange, interdealer quotation system or other organization on which the Subordinated Debentures may be listed, and upon such notice as may be required by such exchange, system or organization. The amount of interest payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of the actual number of days elapsed in such 90 day quarter. In the event that any date on which interest is payable on the Subordinated Debentures is not a Business Day, then payment of the interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, then such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. OPTION TO CHANGE SCHEDULED MATURITY DATE The "Scheduled Maturity Date" of the Subordinated Debentures is , 2026. The Company, however, may extend such maturity date ( , 2026 or the maturity date then in effect, as the case may be, is hereinafter referred to as the "Maturity Date") for one or more periods, but in no event later than the earlier of (i) , 2045 or (ii) the "Interest Deduction Date." The "Interest Deduction Date" shall mean the date which is six months earlier than the ending date of the maximum term (beginning on the date of issue of the Subordinated Debentures and including any extensions thereof), as determined under any federal statute applicable by its terms to the Subordinated Debentures which is enacted at any time after the 40 42 issuance of the Subordinated Debentures (including, but not limited to, at any time after an extension of the Maturity Date), of a debt instrument for which interest is deductible for federal income tax purposes. In no event shall the extended Maturity Date be later than the Interest Deduction Date even if the Maturity Date has previously been extended to a date beyond the Interest Deduction Date. The Company must exercise its right to extend the term at least 90 days prior to the Maturity Date then in effect and must satisfy the following conditions on the date the Company exercises such right and on the Maturity Date then in effect prior to such proposed extension: (a) the Company is not in bankruptcy or otherwise insolvent, (b) the Company is not in default on any Subordinated Debenture issued to the Trust or to any trustee of the Trust in connection with an issuance of Trust Securities by the Trust, (c) the Company has made timely payments on the Subordinated Debentures for the immediately preceding six quarters without deferrals, (d) the Trust is not in arrears on payments of distributions on the Trust Securities, (e) the Subordinated Debentures or Preferred Securities are rated investment grade by any one of Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investor Services, Duff & Phelps Credit Rating Company or any other nationally recognized statistical rating organization, and (f) the final maturity of such Subordinated Debentures is not later than the 49th anniversary of the issuance of the Preferred Securities. Pursuant to the Declaration, the Regular Trustees are required to give notice of the Company's election to change the Maturity Date to the holders of the Preferred Securities. In addition, if the Company exercises its right to liquidate the Trust and distribute the Subordinated Debentures as discussed above under "Description of the Preferred Securities -- Distribution of the Subordinated Debentures," effective upon such exercise, the Maturity Date of the Subordinated Debentures may be changed to (i) any date elected by the Company that is no earlier than , 2001 and (ii) any date elected by the Company which is not later than the earlier of (a) , 2045 or (b) the "Interest Deduction Date"; provided that on the date the Company exercises such right, and on the Maturity Date in effect prior to such proposed extension, the conditions specified in the previous paragraph are satisfied. OPTION TO EXTEND INTEREST PAYMENT PERIOD The Company has the right, from time to time, to defer payment of interest on the Subordinated Debentures for up to 20 consecutive quarters, provided that no Extension Period may extend beyond the Maturity Date of the Subordinated Debentures. There could be multiple Extension Periods of varying lengths during the term of the Subordinated Debentures. At the end of each Extension Period, if any, the Company shall pay all interest then accrued and unpaid, together with interest thereon, compounded quarterly at the rate specified for the Subordinated Debentures to the extent permitted by applicable law ("Compound Interest"). In the event the Company exercises this right, then during any Extension Period, (a) the Company shall not declare or pay any dividends on, make any distribution with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to any of its capital stock and (b) the Company shall not, directly or indirectly, and will not allow any of its subsidiaries to, make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to the Subordinated Debentures; provided, however, that, the restriction in clause (a) above does not apply (i) to repurchases or acquisitions of shares of common stock of the Company as contemplated by any employment arrangement, benefit plan or other similar contract with or for the benefit of employees, officers or directors entered into in the ordinary course of business, (ii) as a result of an exchange or conversion of any class or series of the Company's capital stock for common stock, (iii) to the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged or (iv) to the payment of any stock dividend by the Company payable in common stock. Prior to the termination of any such Extension Period, the Company may further defer payments of interest by extending the interest payment period; provided, however, that each Extension Period, including all such previous and further extensions if any, may not exceed 20 consecutive quarters or extend beyond the Maturity Date. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the terms set forth in this section. No interest during an Extension Period, except at the end thereof, shall be due and payable. The Company has no present intention of exercising its right to defer payments of interest by extending the interest payment period on the Subordinated Debentures. If the Property Trustee shall be the sole holder of the 41 43 Subordinated Debentures, the Company shall give the Regular Trustees and the Property Trustee notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the date distributions on the Preferred Securities are payable or (ii) the date the Regular Trustees are required to give notice to the NYSE (or other applicable self-regulatory organization) or to holders of the Preferred Securities of the record date or the date such distribution is payable. The Regular Trustees shall give notice of the Company's selection of such Extension Period to the holders of the Preferred Securities. If the Property Trustee shall not be the sole holder of the Subordinated Debentures, the Company shall give the holders of the Subordinated Debentures notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the applicable Interest Payment Date or (ii) the date upon which the Company is required to give notice to the NYSE (or other applicable self-regulatory organization) or to holders of the Subordinated Debentures of the record or payment date of such related interest payment. COVENANTS The Indenture requires the Company to covenant to the following with respect to the Subordinated Debentures: (i) to duly and punctually pay the principal of and interest on the Subordinated Debentures (together with any additional amounts payable pursuant to the terms thereof) and comply with all other terms, agreements and conditions contained therein or made in the Indenture for the benefit of the Subordinated Debentures; (ii) to maintain an office or agency where the Subordinated Debentures may be presented, surrendered for payment, transferred or exchanged and where notices to the Company may be served; (iii) if the Company shall act as its own paying agent for the Subordinated Debentures, to segregate and hold in trust for the benefit of the persons entitled thereto a sum sufficient to pay the principal of and premium or interest, if any, so becoming due; (iv) to appoint a successor trustee whenever necessary to avoid or fill a vacancy in the office of trustee; (v) to preserve its corporate existence; (vi) to cause all properties used or useful in the conduct of its business or the business of any subsidiary to be maintained and kept in good condition and (vii) to pay or discharge, before the same shall become delinquent, all taxes, assessments, government charges, and all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or a subsidiary that comprise 10% or more of the combined assets of the Company, other than claims contested in good faith by the Company. The Indenture also requires the Company to deliver to the Trustee, within 120 days after the end of each fiscal year, a written statement as to whether, to the best knowledge of the officer signing the statement, the Company is in compliance with the terms of the Indenture and, if not, the nature and status of such non-compliance. In addition, the Company has also covenanted, with respect to the Subordinated Debentures, that for so long as the Preferred Securities and the Common Securities remain outstanding the Company will (i) maintain 100% direct or indirect ownership of the Common Securities, provided, however, that any permitted successor of the Company under the Indenture may succeed to the Company's ownership of the Common Securities, (ii) not voluntarily dissolve, wind-up or terminate the Trust, except in connection with the distribution of Subordinated Debentures or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, (iii) timely perform its duties as sponsor of the Trust, (iv) use its reasonable efforts to cause the Trust (a) to remain a business trust classified as a grantor trust, except in connection with a distribution of the Subordinated Debentures to the holders of Preferred Securities in liquidation of the Trust, the redemption of all of the Preferred Securities and Common Securities of the Trust or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (b) continue not to be treated as an association taxable as a corporation for United States federal income tax purposes other than in connection with a distribution of the Subordinated Debentures to the holders of Preferred Securities in liquidation of the Trust, and (v) use its reasonable efforts to cause each holder of Preferred Securities and Common Securities to be treated as owning an undivided beneficial interest in the Subordinated Debentures. CONSOLIDATION, MERGER AND TRANSFER OF ASSETS Upon any consolidation of the Company with, or merger of the Company into, any other person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety, the successor person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and 42 44 power of, the Company under the Indenture with the same effect as the Company prior to such transaction, and thereafter, except in the case of a lease, the Company shall be relieved of all obligations and covenants under the Indenture and the Subordinated Debentures. INDENTURE EVENTS OF DEFAULT The occurrence of any of the following events with respect to the Subordinated Debentures will, unless otherwise specified, constitute an "Event of Default" with respect to the Subordinated Debentures: (a) default for thirty (30) days in the payment of any installment of interest on the Subordinated Debentures; (b) default in the payment of any of the principal of the Subordinated Debentures when due, whether at maturity, upon redemption, by declaration of acceleration or otherwise; (c) default for sixty (60) days by the Company in the observance or performance of any other covenant or agreement contained in the Subordinated Debentures or the Indenture (other than a covenant or agreement default which is specifically designated as having a different time period) for the benefit of the Subordinated Debentures after written notice thereof as provided in the Indenture; (d) (i) an event of default occurs under any instrument (including the Indenture) under which there is at the time outstanding, or by which there may be secured or evidenced, any indebtedness of the Company for money borrowed by the Company (other than non-recourse indebtedness) which results in acceleration or nonpayment at maturity (after giving effect to any applicable grace period) of such indebtedness in an aggregate amount exceeding $15,000,000; or any such indebtedness exceeding $15,000,000 shall otherwise be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled prepayment or exercise of an optional prepayment right), prior to the stated maturity thereof; or any failure by the Company to make any payment under a guarantee in respect of any indebtedness, in each case in an amount of at least $15,000,000, on the date such payment is due (or within any grace period specified in the agreement or other instrument governing such indebtedness); in which case the Company shall immediately give notice to the Trustee of such acceleration or non-payment, and (ii) there shall have been a failure to cure such default or to pay or discharge such defaulted indebtedness within ten (10) days after written notice thereof as provided in the Indenture; (e) any final non-appealable judgment or order for the payment of money in excess of $15,000,000 is rendered against the Company, such judgment or order is not satisfied by payment or bonded and either enforcement proceedings have been commenced by the judgment creditor or there has been a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not have been in effect; provided, however, that a judgment or order fully covered by insurance (or a judgment or order for the payment of money covered by insurance to the extent of all payments in excess of $15,000,000), which coverage has not been disputed by the insurer, shall not be considered a default or an Event of Default; or (f) certain events of bankruptcy, insolvency or reorganization relating to the Company. In addition, an Event of Default shall include the voluntary or involuntary dissolution or winding up of the business of the Trust or other termination of the existence of the Trust, other than in connection with (i) the distribution of the Subordinated Debentures to holders of the Trust Securities in liquidation of their interests in the Trust, (ii) the redemption of all of the outstanding Trust Securities, or (iii) certain mergers, consolidations or amalgamations of the Trust, each as permitted by the Declaration. If any Event of Default shall occur and be continuing, the Property Trustee, as the holder of the Subordinated Debentures, will have the right to declare the principal of and the interest on the Subordinated Debentures (including any Compounded Interest and any other amounts payable under the Indenture) to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Subordinated Debentures subject to the subordination provisions in the Indenture. An Event of Default also constitutes a Declaration Event of Default. If the Property Trustee fails to enforce its rights with respect to the Subordinated Debentures held by the Trust, any record holder of Preferred Securities may institute legal proceedings directly against the Company to enforce the Property Trustee's rights under such Subordinated Debentures without first instituting any legal proceedings against such Property Trustee or any other person or entity. In addition, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Subordinated Debentures issued to the Trust on the date such interest or principal is otherwise payable, then a record holder of Preferred 43 45 Securities may institute a proceeding directly against the Company for enforcement of payment to the record holder of the Preferred Securities of the principal of or interest on the Subordinated Debentures on or after the respective due dates specified in the Subordinated Debentures, and the amount of the payment will be based on the holder's pro rata share of the amount due and owing on all of the Preferred Securities. The record holder in the case of the issuance of one or more global Preferred Securities certificates will be DTC acting at the direction of its Direct Participants, who in turn will be acting at the direction of the Beneficial Owners. The holders of Preferred Securities in certain circumstances have the right to direct the Property Trustee to exercise its rights, with respect to other than principal and interest payments on the Subordinated Debentures, as the holder of the Subordinated Debentures. See "Description of the Preferred Securities -- Declaration Events of Default" and "Description of the Preferred Securities -- Voting Rights." BOOK-ENTRY AND SETTLEMENT If distributed to holders of Preferred Securities in connection with the involuntary or voluntary dissolution, winding-up or liquidation of the Trust, it is presently anticipated that the Subordinated Debentures will be issued in the form of one or more global certificates (each a "Global Security") registered in the name of a securities depository or its nominee. Except under the limited circumstances described below, Subordinated Debentures represented by the Global Security will not be exchangeable for, and will not otherwise be issuable as, Subordinated Debentures in definitive form. The Global Securities described above may not be transferred except by the depository to a nominee of the depository or by a nominee of the depository to the depository or another nominee of the depository or to a successor depository or its nominee. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such laws may impair the ability to transfer beneficial interests in such a Global Security. Except as provided below, owners of beneficial interests in such a Global Security will not be entitled to receive physical delivery of Subordinated Debentures in definitive form and will not be considered the Holders (as defined in the Indenture) thereof for any purpose under the Indenture, and no Global Security representing Subordinated Debentures shall be exchangeable, except for another Global Security of like denomination and tenor to be registered in the name of the depository or its nominee or to a successor depository or its nominee. Accordingly, each beneficial owner must rely on the procedures of the depository or, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest to exercise any rights of a Holder under the Indenture. THE DEPOSITORY If Subordinated Debentures are distributed to holders of Preferred Securities in liquidation of such holders' interests in the Trust, DTC will act as securities depository for the Subordinated Debentures. For a description of DTC and the specific terms of the depository arrangements, see "Description of the Preferred Securities -- Book-Entry Issuance -- The Depository Trust Company." As of the date of this Prospectus, the description therein of DTC's book-entry system and DTC's practices as they relate to purchases, transfers, notices and payments with respect to the Preferred Securities apply in all material respects to any debt obligations represented by one or more Global Securities held by DTC. The Company may appoint a successor to DTC or any successor depository in the event DTC or such successor depository is unable or unwilling to continue as the depository for the Global Securities. None of the Company, the Trust, the Indenture Trustee, any paying agent and any other agent of the Company or the Indenture Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for the Subordinated Debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. 44 46 DISCONTINUANCE OF THE DEPOSITORY'S SERVICES A Global Security shall be exchangeable for Subordinated Debentures in definitive certificated form registered in the names of persons other than the depository or its nominee only if (i) the depository notifies the Company that it is unwilling or unable to continue as a depository for such Global Security and no successor depository shall have been appointed, (ii) the depository, at any time, ceases to be a clearing agency registered under the Exchange Act at which time the depository is required to be so registered to act as such depository and no successor depository shall have been appointed, or (iii) the Company, in its sole discretion, determines that such Global Security shall be so exchangeable. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Subordinated Debentures registered in such names as the depository shall direct. It is expected that such instructions will be based upon directions received by the depository from its Participants with respect to ownership of beneficial interests in such Global Security. MISCELLANEOUS The Indenture will provide that the Company will pay all fees and expenses related to (i) the offering of the Trust Securities and the Subordinated Debentures, (ii) the organization, maintenance and dissolution of the Trust, (iii) the retention of the Trustees and (iv) the enforcement by the Property Trustee of the rights of the holders of the Preferred Securities. EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBENTURES AND THE TRUST GUARANTEE As set forth in the Declaration, the sole purpose of the Trust is to (i) issue the Trust Securities evidencing undivided beneficial interests in the assets of the Trust, (ii) invest the proceeds from such issuance and sale in the Subordinated Debentures and (iii) engage in only those other activities necessary or incidental thereto. As long as payments of interest and other payments are made when due on the Subordinated Debentures, such payments will be sufficient to cover distributions and payments due on the Trust Securities because: (i) the aggregate principal amount of Subordinated Debentures will be equal to the sum of the aggregate stated liquidation amount of the Trust Securities; (ii) the interest rate and the interest and other payment dates on the Subordinated Debentures will match the distribution rate and distribution and other payment dates for the Preferred Securities; (iii) the Company shall pay all, and the Trust shall not be obligated to pay, directly or indirectly, any, costs, expenses, debts and obligations (other than with respect to the Trust Securities) related to the Trust; and (iv) the Declaration provides that the Trustees shall not cause or permit the Trust to, among other things, engage in any activity that is not consistent with the purposes of the Trust. Payments of distributions (to the extent funds therefor are available) and other payments due on the Preferred Securities (to the extent funds therefor are available) are guaranteed by the Company as and to the extent set forth under "Description of Trust Guarantee." If the Company does not make interest and/or principal payments on the Subordinated Debentures purchased by the Trust, the Trust will not have sufficient funds to pay distributions on the Preferred Securities. The Trust Guarantee will not apply to the payment of distributions and other payments on the Preferred Securities when the Trust does not have sufficient funds to make such distributions or other payments. The Trust Guarantee will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company except those made pari passu or subordinate by their terms, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company and (iii) senior to the Company's common stock. The Trust Guarantee, when taken together with the back-up undertakings, consisting of obligations of the Company as set forth in the Declaration (including the obligation to pay expenses of the Trust), the Indenture 45 47 and the Subordinated Debentures issued to the Trust, provide a full and unconditional guarantee by the Company of the Preferred Securities. If the Preferred Securities Guarantee Trustee fails to enforce the Trust Guarantee, any record holder of Preferred Securities may institute a legal proceeding directly against the Company to enforce the Preferred Securities Guarantee Trustee's rights under the Trust Guarantee without first instituting a legal proceeding against the Trust, the Preferred Securities Guarantee Trustee or any other person or entity. In addition, if the Company has failed to make a Trust Guarantee Payment, a record holder of Preferred Securities may directly institute a proceeding against the Company for enforcement of the Trust Guarantee for such payment to the record holder of the Preferred Securities of the principal of or interest on the Subordinated Debentures on or after the respective due dates specified in the Subordinated Debentures, and the amount of the payment will be based on the holder's pro rata share of the amount due and owing on all of the Preferred Securities. The Company has waived any right or remedy to require that any action be brought first against the Trust or any other person or entity before proceeding directly against the Company. The record holder in the case of the issuance of one or more global Preferred Securities certificates will be DTC acting at the direction of its Direct Participants, who in turn will be acting at the direction of the beneficial owners of the Preferred Securities. If the Property Trustee fails to enforce its rights with respect to the Subordinated Debentures held by the Trust, any record holder of Preferred Securities may institute legal proceedings directly against the Company to enforce the Property Trustee's rights under such Subordinated Debentures without first instituting any legal proceedings against such Property Trustee or any other person or entity. In addition, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest, principal or other required payment on the Subordinated Debentures issued to the Trust on the date such interest, principal or other payment is otherwise payable, then a record holder of Preferred Securities may institute Direct Action against the Company for enforcement of payment on the Subordinated Debentures on or after the respective due dates specified in the Subordinated Debentures. To the extent the Company makes a payment to a record holder of Preferred Securities in connection with proceedings by such record holder directly against the Company, the Company will be subrogated to the rights of the record holder of Preferred Securities to the extent of payments made by the Company to the record holder. The record holder in the case of the issuance of one or more global Preferred Securities certificates will be DTC acting at the direction of its Direct Participants, who in turn will be acting at the direction of the beneficial owners of the Preferred Securities. If another Indenture Event of Default occurs and is continuing, the Declaration provides a mechanism whereby the holders of the Preferred Securities, using the procedures described in "Description of the Preferred Securities -- Voting Rights," may direct the Property Trustee to enforce its rights under the Subordinated Debentures. UNITED STATES FEDERAL INCOME TAXATION GENERAL The following is a summary of certain of the material United States federal income tax consequences of the purchase, ownership and disposition of Preferred Securities. Unless otherwise stated, this summary deals only with Preferred Securities held as capital assets by holders who purchase the Preferred Securities upon original issuance ("Initial Holders"). It does not deal with special classes of holders such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors, or persons that will hold the Preferred Securities as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment, or as other than a capital asset. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of Preferred Securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the Preferred Securities. This summary is based on the Code, U.S. Treasury regulations thereunder and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. Any such changes may be applied retroactively in a manner that could cause the tax consequences to vary substantially from the 46 48 consequences described below, possibly adversely affecting a beneficial owner of the Preferred Securities. In particular, legislation has been proposed that could adversely affect the Company's ability to deduct interest on the Subordinated Debentures, which may in turn permit the Company to cause a redemption of the Preferred Securities prior to 2001. See "-- Proposed Tax Law Changes." CLASSIFICATION OF THE SUBORDINATED DEBENTURES AND THE TRUST In connection with the issuance of the Subordinated Debentures, Akin, Gump, Strauss, Hauer & Feld, L.L.P. ("Tax Counsel"), tax counsel for the Company and the Trust, will render its opinion generally to the effect that, although not entirely free from doubt, under current law and assuming full compliance with the terms of the Indenture (and certain other documents), and based upon certain facts and assumptions contained in such opinion, the Subordinated Debentures will be classified for United States federal income tax purposes as indebtedness of the Company. In connection with the issuance of the Preferred Securities, Tax Counsel will render its opinion generally to the effect that under current law and assuming full compliance with the terms of the Declaration and other documents, and based upon certain facts and assumptions contained in such opinion, the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for United States federal income tax purposes, each holder of Preferred Securities generally will be considered the owner of an undivided interest in the Subordinated Debentures. Each holder will be required to include in its gross income its allocable share of income on the Subordinated Debentures. INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT Under recently issued income tax regulations applicable to all debt instruments that, like the Subordinated Debentures, are issued on or after August 13, 1996, remote contingencies that stated interest will not be timely paid are ignored in determining whether a debt instrument is issued with OID. OID must be included in income by all holders as it accrues economically on a daily basis, without regard to when it is paid in cash or whether a particular holder generally uses the cash method of accounting. The Company has concluded that the likelihood of its exercising its option to defer payments of interest is remote because exercising that option would prevent the Company from declaring dividends on its stock. Based upon this conclusion, and although not entirely free from doubt, in the opinion of Tax Counsel the Subordinated Debentures will not include OID. As a consequence, holders of the Preferred Securities should report interest under their own methods of accounting (e.g., cash or accrual) instead of under the daily economic accrual rules for OID instruments. Under the new regulations, however, if the Company exercises its right to defer payments of interest, the Subordinated Debentures will become OID instruments, and all holders of the Preferred Securities will be required to accrue interest on a daily basis during any Extension Period even though the Company will not pay the interest in cash until the end of the Extension Period, and even though a holder may use the cash method of accounting. A holder who disposes of the Preferred Securities during such an Extension Period may suffer a loss because the market value of the Trust Securities will likely fall if the Company exercises its option to defer payments of interest on the Subordinated Debentures. Furthermore, the market value of the Preferred Securities may not reflect the accumulated distribution that will be paid at the end of the Extension Period, and a holder who sells the Preferred Securities during the Extension Period will not receive from the Company any cash related to the interest income the holder accrued and included in its taxable income under the OID rules (because that cash will be paid to the holder of record at the end of the Extension Period). If the Subordinated Debentures become OID instruments (i.e., if the Company exercises its right to defer payment of interest), the Subordinated Debentures will be taxed as OID instruments for as long as they remain outstanding. Thus, even after the end of the Extension Period, all holders will be required to continue accruing interest on the Subordinated Debentures on a daily basis, regardless of their method of accounting. The new regulations have not been addressed in any rulings or other interpretations by the Internal Revenue Service ("IRS"), and it is possible that the IRS could take a position contrary to the interpretation herein. 47 49 Corporate holders of the Preferred Securities will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the Preferred Securities. MARKET DISCOUNT AND ACQUISITION PREMIUM Holders of Preferred Securities other than Initial Holders may be considered to have acquired their undivided interests in the Subordinated Debentures with "market discount" or "acquisition premium" as such phrases are defined for United States federal income tax purposes. Such holders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the Preferred Securities. RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST As described under the caption "Description of the Preferred Securities -- Distribution of the Subordinated Debentures," Subordinated Debentures may be distributed to holders in exchange for the Preferred Securities and in liquidation of the Trust. Under current law, such a distribution would be treated for United States federal income tax purposes as a non-taxable event to each holder, and each holder would receive an aggregate tax basis in the Subordinated Debentures equal to such holder's aggregate tax basis in its Preferred Securities. A holder's holding period in the Subordinated Debentures so received in liquidation of the Trust would include the period during which the Preferred Securities were held by such holder. If, however, the liquidation of the Trust were to occur because the Trust is subject to United States federal income tax with respect to income accrued or received on the Subordinated Debentures, the distribution of the Subordinated Debentures to holders would be a taxable event to each holder and a holder would recognize gain or loss as if the holder had exchanged its Preferred Securities for the Subordinated Debentures it received upon liquidation of the Trust. Under certain circumstances described herein (see "Description of the Preferred Securities -- Special Event Redemption"), the Subordinated Debentures may be redeemed for cash, with the proceeds of such redemption distributed to holders in redemption of their Preferred Securities. Under current law, such a redemption would constitute a taxable disposition of the redeemed Preferred Securities for United States federal income tax purposes, and a holder would recognize gain or loss as if it sold such redeemed Preferred Securities for cash. See "-- Sales of Preferred Securities." SALES OF PREFERRED SECURITIES A holder that sells Preferred Securities will recognize gain or loss equal to the difference between its adjusted tax basis in the Preferred Securities and the amount realized on the sale of such Preferred Securities. Assuming the Company does not defer interest on the Subordinated Debentures by extending the interest payment period, a holder's adjusted tax basis in the Preferred Securities generally will equal its initial purchase price. Subject to the market discount rules described above and the discussion below regarding accrued and unpaid interest, such gain or loss generally will be a capital gain or loss and generally will be a long-term capital gain or loss if the Preferred Securities have been held for more than one year. The Preferred Securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying Subordinated Debentures. If the Company exercises its right to defer payments of interest, a holder who disposes of Preferred Securities between record dates for payments of distributions thereon will be required to include in income as ordinary income, accrued and unpaid interest on the Subordinated Debentures through the date of disposition, and to add such amount to such holder's adjusted tax basis in its pro rata share of the underlying Subordinated Debentures deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis (which will include all accrued but unpaid interest) a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. Accrual basis taxpayers would be subjected to similar treatment without regard to the Company's election to defer. 48 50 UNITED STATES ALIEN HOLDERS Prospective purchasers of Preferred Securities that are United States Alien Holders should consult their tax advisor with respect to the United States federal tax consequences, including in particular, potential withholding tax consequences, as well as any tax consequences that may arise under the laws of any U.S. state, local or other U.S. or non-U.S. tax jurisdiction. For purposes of this discussion, a "United States Alien Holder" is any corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership, or a non-resident fiduciary of a foreign estate or trust. INFORMATION REPORTING TO HOLDERS Income on the Preferred Securities will be reported to holders on Forms 1099, which forms should be mailed to holders of Preferred Securities by January 31 following each calendar year. BACKUP WITHHOLDING Payments made on, and proceeds from the sale of, the Preferred Securities may be subject to a "backup" withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amounts will be allowed as a credit against the holder's federal income tax, provided the required information is provided to the Internal Revenue Service. PROPOSED TAX LAW CHANGES On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"), the revenue portion of President Clinton's fiscal 1997 budget proposal, was released. The Bill would, among other things, generally deny interest deductions for interest or OID on an instrument issued by a corporation that has a maximum weighted average maturity of more than 40 years. The Bill would also treat as equity, instruments issued by a corporation that have a maximum term of more than 20 years and that are not shown as indebtedness on the consolidated balance sheet of the issuer. For purposes of determining the weighted average maturity or the term of an instrument, any right to extend would be treated as exercised. The above-described provisions of the Bill were proposed to be effective generally for instruments issued on or after December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate Finance and House Ways and Means Committees issued a joint statement (the "Joint Statement") to the effect that it was their intention that the effective date of the President's legislative proposals, if adopted, would be no earlier than the date of appropriate Congressional action. In addition, subsequent to the publication of the Joint Statement, Senator Daniel Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury Department officials concurring with the views expressed in the Joint Statement. Under current law, it is likely that the Subordinated Debentures will be treated as indebtedness of the Company and the Company will be able to deduct interest on the Subordinated Debentures beneficially held by the holders of the Preferred Securities. The terms of the Subordinated Debentures limit the right to extend the maturity of the Subordinated Debentures to a date which is six months shorter than any legislative limit on the length of debt securities for which interest is deductible. Based on the advice of Tax Counsel, the Company believes this will allow it an interest deduction if the 40-year weighted average maturity component of the Bill is enacted. However, if the provision of the Bill regarding a 20-year term is enacted with retroactive effect with regard to the Subordinated Debentures, the Company will not be entitled to an interest deduction with respect to the Subordinated Debentures. There can be no assurance that current or future legislative proposals, adverse judicial decisions, final legislation or official administrative pronouncements will not affect the ability of the Company to deduct interest on the Subordinated Debentures, giving rise to a Tax Event which would permit the Company to cause the redemption of the Preferred Securities prior to July 30, 2001 (the first date on which the Company would otherwise be able to cause a redemption of Preferred Securities) as described more fully under "Description of Preferred Securities -- Special Event Redemption." 49 51 THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. 50 52 UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement (the "Underwriting Agreement"), the Trust has agreed to sell to each of the Underwriters named herein, and each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, . are acting as representatives (the "Representatives"), has severally agreed to purchase the number of Preferred Securities set forth opposite its name below. In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Preferred Securities offered hereby if any of the Preferred Securities are purchased. In the event of default by an Underwriter, the Underwriting Agreement provides that, in certain circumstances, the purchase commitments of the nondefaulting Underwriters may be increased or the Underwriting Agreement may be terminated.
NUMBER OF UNDERWRITER PREFERRED SECURITIES --------------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated................................... --------------------- Total.......................................... 4,000,000 ==============
The Underwriters propose to offer the Preferred Securities in part directly to the public at the initial public offering price, as set forth on the cover page of this Prospectus, and in part to certain securities dealers at such price less a concession not in excess of $ per Preferred Security. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per Preferred Security to certain brokers and dealers. After the Preferred Securities are released for sale to the public, the offering price and other selling terms may from time to time be varied by the Representatives. In view of the fact that the proceeds of the sale of the Preferred Securities will be used to purchase the Subordinated Debentures of the Company, the Underwriting Agreement provides that the Company will agree to pay as compensation ("Underwriters' Compensation") for the Underwriters' arranging the investment therein of such proceeds, an amount of $ per Preferred Security (or $ in the aggregate) for the accounts of the several Underwriters, provided that such compensation for sales of 10,000 or more Preferred Securities to any single purchaser will be $ per Preferred Security. Therefore, to the extent of such sales, the actual amount of Underwriters' Compensation will be less than the aggregate amount specified in the preceding sentence. Pursuant to the Underwriting Agreement, the Trust and the Company have granted to the Underwriters an option exercisable for 30 days to purchase up to an additional 600,000 Preferred Securities at the offering price per Preferred Security set forth on the cover page hereof, solely to cover over-allotments, if any, in the sale of the Preferred Securities. The Company will pay Underwriters' Compensation in the amounts per Preferred Security set forth above with respect to such additional Preferred Securities. To the extent such option is exercised, each Underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional Preferred Securities as the number set forth next to such Underwriter's name in the preceding table bears to the total number of Preferred Securities offered by the Underwriters hereby. During a period of 90 days from the date of this Prospectus, neither the Trust nor the Company will, without the prior written consent of the Representatives, directly or indirectly, sell, offer to sell, grant any option for the sale of, or otherwise dispose of, any Preferred Securities, any security convertible into or exchangeable into or exercisable for Preferred Securities or any equity securities substantially similar to the Preferred Securities (except for the Subordinated Debentures and the Preferred Securities offered hereby). Application will be made to list the Preferred Securities on the NYSE. If approved, trading of the Preferred Securities on the NYSE is expected to commence within a 30-day period after the initial delivery of 51 53 the Preferred Securities. The Representatives have advised the Trust that, if approved, they intend to make a market in the Preferred Securities prior to the commencement of trading on the NYSE. The Representatives have no obligation to make a market in the Preferred Securities, however, and may cease market making activities, if commenced, at any time. Prior to this offering, there has been no public market for the Preferred Securities. In order to meet one of the requirements for listing the Preferred Securities on the NYSE, the Underwriters will undertake to sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial holders. The Company and the Trust have agreed to indemnify the Underwriters against, or contribute to payments that the Underwriters may be required to make in respect of, certain liabilities, including liabilities under the Securities Act. Certain of the Underwriters engage in transactions with, and, from time to time, have performed services for, the Company and its subsidiaries in the ordinary course of business. LEGAL MATTERS The validity of the Securities offered hereby other than the Preferred Securities will be passed upon for the Company and the Trust by Keating, Muething & Klekamp, P.L.L., Cincinnati, Ohio. Certain United States federal income taxation matters also will be passed upon for the Company and the Trust by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington, D.C. Attorneys in the Keating, Muething & Klekamp P.L.L., law firm and Akin, Gump, Strauss, Hauer & Feld, L.L.P. law firm hold shares of common stock of the Company. Certain matters of Delaware law relating to the validity of the Preferred Securities will be passed upon for the Trust by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware. Certain legal matters in connection with the Securities will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New York, New York, and Taft, Stettinius & Hollister, Cincinnati, Ohio. EXPERTS The consolidated financial statements of AFG appearing in AFG's Annual Report (Form 10-K) for the year ended December 31, 1995, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such report is based in part on the reports of Deloitte & Touche LLP, independent auditors, relating to the consolidated financial statements of American Premier Underwriters, Inc. for the years ended December 31, 1994 and 1993 and of Deloitte & Touche, independent auditors, relating to the consolidated financial statements of General Cable Corporation for the year ended December 31, 1993. AFG's financial statements referred to above are incorporated herein by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. 52 54 ------------------------------------------------------ ------------------------------------------------------ NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE TRUST OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information................... 4 Information of Certain Documents by Reference............................. 4 Prospectus Summary...................... 6 Risk Factors............................ 10 The Trust............................... 19 The Company............................. 20 Capitalization.......................... 23 Ratio of Earnings to Fixed Charges...... 24 Use of Proceeds......................... 24 Description of the Preferred Securities............................ 24 Description of Trust Guarantee.......... 35 Description of the Subordinated Debentures............................ 38 Effect of Obligations Under the Subordinated Debentures and the Trust Guarantee............................. 45 United States Federal Income Taxation... 46 Underwriting............................ 51 Legal Matters........................... 52 Experts................................. 52
------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ 4,000,000 PREFERRED SECURITIES AMERICAN FINANCIAL CAPITAL TRUST I % TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRSSM") GUARANTEED TO THE EXTENT SET FORTH HEREIN BY AMERICAN FINANCIAL GROUP, INC. ------------------------ PROSPECTUS ------------------------ MERRILL LYNCH & CO. , 1996 ------------------------------------------------------ ------------------------------------------------------ 55 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the expenses in connection with the offering described in this Registration Statement: Securities and Exchange Commission registration fee*............................... $39,655 NYSE listing fee................................................................... Legal fees and expenses............................................................ Accounting fees and expenses....................................................... Printing and engraving expenses.................................................... Trustee's fees and expenses........................................................ Rating Agencies' fees.............................................................. Blue Sky fees and expenses......................................................... Miscellaneous...................................................................... ------- TOTAL............................................................................ $ =======
- --------------- *Actual; other expenses are to be filed by amendment. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Ohio Revised Code, Section 1701.13(E), allows indemnification by the Company of any person made or threatened to be made a party to any proceedings, other than a proceeding by or in the right of the Company, by reason of the fact that he is or was a director, officer, employee or agent of the Company, against expenses, including judgment and fines, if he acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Company and, with respect to criminal actions, in which he had no reasonable cause to believe that his conduct was unlawful. Similar provisions apply to actions brought by or in the right of the Company, except that no indemnification shall be made in such cases when the person shall have been adjudged to be liable for negligence or misconduct to the Company unless deemed otherwise by the court. Indemnifications are to be made by a majority vote of a quorum of disinterested directors or the written opinion of independent counsel or by the shareholders or by the court. The Company's Code of Regulations extends such indemnification. The Company maintains, at its expense, Directors and Officers Liability and Company Reimbursement Liability Insurance. The Directors and Officers Liability portion of such policy covers all directors and officers of the Company and of the companies which are, directly or indirectly, more than 50% owned by the Company. The policy provides for payment on behalf of the directors and officers, up to the policy limits and after expenditure of a specified deductible, of all Loss (as defined) from claims made against them during the policy period for defined wrongful acts, which include errors, misstatements or misleading statements, acts or omissions and neglect or breach of duty by directors and officers in the discharge of their individual or collective duties as such. The insurance includes the cost of investigations and defenses, appeals and bonds and settlements and judgments, but not fines or penalties imposed by law. The insurance does not cover any claims arising out of acts alleged to have been committed prior to November 24, 1978. The insurer limit of liability under the policy is $50,000,000 in the aggregate for all losses each year subject to certain individual and aggregate deductibles. The policy contains various exclusions and reporting requirements. The Company also has entered into indemnification agreements with its executive officers and directors providing for indemnification (and advancement of expenses) against certain liabilities to the fullest extent provided by Ohio law. II-1 56 The Declaration provides that, to the fullest extent permitted by applicable law, the Trust shall indemnify and hold harmless each of the Trustees, any affiliate of the Trustees, any officer, director, shareholder, member, partner, employee, representative or agent of the Trustees, or any employee or agent of the Trust or its affiliates (each a "Trust Indemnified Person"), from and against any loss, damage or claim incurred by such Trust Indemnified Person by reason of any act or omission performed or omitted by such Trust Indemnified Person in good faith on behalf of the Trust and in a manner such Trust Indemnified Person reasonably believed to be within the scope of authority conferred on such Trust Indemnified Person by the Declaration, except that no Trust Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Trust Indemnified Person by reason of gross negligence (or, in the case of the Property Trustee, negligence) or willful misconduct with respect to such acts or omissions. The Declaration also provides that, to the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Trust Indemnified Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Trust prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Trust of an undertaking by or on behalf of the Trust Indemnified Person to repay such amount if it shall be determined that the Trust Indemnified Person is not entitled to be indemnified as authorized in the Declaration. The Declaration further provides that no Trust Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person (as defined therein) or for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Trust Indemnified Person in good faith on behalf of the Trust and in a manner such Trust Indemnified Person reasonably believed to be within the scope of the authority conferred on such Trust Indemnified Person by the Declaration or by law, except that a Trust Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Trust Indemnified Person's gross negligence or willful misconduct with respect to acts or omissions. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - -------------- ------------------------------------------------------------------------------ 1.1 * Form of Underwriting Agreement for Preferred Securities 4.1 Form of Indenture 4.2 Certificate of Trust of American Financial Capital Trust I 4.3 * Declaration of Trust of American Financial Capital Trust I 4.4 Form of Preferred Securities Guarantee Agreement 4.5 Form of Common Securities Guarantee Agreement 4.6 Form of Subordinated Debenture (contained in Exhibit 4.1) 4.7 Form of Preferred Security 4.8 Form of Common Security 5.1 * Opinion of Keating, Muething & Klekamp, P.L.L. 5.2 * Opinion of Morris, Nichols, Arsht & Tunnell 8.1 * Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. 23.1 Consents of Independent Auditors. 23.2 * Consent of Keating, Muething & Klekamp, P.L.L. (Contained on Exhibit 5.1) 23.3 * Consent of Morris, Nichols, Arsht & Tunnell (Contained on Exhibit 5.2) 23.4 * Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (Contained on Exhibit 8.1) 24 Powers of Attorney (contained on the signature page). 25.1 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Trustee under the Indenture
II-2 57
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - -------------- ------------------------------------------------------------------------------ 25.2 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Trustee under the Declaration of American Financial Capital Trust I 25.3 Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as Trustee of the Trust Preferred Securities Guarantee for the benefit of the holders of Preferred Securities of American Financial Capital Trust I
- --------------- * To be filed by amendment. ITEM 17. UNDERTAKINGS. (a) The Company hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Company's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The Company and the Trust hereby undertake that: (1) for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Company and the Trust pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and (2) for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 58 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Company certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Cincinnati, State of Ohio, as of the 24th day of September, 1996 AMERICAN FINANCIAL GROUP, INC. By: CARL H. LINDNER Carl H. Lindner Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Each person below whose signature is preceded by an (*) hereby constitutes and appoints each of Fred J. Runk, James C. Kennedy and Karl J. Grafe, his true and lawful attorney and agent, to do any and all acts and instruments for him and in his name in the capacity indicated below, which said attorneys and agents, or any of them, may deem necessary or advisable to enable American Financial Group, Inc. to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign amendments (including post effective amendments).
SIGNATURE CAPACITY DATE - -------------------------------------------- ------------------------------------------------------------ * CARL H. LINDNER Chairman of the Board and Chief September 24, 1996 Carl H. Lindner Executive Officer and a Director (Principal Executive Officer) * CARL H. LINDNER III Director September 24, 1996 Carl H. Lindner III * S. CRAIG LINDNER Director September 24, 1996 S. Craig Lindner * KEITH E. LINDNER Director September 24, 1996 Keith E. Lindner * JAMES E. EVANS Director September 24, 1996 James E. Evans * Theodore H. Emmerich Director September 24, 1996 Theodore H. Emmerich * THOMAS M. HUNT Director September 24, 1996 Thomas M. Hunt * WILLIAM R. MARTIN Director September 24, 1996 William R. Martin FRED J. RUNK Senior Vice President and Treasurer September 24, 1996 Fred J. Runk (Principal Financial and Accounting Officer)
II-4 59 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, American Financial Capital Trust I certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Cincinnati, State of Ohio, as of the 24th day of September, 1996 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Each person below whose signature is preceded by an (*) hereby constitutes and appoints each of Fred J. Runk, James C. Kennedy and Karl J. Grafe, his true and lawful attorney and agent, to do any and all acts and instruments for him and in his name in the capacity indicated below, which said attorneys and agents, or any of them, may deem necessary or advisable to enable American Financial Capital Trust I to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign amendments (including post effective amendments) and any related Registration Statement, or amendment thereto, filed pursuant to Rule 462(b) promulgated under the Securities Act of 1933. AMERICAN FINANCIAL CAPITAL TRUST I By: * JAMES E. EVANS James E. Evans, as Trustee By: * THOMAS E. MISCHELL Thomas E. Mischell, as Trustee II-5 EX-4.1 2 EXHIBIT 4.1 1 EXHIBIT 4.1 AMERICAN FINANCIAL GROUP, INC. TO THE BANK OF NEW YORK a New York banking corporation, Trustee ------------------- Indenture Dated as of September __, 1996 $[103,092,784] ___% Subordinated Debentures 2 RECITALS OF THE COMPANY...........................................1 ARTICLE ONE.......................................................1 Definitions and Other Provisions of General Application...........1 SECTION 101. Definitions.........................................1 Act............................................................2 Affiliate......................................................2 Authenticating Agent...........................................2 Board of Directors.............................................2 Board Resolution...............................................2 Business Day...................................................2 Commission.....................................................2 Common Securities..............................................3 Company........................................................3 Company Request................................................3 Corporate Trust Office.........................................3 Covenant Defeasance............................................3 Declaration....................................................3 Defaulted Interest.............................................3 Defeasance.....................................................3 Depositary.....................................................3 Event of Default...............................................3 Exchange Act...................................................3 Expense Agreement..............................................3 Extension Period...............................................3 Global Security................................................3 Holder.........................................................3 Indenture......................................................3 Institutional Trustee..........................................4 Interest Payment Date..........................................4 Investment Company Act Event...................................4 Maturity.......................................................4 Officers' Certificate..........................................4 Opinion of Counsel.............................................4 Outstanding....................................................4 Parent Guarantees..............................................5 Paying Agent...................................................5 Person.........................................................5 Predecessor Security...........................................5 Preferred Securities...........................................5 Redemption Date................................................5 Redemption Price...............................................5 Regular Record Date............................................5 Responsible Officer............................................5 Securities.....................................................5 Security Register..............................................5 Senior Indebtedness............................................5 Special Event..................................................6 Special Record Date............................................6 Stated Maturity................................................6 3 Subsidiary.......................................................6 Tax Event........................................................6 Trust............................................................7 Trustee..........................................................7 Trust Indenture Act..............................................7 U.S. Government Obligations......................................7 Vice President...................................................7 SECTION 102. Compliance Certificates and Opinions..................7 SECTION 103. Form of Documents Delivered to Trustee................7 SECTION 104. Acts of Holders; Record Dates.........................8 SECTION 105. Notices, Etc. to Trustee and the Company..............8 SECTION 106. Notice to Holders; Waiver.............................9 SECTION 107. Conflict with Trust Indenture Act.....................9 SECTION 108. Effect of Headings and Table of Contents..............9 SECTION 109. Separability Clause...................................9 SECTION 110. Benefits of Indenture................................10 SECTION 111. Governing Law........................................10 SECTION 112. Legal Holidays.......................................10 ARTICLE TWO........................................................10 Security Forms.....................................................10 SECTION 201. Forms Generally......................................10 SECTION 202. Form of Face of Security.............................11 SECTION 203. Form of Reverse of Security..........................13 SECTION 204. Form of Trustee's Certificate of Authentication......15 ARTICLE THREE......................................................15 The Securities.....................................................15 SECTION 301. Title and Terms......................................15 SECTION 302. Denominations........................................17 SECTION 303. Execution, Authentication, Delivery and Dating.......17 SECTION 304. Temporary Securities.................................18 SECTION 305. Registration; Registration of Transfer and Exchange..18 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities....19 SECTION 307. Payment of Interest; Interest Rights Preserved.......20 SECTION 308. Persons Deemed Owners................................21 SECTION 309. Cancellation.........................................21 SECTION 310. Computation of Interest..............................21 SECTION 311. Right of Set-Off.....................................21 SECTION 312. CUSIP Numbers........................................21 SECTION 313. Global Securities....................................21 ARTICLE FOUR.......................................................23 Satisfaction and Discharge; Defeasance.............................23 SECTION 401. Satisfaction and Discharge of Indenture..............23 SECTION 402. Defeasance and Discharge............................24 SECTION 403. Covenant Defeasance..................................24 SECTION 404. Conditions to Defeasance or Covenant Defeasance......25 SECTION 405. Application of Trust Money...........................25 SECTION 406. Indemnity for U.S. Government Obligations............26 ARTICLE FIVE.......................................................26 Remedies...........................................................26 SECTION 501. Events of Default....................................26 4 Event of Default..................................................................26 SECTION 502. Acceleration of Maturity; Rescission and Annulment.....................27 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee........27 SECTION 504. Trustee May File Proofs of Claim.......................................28 SECTION 505. Trustee May Enforce Claims Without Possession of Securities............28 SECTION 506. Application of Money Collected.........................................29 SECTION 507. Limitation on Suits....................................................29 SECTION 508. Unconditional Right of Holders to Receive Principal and Interest.......29 SECTION 509. Restoration of Rights and Remedies.....................................30 SECTION 510. Rights and Remedies Cumulative.........................................30 SECTION 511. Delay or Omission Not Waiver...........................................30 SECTION 512. Control by Holders.....................................................30 SECTION 513. Waiver of Past Defaults................................................30 SECTION 514. Undertaking for Costs..................................................31 SECTION 515. Waiver of Stay or Extension Laws.......................................31 SECTION 516. Preferred Security Holders Rights......................................31 ARTICLE SIX..........................................................................31 Trustee..............................................................................32 SECTION 601. Certain Duties and Responsibilities....................................32 SECTION 602. Notice of Defaults.....................................................32 SECTION 603. Certain Rights of Trustee..............................................32 SECTION 604. Not Responsible for Recitals or Issuance of Securities.................33 SECTION 605. May Hold Securities....................................................33 SECTION 606. Money Held in Trust....................................................33 SECTION 607. Compensation; Reimbursement; and Indemnity.............................33 SECTION 608. Disqualification; Conflicting Interests................................34 SECTION 609. Corporate Trustee Required; Eligibility................................34 SECTION 610. Resignation and Removal; Appointment of Successor......................34 SECTION 611. Acceptance of Appointment by Successor.................................35 SECTION 612. Merger, Conversion, Consolidation or Succession to Business............36 SECTION 613. Preferential Collection of Claims Against Company......................36 ARTICLE SEVEN........................................................................36 Holders' Lists and Reports by Trustee and Company....................................36 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders..............36 SECTION 702. Preservation of Information; Communications to Holders.................36 SECTION 703. Reports by Trustee.....................................................37 SECTION 704. Reports by Company.....................................................37 ARTICLE EIGHT........................................................................37 Consolidation, Merger, Conveyance, Transfer or Lease.................................37 SECTION 801. Successor Substituted..................................................37 ARTICLE NINE.........................................................................38 Supplemental Indentures..............................................................38 SECTION 901. Supplemental Indentures Without Consent of Holders.....................38 SECTION 902. Supplemental Indentures with Consent of Holders........................38 SECTION 903. Execution of Supplemental Indentures...................................39 SECTION 904. Effect of Supplemental Indentures......................................39 SECTION 905. Conformity with Trust Indenture Act....................................39 SECTION 906. Reference in Securities to Supplemental Indentures.....................39 ARTICLE TEN..........................................................................40 Covenants; Representations and Warranties............................................40
5 SECTION 1001. Payment of Principal and Interest............................40 SECTION 1002. Maintenance of Office or Agency..............................40 SECTION 1003. Money for Security Payments to Be Held in Trust..............40 SECTION 1004. Statement by Officers as to Default..........................41 SECTION 1005. Existence....................................................41 SECTION 1006. Maintenance of Properties....................................41 SECTION 1007. Payment of Taxes and Other Claims............................42 SECTION 1008. Additional Covenants.........................................42 SECTION 1009. Waiver of Certain Covenants..................................42 ARTICLE ELEVEN..............................................................42 Subordination of Securities.................................................43 SECTION 1101. Securities Subordinate to Senior Indebtedness................43 SECTION 1102. Default on Senior Indebtedness...............................43 SECTION 1103. Liquidation; Dissolution; Bankruptcy.........................43 SECTION 1104. Subrogation..................................................45 SECTION 1105. Trustee to Effectuate Subordination..........................45 SECTION 1106. Notice by the Company........................................46 SECTION 1107. Rights of the Trustee; Holders of Senior Indebtedness........46 SECTION 1108. Subordination May Not be Impaired............................47 ARTICLE TWELVE..............................................................47 Redemption of Securities....................................................47 SECTION 1201. Optional Redemption; Conditions to Optional Redemption.......47 SECTION 1202. Applicability of Article.....................................47 SECTION 1203. Election to Redeem; Notice to Trustee........................48 SECTION 1204. Selection by Trustee of Securities to Be Redeemed............48 SECTION 1205. Notice of Redemption.........................................48 SECTION 1206. Deposit of Redemption Price..................................49 SECTION 1207. Securities Payable on Redemption Date........................49 SECTION 1208. Securities Redeemed in Part..................................49 6 Sections 310 through 318 of the Trust Indenture Act of 1939:
Trust Indenture Indenture Act Section Section - ------------------- ------- Section 310(a)(1)....................................... 609 (a)(2)............................................. 609 (a)(3)............................................. Not Applicable (a)(4)............................................. Not Applicable (b) ............................................... 608, 610 Section 311(a).......................................... 613 (b) .............................................. 613 Section 312(a).......................................... 701 (b) .............................................. 702(b) (c) ............................................... 702(c) Section 313(a).......................................... 703(a) (a)(4)............................................. 101, 1004 (b) ............................................... 703(a) (c) ............................................... 703(a) (d) ............................................... 703(b) Section 314(a).......................................... 704 (b) ............................................... Not Applicable (c)(1)............................................. 102 (c)(2)............................................. 102 (c)(3)............................................. Not Applicable (d) ............................................... Not Applicable (e) ............................................... 102 Section 315(a).......................................... 601 (b) ............................................... 602 (c) ............................................... 601 (d) ............................................... 601 (e) ............................................... 514 Section 316(a).......................................... 101 (a)(1)(A).......................................... 502 (a)(1)(B).......................................... 513 (a)(2)............................................. Not Applicable (b) ............................................... 508 (c) ............................................... 104(c) Section 317(a)(1)...................................... 503 (a)(2)............................................. 504 (b) ............................................... 1003 Section 318(a)......................................... 107
-viii- 7 This INDENTURE is dated as of September __, 1996, between American Financial Group, Inc., a corporation duly organized and existing under the laws of the State of Ohio (herein called the "Company"), having its principal office at One East Fourth Street, Cincinnati, Ohio 45202, and The Bank of New York, a New York banking corporation, as Trustee (herein called the "Trustee"). Unless otherwise defined herein, all capitalized items used herein shall have the meanings ascribed to them in the Amended and Restated Declaration of Trust between the Company, as Depositor, and The Bank of New York, The Bank of New York (Delaware), James E. Evans and Thomas E. Mischell, as trustees, dated as of September __, 1996 (the "Declaration"), as in effect on the date hereof, and which is incorporated herein by reference. RECITALS OF THE COMPANY WHEREAS, for its lawful corporate purposes, the Company has duly authorized the execution and delivery of this Indenture to provide for the issuance of its ___% Subordinated Debentures due 2026 (the "Securities"). WHEREAS, American Financial Capital Trust I (the "Trust") has offered to the public $[ ] aggregate liquidation amount of its ___% Trust Originated Preferred Securities (the "Preferred Securities") representing undivided beneficial interests in the assets of the Trust and proposes to invest the proceeds from such offering in $[ ] aggregate principal amount of the Securities. WHEREAS, to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered, the Company has duly authorized the execution of this Indenture. WHEREAS, all things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holder thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. DEFINITIONS. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; 8 (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (5) a reference to any Person shall include its successors and assigns; (6) a reference to any agreement or instrument shall mean such agreement or instrument as supplemented, modified, amended or amended and restated and in effect from time to time; (7) a reference to any statute, law, rule or regulation, shall include any amendments thereto applicable to the relevant Person, and any successor statute, law, rule or regulation; and (8) a reference to any particular rating category shall be deemed to include any corresponding successor category, or any corresponding rating category issued by a successor or subsequent rating agency. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board as the context requires. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday or Sunday or a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Trustee, or the principal office of the Property Trustee, under the Trust Agreement, is closed for business. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. 2 9 "Common Securities" means the common securities issued by the Trust. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, a President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Corporate Trust Office" means the principal office of the Trustee in the City of New York, at which at any particular time its corporate trust business shall be administered and which at the date of this Indenture is The Bank of New York. "Covenant Defeasance" has the meaning specified in Section 403. "Declaration" has the meaning specified in the Recitals. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 402. "Depositary" means, with respect to Securities issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor legislation. "Expense Agreement" means the Expense Agreement contemplated by Section 607. "Extension Period" has the meaning specified in Section 301. "Global Security" means a Security that evidences all or part of the Securities and is authenticated and delivered to, and registered in the name of, the Depositary for such Securities or a nominee thereof. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. 3 10 "Institutional Trustee" has the meaning set forth in the Declaration. "Interest Payment Date," when used with respect to any installment of interest on a Security, means the date specified in such Security as the fixed date on which an installment of interest with respect to the Securities is due and payable. "Investment Company Act Event" means the receipt by the Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940. "Maturity," when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. One of the officers signing an Officers' Certificate given pursuant to Section 1004 shall be the principal executive, financial or accounting officer of the Company. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company (and who may be an employee of the Company), and who shall be reasonably acceptable to the Trustee. An opinion of counsel may rely on certificates as to matters of fact. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities authenticated and delivered under this Indenture, except: (i) Securities cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holder of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant 4 11 to Section 306, or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company. "Parent Guarantees" has the meaning specified in the Recitals to this instrument. "Paying Agent" means any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Securities" has the meaning specified in the Recitals to this instrument. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date means the Business Day next preceding such Interest Payment Date or, if the Securities are no longer in the form prescribed by Section 313, the date selected by the Company which shall be more than one Business Day but less than 60 Business Days prior to the relevant Interest Payment Date. "Responsible Officer," when used with respect to the Trustee, means the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Securities" has the meaning specified in the Recitals to this instrument. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company, for money borrowed and (B) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by the Company, (ii) all 5 12 capital lease obligations of the Company, (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business), (iv) all obligations of the Company for the reimbursement on any letter of credit, banker's acceptance, security purchase facility or similar credit transaction, (v) all obligations of the type referred to in clauses (i) through (iv) above of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise and (vi) all obligations of the type referred to in clauses (i) through (v) above of other persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), except for (1) any such indebtedness that is by its terms subordinated to or pari passu with the Securities and (2) any indebtedness in respect of debt securities, issued to any trust, or a trustee of such trust, partnership or other entity affiliated with the Company that is a financing entity of the Company (a "financing entity") in connection with the issuance by such financing entity of securities that are similar to the Preferred Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the benefits of the subordination provisions irrespective of any amendment, modification or waiver of any term of such Senior Indebtedness. "Special Event" means either an Investment Company Event or a Tax Event. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the date on which the principal, together with any accrued and unpaid interest, of such Security or such installment of interest is due and payable (whether the initial such date or, if pursuant to Section 301 the Company elects to extend the Stated Maturity, such later date as is chosen by the Company pursuant to Section 301). "Subsidiary" means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Tax Event" means the receipt by the Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or (b) as a result of any amendment to, or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority which amendment or change is enacted, promulgated, issued or announced or which interpretation or pronouncement is issued or announced or which action is taken, in each case on or after the date of issuance of the Preferred Securities), there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days of the date thereof, subject to United States Federal income tax with respect to interest received on the Securities, (ii) interest payable by the Company on the Securities is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, for United States Federal income tax purposes or (iii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of other taxes, duties or other governmental charges. 6 13 "Trust" means the statutory business trust the American Financial Capital Trust I declared and established pursuant to the Delaware Business Trust Act by the Declaration. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "U.S. Government Obligations" has the meaning specified in Section 404. "Vice President," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirement set forth in this Indenture. SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 7 14 SECTION 104. ACTS OF HOLDERS; RECORD DATES. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee at the address specified in Section 105 and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section . (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 105. NOTICES, ETC. TO TRUSTEE AND THE COMPANY. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: 8 15 (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Institutional Trust Group; or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the provision of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 9 16 SECTION 110. BENEFITS OF INDENTURE. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness, the holders of Preferred Securities (to the extent provided herein) and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 111. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF. THIS INDENTURE IS SUBJECT TO THE PROVISIONS OF THE TRUST INDENTURE ACT THAT ARE REQUIRED TO BE PART OF THIS INDENTURE AND SHALL, TO THE EXTENT APPLICABLE, BE GOVERNED BY SUCH PROVISIONS. SECTION 112. LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal of the Securities need not be made on such date, but may be made on the next succeeding Business Day (except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, shall be the immediately preceding Business Day) with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE TWO SECURITY FORMS SECTION 201. FORMS GENERALLY. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these or other methods, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. 10 17 SECTION 202. FORM OF FACE OF SECURITY. AMERICAN FINANCIAL GROUP, INC. __% Subordinated Debenture, Due __________ __, 2026 $_________ No.______ CUSIP No. _________ AMERICAN FINANCIAL GROUP, INC., a corporation duly organized and existing under the laws of the State of Ohio (herein called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______________________________, or registered assigns, the principal sum of ________ DOLLARS ($_____) on ____ __, 2026, provided that the Company may extend the maturity date subject to certain conditions specified in Section 301 of the Indenture, which extended maturity date shall in no case be later than ____ __, 2045, and to pay interest on said principal sum from __________ __, 1996 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on January 15, April 15, July 15 and October 15 of each year, commencing January 15, 1997, at the rate of __% per annum until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable for any period will be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed, will be computed on the basis of actual number of days elapsed in such 90-day quarter. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on the date the payment was originally payable. A "Business Day" shall mean any day other than a day on which banking institutions in the City of New York are authorized or required by law or executive order to remain closed or a day on which the Corporate Trust Office of the Trustee, or the principal office of the Property Trustee under the Trust Agreement, is closed for business. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name the Securities (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day next preceding such Interest Payment Date. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name the Securities (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. 11 18 The Company shall have the right at any time during the term of this Security, from time to time, to defer payment of interest on such Security for up to 20 consecutive quarters (an "Extension Period"), provided that no Extension Period may extend past the Maturity of this Security. There may be multiple Extension Periods of varying lengths during the term of this Security. At the end of each Extension Period, if any, the Company shall pay all interest then accrued and unpaid, together with interest thereon, compounded quarterly at the rate specified on this Security to the extent permitted by applicable law; provided that during any such Extension Period, (a) the Company shall not declare or pay any dividends on, or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) repurchases or acquisitions of shares of the Common Stock of the Company as contemplated by any employment arrangement, benefit plan or other similar contract with or for the benefit of employees, officers or directors entered into in the ordinary course of business, (ii) as a result of an exchange or conversion of any class or series of the Company's capital stock for the Company's Common Stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such Company capital stock or the security being converted or exchanged, or (iv) the payment of any stock dividend by the Company payable in the Company's Common Stock) or make any guarantee payments with respect to the foregoing and (b) the Company shall not directly or indirectly, and shall not allow any of its Subsidiaries to, make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to this Security. Prior to the termination of any such Extension Period, the Company may further defer payments of interest by extending the payment period, provided that such Extension Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters or extend beyond the Maturity of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest then due, the Company may select a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Trustee notice of its selection of an Extension Period at least one Business Day prior to the earlier of (i) the Interest Payment Date or (ii) the date the Trust is required to give notice to the New York Stock Exchange (or other applicable self-regulatory organization) or to holders of the Preferred Securities of the record date or the date such distributions are payable, but in any event not less than one Business Day prior to such record date. Payment of the principal of and interest on this Security will be made at the office or agency of the Paying Agent maintained for that purpose in the United States, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior 12 19 Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of the Indenture summarized on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, American Financial Group, Inc. has caused this instrument to be duly executed under its corporate seal. Dated:____________, 1996 AMERICAN FINANCIAL GROUP, INC. By:_______________________________ Name: Title: Attest: _____________________________________ SECTION 203. FORM OF REVERSE OF SECURITY. This Security is one of a duly authorized issue of Securities of American Financial Group, Inc. (the "Company"), designated as its __% Subordinated Debentures, due ____ __, 20__ (herein called the "Securities"), limited in aggregate principal amount to $___________ issued under an Indenture, dated as of __________, 1996 (herein called the "Indenture"), between the Company and The Bank of New York, a New York banking corporation, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security which are defined in the Indenture or in the Declaration attached as Annex A thereto shall have the meanings assigned to them in the Indenture or the Declaration, as the case may be. At any time on or after ____ __, ____, the Company shall have the right, subject to the terms and conditions of Article Twelve of the Indenture, to redeem this Security at the option of the Company, without premium or penalty, in whole or in part, at a Redemption Price equal to 100% of the principal amount to be redeemed plus accrued but unpaid interest to the Redemption Date. If a Special Event as defined in Article Twelve of the Indenture shall occur and be continuing, the Company shall have the right, subject to the terms and conditions of Article Twelve of the Indenture, 13 20 to redeem this Security at the option of the Company, without premium or penalty, in whole but not in part, at a Redemption Price equal to 100% of the principal amount thereof plus accrued but unpaid interest to the Redemption Date. Any redemption pursuant to this paragraph will be made upon not less than 30 nor more than 60 days notice, at the Redemption Price. If the Securities are only partially redeemed by the Company, the Securities will be redeemed pro rata. If a partial redemption of the Preferred Securities resulting from a partial redemption of the Securities would result in the delisting of the Preferred Securities from the securities exchange or quoting service on which the Preferred Securities are then listed or quoted, the Company may only redeem the Securities in whole. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default with respect to the Securities shall occur and be continuing, the principal of the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for satisfaction and discharge at any time of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of Holders of not less than a majority in principal amount of the Outstanding Securities affected by such modification, to modify the Indenture in a manner affecting the rights of the Holders of the Securities; provided that no such modification may, without the consent of the Holder of each Outstanding Security affected thereby, (i) except to the extent permitted and subject to the conditions set forth in the Indenture with respect to the extension of the Maturity of the Security, change the maturity of, the principal of, or any installment of interest on, the Security or reduce the principal amount thereof, or the rate of payment of interest thereon, or change the place of payment where, or the coin or currency in which, this Security or interest thereon is payable, or impair the right to institute suit for the enforcement of such payment on or after the Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or modify the provisions of the Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (ii) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for such supplemental Indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults hereunder and their consequences) provided for in the Indenture, or (iii) modify any of the provisions of Section 513, Section 903 or Section 1009 of the Indenture, except to increase any such percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, that, so long as any of the Preferred Securities remains outstanding, no such amendment shall be made that adversely affects the holders of the Preferred Securities, and no termination of the Indenture shall occur, and no waiver of an Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of the outstanding Preferred Securities unless and until the principal of and any premium on the Securities and all accrued and unpaid interest thereon have been paid in full. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in New York, New York, duly endorsed by, or 14 21 accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities are issuable only in registered form without coupons in denominations of $25 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Securities referred to in the within-mentioned Indenture. THE BANK OF NEW YORK as Trustee By: ___________________________________ Authorized Officer ARTICLE THREE THE SECURITIES SECTION 301. TITLE AND TERMS. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $____________ except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 906 or 1208. The Securities shall be known and designated as the "__% Subordinated Debentures, Due ____ __, ____" of the Company. Their initial Stated Maturity shall be __________ __, 2026. Not more than one year or less than one month prior to the initial Stated Maturity, the Company may, in its sole discretion, extend the Stated Maturity no more than one time for one or more periods, but in no event 15 22 later than the earlier of (i) ___________, 2045 or (ii) the Interest Deduction Date. The "Interest Deduction Date" shall mean the date which is six months earlier than the ending of the maximum term (beginning on the date of issue of the Securities and including any extensions thereof), as determined under any federal statute applicable by its terms to the Securities which is enacted at any time after the issuance of the Securities (including, but not limited to, at any time after an extension of the Stated Maturity), of a debt instrument for which interest is deductible for federal income tax purposes. In no event shall the extended Stated Maturity be later than the Interest Deduction Date even if the Stated Maturity has previously been extended to a date beyond the Interest Deduction Date up to an additional 19 years from the initial Maturity Date, provided that all of the following conditions are satisfied at the time the Company elects to extend the stated maturity: (i) the Company is not in bankruptcy, insolvent or in liquidation, (ii) the Company is not in default in the payment of any interest or principal, on any Security, (iii) the Company has made timely payments on the Securities for the immediately preceding six quarters without deferrals or extensions of the interest payment period, (iv) the Trust is not in arrears on payments of distributions on the Preferred Securities, (v) the Securities or Preferred Securities are rated not less than BBB or better by any one of Standard & Poors Ratings Services or Baa2 or better by Moody's Investors Service, Inc. or the equivalent by any other nationally recognized statistical rating organization, and (vi) the extended Stated Maturity is no later than the 49th anniversary of the issuance of the Preferred Securities. The Securities shall bear interest at the rate of __% per annum, from _______, 1996 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable quarterly (subject to deferral as set forth herein), in arrears, on January 15, April 15, July 15 and October 15 of each year, commencing January 15, 1997 until the principal thereof is paid or made available for payment. Interest will compound quarterly and will accrue at the rate of __% per annum on any interest installment in arrears for more than one quarter or during an extension of an interest payment period as set forth below in this Section 301. In the event that any date on which interest is payable on the Securities is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (except that, if such Business Day is in the next succeeding calendar year, such Interest Payment Date shall be the immediately preceding Business Day) (and without any interest or other payment in respect of any such delay). The Company shall have the right, at any time during the term of the Securities, from time to time, to defer payment of interest on such Security for up to 20 consecutive quarters (an "Extension Period") provided that no Extension Period may extend past the Maturity of the Security. There may be multiple Extension Periods of varying lengths during the term of the Securities. At the end of each Extension Period, if any, the Company shall pay all interest then accrued and unpaid, together with interest thereon, compounded quarterly at the rate specified on this Security to the extent permitted by applicable law; provided, that during any such Extension Period, (a) the Company shall not declare or pay any dividends on or make a distribution with respect to, or redeem, purchase or acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) repurchases or acquisitions of shares of the Common Stock of the Company as contemplated by any employment arrangement, benefit plan or other similar contract with or for the benefit of employees, officers or directors entered into in the ordinary course of business, (ii) as a result of an exchange or conversion of any class or series of the Company's capital stock for the Company's Common Stock, (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such Company capital stock or the security being converted or exchanged, or (iv) the payment of any stock dividend by the Company payable in the Company's Common Stock) and (b) the Company shall not, directly or indirectly, and shall not allow any of its Subsidiaries to, make any 16 23 payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities issued by the Company that rank pari passu with or junior to this Security. Prior to the termination of any such Extension Period, the Company may further defer payments of interest by extending the interest payment period; provided that such Extension Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters or extend beyond the Maturity of this Security. Upon the termination of any such Extension Period and upon the payment of all accrued and unpaid interest then due, the Company may select a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Trustee notice of its selection of an Extension Period at least one Business Day prior to the earlier of (i) the Interest Payment Date or (ii) the date the Trust is required to give notice to the New York Stock Exchange or other applicable self-regulatory organization or to holders of the Preferred Securities of the record date or the date such distributions are payable, but in any event not less than one Business Day prior to such record date. The Trustee shall promptly give notice of the Company's selection of such Extension Period to the holders of the Preferred Securities. The principal of and interest on the Securities shall be payable at the office or agency of the Paying Agent in the United States maintained for such purpose and at any other office or agency maintained by the Company for such purpose in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer in immediately available funds at such place and to such account as may be designated by the Person entitled thereto as specified in the Security Register. The Securities shall be subordinated in right of payment to Senior Indebtedness as provided in Article Eleven. The Securities shall be redeemable as provided in Article Twelve. SECTION 302. DENOMINATIONS. The Securities shall be issuable only in registered form, without coupons, and only in denominations of $25 and any integral multiple thereof. SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, a President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. 17 24 At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. SECTION 304. TEMPORARY SECURITIES. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 305. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. the Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the 18 25 Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Sections 304, 906 or 1208 not involving any transfer. If the Securities are to be redeemed in part, the Company shall not be required (A) to issue, register the transfer of or exchange any Securities during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Securities selected for redemption under Section 1203 and ending at the close of business on the day of such mailing, or (B) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section , the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not 19 26 the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. the Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and, if so listed, upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section , each Security delivered under this Indenture upon registration of transfer of or in exchange for or 20 27 in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue which were carried by such other Security. SECTION 308. PERSONS DEEMED OWNERS. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee shall treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 309. CANCELLATION. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section , except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. SECTION 310. COMPUTATION OF INTEREST. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly period for which interest is computed will be computed on the basis of actual number of days elapsed in such 90-day quarter. SECTION 311. RIGHT OF SET-OFF. Notwithstanding anything to the contrary in the Indenture, the Company shall have the right to set-off any payment it is otherwise required to make thereunder to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Parent Guarantees. SECTION 312. CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. 21 28 SECTION 313. GLOBAL SECURITIES. If the Securities are distributed to holders of Preferred Securities in liquidation of such holder's interests in the Trust, such Securities will initially be issued as a Global Security. If the Company shall establish that the Securities are to be issued in the form of one or more Global Securities, then the Company shall execute and the Trustee shall, in accordance with Section 303 and the Company Order, authenticate and deliver one or more Global Securities that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of all of the Securities to be issued in the form of Global Securities and not yet cancelled, (ii) shall be registered in the name of the Depositary for such Global Security or Securities or the nominee of such Depositary, and (iii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions. Global Securities shall bear a legend substantially to the following effect: This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Global Security is exchangeable for Securities registered in the name of a Person other than the Depositary or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Security (other than a transfer of this Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in such limited circumstances. Every Security delivered upon registration of transfer of, or in exchange for, or in lieu of, this Global Security shall be a Global Security subject to the foregoing, except in the limited circumstances described above. Unless this certificate is presented by an authorized representative of The Depositary Trust Company, a New York corporation ("DTC"), to the Company or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is to be made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. Notwithstanding the provisions of Section 305, unless and until it is exchanged in whole or in part for Securities in definitive registered form, a Global Security representing all or a part of the Securities may not be transferred in the manner provided in Section 305 except as a whole by the Depositary to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. If at any time the Depositary for any Securities represented by one or more Global Securities notifies the Company that it is unwilling or unable to continue as Depositary for such Securities or if at any time the Depositary for such Securities shall no longer be eligible under this Section 313, the Company shall appoint a successor Depositary with respect to such Securities. If a successor Depositary for such Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company's election that such Securities be represented by one or more Global Securities shall no longer be effective and the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Securities, will authenticate and deliver Securities in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities in exchange for such Global Security or Securities. 22 29 The Company may at any time and in its sole discretion determine that the Securities issued in the form of one or more Global Securities shall no longer be represented by a Global Security or Securities. In such event the Company shall execute, and the Trustee, upon receipt of a Company Order or an Officers' Certificate for the authentication and delivery of definitive Securities, shall authenticate and deliver, Securities in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such Securities, in exchange for such Global Security or Securities. If specified by the Company with respect to Securities represented by a Global Security, the Depositary for such Global Security may surrender such Global Security in exchange in whole or in part for Securities in definitive registered form on such terms as are acceptable to the Company and such Depositary. Thereupon, the Company shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to the Person specified by such Depositary, a new Security or Securities, of any authorized denominations as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Global Security; and (ii) to such Depositary a new Global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities authenticated and delivered pursuant to clause (i) above. Upon the exchange of a Global Security for Securities in definitive registered form in authorized denominations, such Global Security shall be cancelled by the Trustee or an agent of the Company or the Trustee. Securities in definitive registered form issued in exchange for a Global Security pursuant to this Section 313 shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee or an agent of the Company or the Trustee. the Trustee or such agent shall deliver at its office such Securities to or as directed by the Persons in whose names such Securities are so registered. ARTICLE FOUR SATISFACTION AND DISCHARGE; DEFEASANCE SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on written demand of and at the expense of the Company, shall execute instruments supplied by the Company acknowledging satisfaction and discharge of this Indenture, when (1) either (A) All Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated 23 30 Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. DEFEASANCE AND DISCHARGE. The following provisions shall apply to the Securities unless specifically otherwise provided in a Board Resolution, Officers' Certificate or indenture supplemental hereto provided pursuant to Section 301. In addition to discharge of this Indenture pursuant to Sections 401 and 403, in the case of any Securities with respect to which the exact amount described in subparagraph (a) of Section 404 can be determined at the time of making the deposit referred to in such subparagraph (a), the Company shall be deemed to have paid and discharged the entire indebtedness on all the Securities as provided in this Section on and after the date the conditions set forth in Section 404 are satisfied, and the provisions of this Indenture with respect to the Securities shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to receive, solely from the trust fund described in subparagraph (a) of Section 404, payments of principal thereof and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), (iv) the rights, obligations, duties and immunities of the Trustee hereunder, (v) this Section 402 and (vi) the rights of the Holders of Securities as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them) (hereinafter called "Defeasance"), and the Trustee at the cost and expense of the Company, shall execute proper instruments acknowledging the same. SECTION 403. COVENANT DEFEASANCE. In the case of any Securities with respect to which the exact amount described in subparagraph (a) of Section 404 can be determined at the time of making the deposit referred to in such subparagraph (a), (i) the Company shall be released from its obligations under any covenants specified in or pursuant to this Indenture (except as to (i) rights of registration of transfer and exchange of Securities, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of Holders of Securities to receive, from the Company pursuant to Section 1001, payments of principal thereof and interest, if any, thereon upon the original stated due dates therefor (but not upon acceleration), (iv) the rights, obligations, duties and immunities of the Trustee hereunder and (v) the rights of the Holders of Securities as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them), and (ii) the occurrence of any event specified in Section 501(3) (with respect to any of the covenants specified in or pursuant to this Indenture) shall be deemed not to be or result in an Event of Default, in each case with respect to the Outstanding Securities as provided in this Section on and after the date the conditions set forth in Section 404 are satisfied (hereinafter called "Covenant Defeasance"), and the Trustee, at the cost and expense of the Company, shall execute proper instruments acknowledging the same. For this purpose, such Covenant Defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant (to the extent so specified in the case of Section 501(4)), whether directly or indirectly by reason of any reference elsewhere herein to any such covenant or by 24 31 reason of any reference in any such covenant to any other provision herein or in any other document, but the remainder of this Indenture and the Securities shall be unaffected thereby. SECTION 404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following shall be the conditions to application of either Section 402 or 403 to the Outstanding Securities: (a) with reference to Section 402 or 403, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee as funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of Securities (i) cash in an amount, (ii) direct obligations of the United States of America, backed by its full faith and credit ("U.S. Government Obligations"), maturing as to principal and interest, if any, at such times and in such amounts as will insure the availability of cash, (iii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, or (iv) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge the principal of and interest, if any, on all Securities on each date that such principal or interest, if any, is due and payable; (b) in the case of Defeasance under Section 402, the Company has delivered to the Trustee an Opinion of Counsel based on the fact that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y), since the date hereof, there has been a change in the applicable United States federal income tax law, in either case to the effect that, and such opinion shall confirm that, the Holders of the Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, Defeasance and discharge and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, Defeasance and discharge had not occurred; (c) in the case of Covenant Defeasance under Section 403, the Company has delivered to the Trustee an Opinion of Counsel to the effect that, and such opinion shall confirm that, the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and Covenant Defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and Covenant Defeasance had not occurred; (d) such Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Company is a party or by which it is bound; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent contemplated by this provision have been complied with. SECTION 405. APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations deposited with the Trustee pursuant to Section 401 shall be held in trust and 25 32 such money and all money from such U.S. Government Obligations shall be applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money and U.S. Government Obligations has been deposited with the Trustee. SECTION 406. INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 404 or the principal or interest received in respect of such obligations other than any such tax, fee or other charge that by law is for the account of the Holders of Outstanding Securities. ARTICLE FIVE REMEDIES SECTION 501. EVENTS OF DEFAULT. "Event of DefaultEvent of Default" wherever used herein, means any one of the following events that has occurred and is continuing (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Eleven or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) failure for thirty days to pay any interest on the Securities when due (subject to the deferral of any due date in the case of an Extension Period); or (2) failure to pay any principal on the Securities when due, whether at Stated Maturity, following notice of redemption, by declaration of acceleration or otherwise; or (3) failure to observe or perform in any material respect any other covenant herein for 90 days after written notice to the Company from the Trustee or the holders of at least 25% in principal amount of the outstanding Securities; or (4) default under any bond, debenture or any other evidence of Indebtedness for money borrowed by the Company having an aggregate outstanding principal amount in excess of $15 million, at maturity or which default shall have resulted in such Indebtedness being accelerated, without such Indebtedness being discharged or such acceleration having been rescinded or annulled within 30 days after receipt of notice thereof by the Company from the Trustee; or (5) the voluntary or involuntary dissolution or winding up of the business of the Trust or other termination of the existence of the Trust, other than in connection with (i) the distribution of the Securities to holders of the Preferred Securities in liquidation of their interests in the Trust, (ii) the redemption of all outstanding Preferred Securities or (iii) certain mergers, consolidations or amalgamations of the Trust, each as permitted by the Declaration; or (6) entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State 26 33 bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of substantially all of the property of the Company, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; or (7) (A) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or (B) the consent by the Company or to the entry of a decree or order for relief in respect of itself in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Company, or (C) the filing by the Company of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or (D) the consent by the Company to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of all or substantially all of the property of the Company, or (E) the making by the Company of an assignment for the benefit of creditors. SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities shall have the right to declare the principal of and the interest on all the Securities and any other amounts payable hereunder to be due and payable immediately, provided, however, that if upon an Event of Default, the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities fail to declare the payment of all amounts on the Securities to be immediately due and payable, the holders of at least 50% in aggregate liquidation preference of Preferred Securities then outstanding shall have such right, by a notice in writing to the Company (and to the Trustee if given by Holders or the holders of Preferred Securities) and upon any such declaration such principal and all accrued interest shall become immediately due and payable. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided in this Article, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. 27 34 SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and interest, and, to the extent that payment thereof shall be legally enforceable, interest on any overdue principal and on any overdue interest, at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. 28 35 SECTION 506. APPLICATION OF MONEY COLLECTED. Subject to Article Eleven, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and interest, respectively. SECTION 507. LIMITATION ON SUITS. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and (subject to Section 307) interest on such Security on the Stated Maturity expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. 29 36 SECTION 509. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. CONTROL BY HOLDERS. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture; and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. WAIVER OF PAST DEFAULTS. Subject to Sections 902 and 1009 hereof, the Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (1) in the payment of the principal of or interest on any Security (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Trustee); or 30 37 (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected; provided, however, that such waiver or modification to such waiver shall not be effective until the holders of a majority in liquidation preference of Preferred Securities shall have consented to such waiver or modification to such waiver; provided further, that if the consent of the Holder of each of the Outstanding Securities is required, such waiver shall not be effective until each Holder of the Preferred Securities shall have consented to such waiver. Upon any such waiver, such default shall cease to exist, effective as of the date specified in such waiver (and effective retroactively to the date of default, if so specified) and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Trustee or in any suit for the enforcement of the right to receive the principal of and interest on any Security. SECTION 515. WAIVER OF STAY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 516. PREFERRED SECURITY HOLDERS RIGHTS. If an Event of Default constituting the failure to pay interest or principal on the Securities on the date such interest or principal is otherwise payable has occurred and is continuing, then a holder of Preferred Securities may directly institute a proceeding for enforcement of payment to such holder directly of the principal of or interest on the Securities having a principal amount equal to the aggregate liquidation amount of the Preferred Securities or such holder on or after the respective due date specified in the Securities. 31 38 ARTICLE SIX TRUSTEE SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. NOTICE OF DEFAULTS. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that except in the case of a default in the payment of the principal of or interest on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Holders of Securities; provided, further, that in the case of any default of the character specified in Section 501(3), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. For purposes of this Section, the Trustee shall not be deemed to have knowledge of a default unless the Trustee has actual knowledge of such default or has received written notice of such default in the manner contemplated by Section 105. SECTION 603. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; 32 39 (d) the Trustee may consult with counsel of its choice and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. the Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. the Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. MAY HOLD SECURITIES. The Trustee, any Paying Agent, any Security Registrar, or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar, or such other agent. Money held by the Trustee in trust hereunder shall not be invested by the Trustee pending distribution thereof to the holders of the Securities. SECTION 606. MONEY HELD IN TRUST. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. the Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. SECTION 607. COMPENSATION; REIMBURSEMENT; AND INDEMNITY. The Company agrees 33 40 (1) to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify each of the Trustee and any predecessor Trustee for, and to hold it harmless against, any and all loss, damage, claim, liability or expense, including taxes (other than taxes based on the income of the Trustee) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or the trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Company, the Trustee shall have a claim prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any, on) or interest on particular Securities. SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and has its Corporate Trust Office in New York, New York. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. 34 41 (b) the Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) the Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; provided that, on request of the Company or the successor Trustee, 35 42 such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS. The Company will furnish or cause to be furnished to the Trustee (a) semiannually, not later than February 15 and August 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders to the extent the Company has knowledge thereof as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS. (a) the Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 36 43 701 supplied to the Trustee by the Depository at the Trustee's request, and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. the Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. SECTION 703. REPORTS BY TRUSTEE. (a) the Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when the Securities are listed on any stock exchange. SECTION 704. REPORTS BY COMPANY. The Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. SUCCESSOR SUBSTITUTED. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. 37 44 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (3) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided that such action pursuant to this clause (3) shall not adversely affect the interests of the Holders of the Securities or, so long as any of the Preferred Securities shall remain outstanding, the holders of the Preferred Securities; or (4) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) except to the extent permitted and subject to the conditions set forth in Section 301 with respect to the extension of the Stated Maturity of the Securities, change the Stated Maturity of, the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon, or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or 38 45 (3) modify any of the provisions of this Section, Section 513 or Section 1010, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, that, so long as any of the Preferred Securities remains outstanding, no such amendment shall be made that adversely affects the holders of the Preferred Securities, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of the outstanding Preferred Securities unless and until the principal of and any premium on the Securities and all accrued and unpaid interest thereon have been paid in full. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. the Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. 39 46 ARTICLE TEN COVENANTS; REPRESENTATIONS AND WARRANTIES SECTION 1001. PAYMENT OF PRINCIPAL AND INTEREST. The Company will duly and punctually pay the principal of and interest on the Securities in accordance with the terms of the Securities and this Indenture. SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in The City of New York an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture 63 may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in the United States) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the United States for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. If the Company shall at any time act as its own Paying Agent, it will, on or at the option of the Company on or before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. In such case the Company shall not invest the amount so segregated and held in trust pending the distribution thereof. Whenever the Company shall have one or more Paying Agents, it will, on or prior to each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act; provided, however, that any such deposit on a due date shall be initiated prior to 1:00 p.m. (New York time) in same-day funds. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (ii) during the continuance of any default by the 40 47 Company (or any other obligor upon the Securities) in the making of any payment in respect of the Securities, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent as such. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or interest on any Security and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease. SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the material terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 1005. EXISTENCE. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders and, while any Preferred Securities are outstanding, the holders of the Preferred Securities. SECTION 1006. MAINTENANCE OF PROPERTIES. The Company will cause all properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. 41 48 SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary that comprise more than 10% of the assets of the Company and its Subsidiaries taken as a whole; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1008. ADDITIONAL COVENANTS. The Company covenants (i) to maintain 100%, direct or indirect, ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities, (ii) not to voluntarily dissolve, wind-up or terminate the Trust, except in connection with a distribution of the Securities or certain mergers, consolidations or amalgamations, (iii) to timely perform its duties as sponsor of the Trust, (iv) to use its reasonable efforts, to cause the Trust (A) to remain a business trust except in connection with the distribution of the Securities to the holders of the Preferred Securities in liquidation of the Trust, the redemption of all Preferred Securities and Common Securities of the Trust or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (B) to continue not to be treated as an association taxable as a corporation for United States federal income tax purposes other than in connection with a distribution of Securities to the holders of Preferred Securities in liquidation of the Trust and (v) to use its reasonable efforts to cause each holder of Preferred Securities and Common Securities to be treated as owning an undivided beneficial interest in the Securities. SECTION 1009. WAIVER OF CERTAIN COVENANTS. Except as otherwise specified as contemplated by Section 301 for Securities, the Company may, with respect to the Securities, omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to Section 901(2) for the benefit of the Holders if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. 42 49 ARTICLE ELEVEN SUBORDINATION OF SECURITIES SECTION 1101. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to Article Four), the payment of the principal of and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness. This Article Eleven shall constitute a continuing offer to all persons who become holders of, or continue to hold, Senior Indebtedness, and such provisions are made for the benefit of the holders of Senior Indebtedness and such holders are made obligees hereunder and any one or more of them may enforce such provisions. Holders of Senior Indebtedness need not prove reliance on the subordination provisions hereof. SECTION 1102. DEFAULT ON SENIOR INDEBTEDNESS. In the event and during the continuation of any default in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness (and any applicable grace period with respect to such default has ended and such default has not been cured or waived) or in the event that the maturity of any Senior Indebtedness has been accelerated because of a default, then, in either case, no payment shall be made by the Company with respect to the principal (including redemption payments) of, or interest on, the Securities. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the preceding paragraph of this Section 1102, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. SECTION 1103. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all principal of, and premium, if any, and interest due or to become due upon all Senior Indebtedness (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding) shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made on account of the principal or interest on the Securities; and upon any such dissolution or winding-up or liquidation or reorganization any payment by the Company, or 43 50 distribution of substantially all of the assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Security or the Trustee would be entitled, except for the provisions of this Article Eleven, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding) or to provide for such payment in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the Holders of Securities or to the Trustee. In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee or the Holders of the Securities before all Senior Indebtedness is paid in full (including interest after the commencement of any bankruptcy, insolvency, receivership or other proceedings at the rate specified in the applicable Senior Indebtedness, whether or not such interest is an allowable claim in any such proceeding), or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness. Any holder of Senior Indebtedness may file any proof of claim or similar instrument on behalf of the Trustee and the Holders if such instrument has not been filed by the date which is 30 days prior to the date specified for filing thereof. For purposes of this Article Eleven, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article Eleven with respect to the Securities to the payment of all Senior Indebtedness that may at the time be outstanding, provided, however, that (i) the Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (ii) the rights of the holders of the Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article Eight hereof shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 1103 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Eight hereof. Nothing in 44 51 Section 1102 or in this Section 1103 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607. SECTION 1104. SUBROGATION. Subject to the payment in full of all Senior Indebtedness, the rights of the Holders of the Securities shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article Eleven, and no payment over pursuant to the provisions of this Article Eleven, to or for the benefit of the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. It is understood that the provisions of this Article Eleven are and are intended solely for the purposes of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of the Senior Indebtedness on the other hand. Nothing contained in this Article Eleven or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders of the Securities and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Eleven of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets of the Company referred to in this Article Eleven, the Trustee, subject to the provisions of Section 601, and the Holders of the Securities, shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding-up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of the Securities, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Eleven. SECTION 1105. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Holder of a Security by acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Eleven and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. 45 52 SECTION 1106. NOTICE BY THE COMPANY. The Company shall give prompt written notice to a Responsible Officer of the Trustee of any fact known to the Company that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article Eleven. Notwithstanding the provisions of this Article Eleven or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of monies to or by the Trustee in respect of the Securities pursuant to the provisions of this Article Eleven, unless and until a Responsible Officer of the Trustee shall have received written notice thereof at the Corporate Trust Office of the Trustee from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 1106 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. The Trustee, subject to the provisions of Section 601, shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness or a trustee on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Eleven, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Eleven, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 1107. RIGHTS OF THE TRUSTEE; HOLDERS OF SENIOR INDEBTEDNESS. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article Eleven in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Eleven, and no implied covenants or obligations with respect to the holders of Senior Indebtedness shall be read into this Indenture against the Trustee. the Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and, subject to the provisions of Section 601, the Trustee shall not be liable to any holder of Senior Indebtedness if it shall pay over or deliver to holders of Securities, the Company or any other Person money or assets to which any holder of Senior Indebtedness shall be entitled by virtue of this Article Eleven or otherwise. 46 53 SECTION 1108. SUBORDINATION MAY NOT BE IMPAIRED. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. ARTICLE TWELVE REDEMPTION OF SECURITIES SECTION 1201. OPTIONAL REDEMPTION; CONDITIONS TO OPTIONAL REDEMPTION. At any time on or after __________ __, 2001, the Company shall have the right, subject to the last paragraph of this Section 1201, to redeem the Securities, in whole or in part, from time to time, at a Redemption Price equal to 100% of the principal amount of Securities to be redeemed plus any accrued but unpaid interest to the Redemption Date. If a Special Event shall occur and be continuing, the Company shall have the right, subject to the last paragraph of this Section 1201 to redeem, upon not less than 30 days nor more than 60 days notice, the Securities in whole, but not in part, at a Redemption Price equal to 100% of the principal amount of Securities then outstanding plus accrued but unpaid interest to the Redemption Date. For so long as the Trust is the Holder of all Securities Outstanding, the proceeds of any redemption described in this Section 1201 shall be used by the Trust to redeem Preferred Securities in accordance with their terms. The Company shall not redeem the Securities in part unless all accrued and unpaid interest has been paid in full on all Securities Outstanding for all quarterly interest periods terminating on or prior to the Redemption Date. SECTION 1202. APPLICABILITY OF ARTICLE. Redemption of Securities at the election of the Company, as permitted by Section 1201, shall be made in accordance with such provision and this Article. 47 54 SECTION 1203. ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem Securities pursuant to Section 1201 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the Company shall, at least 30 days and no more than 60 days prior to the Redemption Date fixed by the Company, notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed and provide a copy of the notice of redemption given to Holders of Securities to be redeemed pursuant to Section 1204. SECTION 1204. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. If less than all the Securities are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected by lot, at the Trustee's discretion (or such other method of selection as the Trustee may customarily employ) not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1205. NOTICE OF REDEMPTION. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall identify the Securities to be redeemed (including CUSIP number) and shall state: (1) the Redemption Date, (2) the Redemption Price, (3) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, and 48 55 (4) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1206. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date; provided, however, that any such deposit on a Redemption Date shall be initiated prior to 1:00 p.m. (New York time) in same-day funds. SECTION 1207. SECURITIES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1208. SECURITIES REDEEMED IN PART. Any Security which is to be redeemed only in part shall be surrendered at a place of payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ----------------------- This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 49 56 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. AMERICAN FINANCIAL GROUP, INC. By:____________________________________ Name: Title: Attest:___________________________ THE BANK OF NEW YORK By:____________________________________ Name: Title: Attest:___________________________ STATE OF __________________) ) ss: COUNTY OF _________________) On the __ day of ___________ 1996, before me personally came __________, to me known, who, being by me duly sworn, did depose and say that he/she is the __________ of American Financial Group, Inc., one of the corporations described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of such corporation. _______________________________________ STATE OF __________________) ) ss: COUNTY OF _________________) On the __ day of __________, 1996, before me personally came _______________, to me known, who, being by me duly sworn, did depose and say that he/she is a ______________________ of The Bank of New York, a New York banking association described in and which executed the foregoing instrument; and that he/she signed his/her name thereto by authority of the Board of Directors of such corporation. _______________________________________ 50 EX-4.2 3 EXHIBIT 4.2 1 Exhibit 4.2 CERTIFICATE OF TRUST OF AMERICAN FINANCIAL CAPITAL TRUST I This Certificate of Trust is being executed as of September 13, 1996 for the purpose of organizing a business trust pursuant to the Delaware Business Trust Act, 12 DEL. C. Section 3801 ET SEQ. (the "Act"). The undersigned hereby certifies as follows: 1) NAME. The name of the business trust is "American Financial Capital Trust I" (the "Trust"). 2) DELAWARE TRUSTEE. The name and business address of the Delaware resident trustee of the Trust meeting the requirements of Section 3807 of the Act are as follows: The Bank of New York (Delaware) 23 White Clay Center Route 273 Newark, Delaware 19711. 3) EFFECTIVE. This Certificate of Trust, which may be executed in counterparts, shall be effective immediately upon filing in the Office of the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned, being all of the trustees of the Trust, have duly executed this Certificate of Trust as of the day and year first above written. THE BANK OF NEW YORK (Delaware), as Delaware Trustee By: ------------------------------ Name: Title: THE BANK OF NEW YORK, as Property Trustee By: ------------------------------ Name: Title: /s/ James E. Evans --------------------------------- JAMES E. EVANS, as Trustee /s/ Thomas E. Mischell --------------------------------- THOMAS E. MISCHELL, as Trustee EX-4.4 4 EXHIBIT 4.4 1 PREFERRED SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as of September __, 1996, is executed and delivered by American Financial Group, Inc., an Ohio corporation (the "Guarantor"), and _______________, as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) of the Preferred Securities (as defined herein) of American Financial Capital Trust I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to the Declaration (as defined herein), the Issuer is issuing on the date hereof 4,000,000 preferred securities, having an aggregate liquidation amount of $100,000,000, designated the ___% Trust Originated Preferred Securities (the "Preferred Securities"); WHEREAS, as incentive for the Holders to purchase the Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Preferred Securities Guarantee, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (as amended, modified or supplemented from time to time, the "Common Securities Guarantee") in substantially identical terms to this Preferred Securities Guarantee for the benefit of the holders of the Common Securities (as defined herein), except that if an Event of Default (as defined in the Declaration), has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under this Preferred Securities Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Preferred Securities Guarantee for the benefit of the Holders. ARTICLE 1 INTERPRETATION AND DEFINITIONS SECTION 1.1 Interpretation and Definitions. In this Preferred Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Preferred Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; 2 (b) a term defined anywhere in this Preferred Securities Guarantee has the same meaning throughout; (c) all references to "the Preferred Securities Guarantee" or "this Preferred Securities Guarantee" are to this Preferred Securities Guarantee as modified, supplemented or amended from time to time; (d) all references in this Preferred Securities Guarantee to Articles and Sections are to Articles and Sections of this Preferred Securities Guarantee, unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Preferred Securities Guarantee, unless otherwise defined in this Preferred Securities Guarantee or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Business Day" means any day other than a day on which banking institutions in New York, New York are authorized or required by law to close. "Common Securities" means the securities representing common undivided beneficial interests in the assets of the Issuer. "Corporate Trust Office" means the office of the Preferred Guarantee Trustee at which the corporate trust business of the Preferred Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Preferred Securities Guarantee is located at _____________________, Attention: Corporate Trust Services Division; telecopy no. ________________. "Covered Person" means any Holder or beneficial owner of Preferred Securities. "Debentures" means the series of subordinated deferrable interest debentures to be issued by the Guarantor designated the ____% Junior Subordinated Debentures due 2026 held by the Property Trustee (as defined in the Declaration) of the Issuer. "Declaration" means the Declaration of Trust, dated as of September __,1996, as amended, modified or supplemented from time to time, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the Holders from time to time of undivided beneficial interests in the assets of the Issuer. 2 3 "Guarantee Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Preferred Securities Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Preferred Securities to the extent the Issuer shall have funds available therefor, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Issuer has funds available therefor, with respect to any Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for Preferred Securities as provided in the Declaration or the redemption of all the Preferred Securities upon maturity or redemption of the Debentures as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under this Preferred Securities Guarantee. "Holder" shall mean any holder, as registered on the books and records of the Issuer of any Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor; and provided further, that in determining whether the Holders of the requisite liquidation amount of Preferred Securities have voted on any matter provided for in this Preferred Securities Guarantee, then for the purpose of such determination only (and not for any other purpose hereunder), if the Preferred Securities remain in the form of one or more Global Certificates (as defined in the Declaration), the term "Holders" shall mean the holder of the Global Certificate acting at the direction of the Preferred Security Beneficial Owners (as defined in the Declaration). "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Preferred Guarantee Trustee. "Indenture" means the Indenture dated as of September __, 1996, among the Guarantor (the "Debenture Issuer") and _________________, as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the Property Trustee (as defined in the Declaration) of the Issuer. 3 4 "Majority in Liquidation Amount of the Preferred Securities" means, except as provided in the terms of the Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Preferred Securities, voting separately as a class, who are the record holders of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Preferred Securities. In determining whether the Holders of the requisite amount of Preferred Securities have voted, Preferred Securities which are owned by the Guarantor or any Affiliate of the Guarantor or any other obligor on the Preferred Securities shall be disregarded for the purpose of any such determination. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers (as defined in the Declaration) of such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Preferred Securities Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Guarantee Trustee" means _______________, until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Preferred Securities Guarantee and thereafter means each such Successor Preferred Guarantee Trustee. "Responsible Officer" means, with respect to the Preferred Guarantee Trustee, any officer within the Corporate Trust Office of the Preferred Guarantee Trustee. including any vice-president, any assistant vice-president, the secretary, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Preferred Guarantee 4 5 Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. ARTICLE 2 TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Preferred Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Preferred Securities Guarantee and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Preferred Securities Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities. (a) The Guarantor shall provide the Preferred Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Preferred Securities ("List of Holders"), (i) within one Business Day after January 1 and June 30 of each year and current as of such date, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request from the Preferred Guarantee Trustee for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Guarantee Trustee; provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it, provided that it may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Preferred Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. 5 6 SECTION 2.3 Reports by Preferred Guarantee Trustee. Within 60 days after May 15 of each year (commencing with the year of the first anniversary of the issuance of the Preferred Securities), the Preferred Guarantee Trustee shall provide to the Holders of the Preferred Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee. The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information as required by Section 314 (if any) of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Preferred Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Guarantee Event of Default; Waiver. The Holders of a Majority in Liquidation Amount of the Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Guarantee Event of Default and its consequences. Upon such waiver, any such Guarantee Event of Default shall cease to exist, and any Guarantee Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Guarantee Event of Default or impair any right consequent thereon. SECTION 2.7 Guarantee Event of Default; Notice. (a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of a Guarantee Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Preferred Securities, notices of all Guarantee Events of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided, that the Preferred Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Preferred Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Preferred Securities. 6 7 (b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Guarantee Event of Default unless the Preferred Guarantee Trustee shall have received written notice thereof or a Responsible Officer of the Preferred Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge thereof. SECTION 2.8 Conflicting Interests. The Declaration shall be deemed to be specifically described in this Preferred Securities Guarantee for the purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. SECTION 2.9 Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Preferred Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Preferred Guarantee Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. SECTION 2.10 Preferred Guarantee Trustee May File Proofs of Claim. Upon the occurrence of a Guarantee Event of Default, the Preferred Guarantee Trustee is hereby authorized to (a) recover judgment, in its own name and as trustee of an express trust, against the Guarantor for the whole amount of any Guarantee Payments remaining unpaid and (b) file such proof of claim and other papers or documents as may be necessary or advisable in order to have its claims and those of the Holders of the Preferred Securities allowed in any judicial proceedings relative to the Guarantor, its creditors or its property. ARTICLE 3 POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of Preferred Guarantee Trustee. (a) The Preferred Securities Guarantee shall be held by the Preferred Guarantee Trustee on behalf of the Issuer for the benefit of the Holders of the Preferred Securities, and the Preferred Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any Person except a Holder of Preferred Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Successor Preferred Guarantee Trustee. The right, title and interest of the Preferred Guarantee Trustee in and to this 7 8 Preferred Securities Guarantee shall automatically vest in any Successor Preferred Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Preferred Guarantee Trustee. (b) If a Guarantee Event of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee has occurred and is continuing, the Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee for the benefit of the Holders of the Preferred Securities. (c) The Preferred Guarantee Trustee, before the occurrence of any Guarantee Event of Default of all Guarantee Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In case a Guarantee Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Preferred Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Preferred Securities Guarantee shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Guarantee Event of Default and after the curing or waiving of all such Guarantee Events of Default that may have occurred: (A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Preferred Securities Guarantee, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Preferred Securities Guarantee. and no implied covenants or obligations shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee; and (B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Preferred Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be 8 9 under a duty to examine the same to determine whether or not they conform to the requirements of this Preferred Securities Guarantee; (ii) the Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee; and (iv) no provision of this Preferred Securities Guarantee shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Preferred Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Preferred Securities Guarantee or indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of Preferred Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Preferred Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Preferred Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Preferred Securities Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action 9 10 hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof). (v) The Preferred Guarantee Trustee may consult with counsel, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Preferred Securities Guarantee from any court of competent jurisdiction. (vi) The Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Preferred Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee such security and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Preferred Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee; provided, that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of a Guarantee Event of Default, of its obligation to exercise the rights and powers vested in it by this Preferred Securities Guarantee. (vii) The Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 10 11 (ix) Any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders of the Preferred Securities, and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Preferred Securities Guarantee, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Preferred Securities Guarantee the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Preferred Guarantee Trustee (i) may request instructions from the Holders of a Majority in Liquidation Amount of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (b) No provision of this Preferred Securities Guarantee shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Preferred Securities Guarantee shall be taken as the statements of the Guarantor, and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Guarantee Trustee makes no representation as to the validity or sufficiency of this Preferred Securities Guarantee. ARTICLE 4 PREFERRED GUARANTEE TRUSTEE SECTION 4.1 Preferred Guarantee Trustee; Eligibility. (a) There shall be at all times be a Preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and 11 12 (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustee. (a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor. (c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee. 12 13 (d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Preferred Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee. (e) No Preferred Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Preferred Guarantee Trustee. (f) Upon termination of this Preferred Securities Guarantee or removal or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all amounts owing for fees and reimbursement of expenses which have accrued to the date of such termination, removal or resignation. ARTICLE 5 GUARANTEE SECTION 5.1 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Notwithstanding anything to the contrary herein, the Guarantor retains all of its rights under the Indenture to (i) extend the interest payment period on the Debentures and the Guarantor shall not be obligated hereunder to make any Guarantee Payments during any Extended Interest Payment Period (as defined in the Indenture) with respect to the Distributions (as defined in the Declaration) on the Preferred Securities, and (ii) change the maturity date of the Debentures to the extent permitted by the Indenture. SECTION 5.3 Obligations Not Affected. 13 14 The obligations, covenants, agreements and duties of the Guarantor under this Preferred Securities Guarantee shall be absolute and unconditional and shall remain in full force and effect until the entire liquidation amount of all outstanding Preferred Securities shall have been paid and such obligation shall in no way be affected or impaired by reason of the happening from time to time of any event, including without limitation, the following, whether or not with notice to, or the consent of the Guarantor: (a) The release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) The extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Debentures or any change to the maturity date of the Debentures permitted by the Indenture); (c) Any failure, omission, delay or lack of diligence on the part of the Property Trustee or the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Property Trustee or the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) The voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) Any invalidity of, or defect or deficiency in, the Preferred Securities; (f) The settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) Any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. 14 15 There shall be no obligation of the Preferred Guarantee Trustee or the Holders to give notice to, or obtain consent of the Guarantor or any other Person with respect to the happening of any of the foregoing. No setoff, counterclaim, reduction or diminution of any obligation, or any defense of any kind or nature that the Guarantor has or may have against any Holder shall be available hereunder to the Guarantor against such Holder to reduce the payments to it under this Preferred Securities Guarantee. SECTION 5.4 Rights of Holders. (a) The Holders of a Majority in Liquidation Amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Preferred Securities Guarantee or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee. (b) If the Preferred Guarantee Trustee fails to enforce this Preferred Securities Guarantee, then any Holder of Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce the Preferred Guarantee Trustee's rights under this Preferred Securities Guarantee without first instituting a legal proceeding against the Issuer, the Preferred Guarantee Trustee or any other person or entity. Notwithstanding the foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder of Preferred Securities may directly institute a proceeding against the Guarantor for enforcement of the Preferred Securities Guarantee for such payment to the Holder of the Preferred Securities of the principal of or interest on the Debentures on or after the respective due dates specified in the Debentures, and the amount of the payment will be based on the Holder's pro rata share of the amount due and owing on all of the Preferred Securities. The Guarantor hereby waives any right or remedy to require, that any action on this Preferred Securities Guarantee be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment. This Preferred Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Preferred Securities Guarantee, if, at 15 16 the time of any such payment, any amounts are due and unpaid under this Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Preferred Guarantee Trustee for the benefit of the Holders. SECTION 5.7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions. So long as any Preferred Securities remain outstanding, if there shall have occurred a Guarantee Event of Default or an event of default under the Declaration, then (a) the Guarantor shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Guarantor which rank pari passu with or junior to the Debentures and (c) the Guarantor shall not make any guarantee payments with respect to the foregoing (other than pursuant to this Preferred Securities Guarantee); provided, however, the Guarantor may declare and pay a stock dividend where the dividend stock is the same stock as that on which the dividend is being paid. SECTION 6.2 Ranking. This Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank: (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, except those liabilities of the Guarantor made pari passu or subordinate by their terms, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. If an Event of Default has occurred and is continuing under the Declaration, the rights of the holders of the Common Securities to receive any payments under the Common Securities Guarantee Agreement shall be subordinated to the rights of the Holders of Preferred Securities to receive Guarantee Payments hereunder. 16 17 ARTICLE 7 TERMINATION SECTION 7.1 Termination. This Preferred Securities Guarantee shall terminate upon (i) full payment of the Redemption Price of all Preferred Securities, (ii) upon the distribution of the Debentures to the Holders of all of the Preferred Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee. ARTICLE 8 INDEMNIFICATION SECTION 8.1 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Preferred Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Preferred Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Preferred Securities might properly be paid. SECTION 8.2 Indemnification. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection 17 18 with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Preferred Securities Guarantee. ARTICLE 9 MISCELLANEOUS SECTION 9.1 Successors and Assigns. All guarantees and agreements contained in this Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. SECTION 9.2 Amendments. Except with respect to any changes that do not adversely affect the rights of the Holders (in which case no consent of the Holders will be required), this Preferred Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of, and action by written consent of the Holders of the Securities apply to the giving of such approval. SECTION 9.3 Notices. All notices provided for in this Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Guarantee Trustee may give notice of to the Guarantor and the Holders of the Preferred Securities): ________________________ ________________________ ________________________ ________________________ (b) If given to the Guarantor, at the Guarantor's mailing addresses set forth below (or such other address as the Guarantor may give notice of to the Preferred Guarantee Trustee and the Holders of the Preferred Securities): 18 19 American Financial Group, Inc. One East Fourth Street Cincinnati, Ohio 45202 Attn: Secretary Telecopy No. (513) 579-2113 (c) If given to any Holder of Preferred Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by: first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. SECTION 9.4 Benefit. This Preferred Securities Guarantee is solely for the benefit of the Holders of the Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities. SECTION 9.5 Governing Law. THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO. 19 20 IN WITNESS WHEREOF, this Preferred Securities Guarantee is executed as of the day and year first above written. AMERICAN FINANCIAL GROUP, INC., as Guarantor By:_______________________________________ Name:_____________________________________ Title:____________________________________ ________________________________________, as Preferred Guarantee Trustee By:_______________________________________ Name:_____________________________________ Title:____________________________________ (Signature Page to the Preferred Securities Guarantee Agreement) 20 21 - -------------------------------------------------------------------------------- PREFERRED SECURITIES GUARANTEE AGREEMENT AMERICAN FINANCIAL CAPITAL TRUST I Dated as of September __, 1996 - -------------------------------------------------------------------------------- 22 TABLE OF CONTENTS ARTICLE 1 INTERPRETATION AND DEFINITIONS..................................................................1 SECTION 1.1 Interpretation and Definitions................................................1 ARTICLE 2 TRUST INDENTURE ACT.............................................................................5 SECTION 2.1 Trust Indenture Act; Application..............................................5 SECTION 2.2 Lists of Holders of Securities................................................5 SECTION 2.3 Reports by Preferred Guarantee Trustee........................................6 SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee...............................6 SECTION 2.5 Evidence of Compliance with Conditions Precedent..............................6 SECTION 2.6 Guarantee Event of Default; Waiver............................................6 SECTION 2.7 Guarantee Event of Default; Notice............................................6 SECTION 2.8 Conflicting Interests.........................................................7 SECTION 2.9 Disclosure of Information.....................................................7 SECTION 2.10 Preferred Guarantee Trustee May File Proofs of Claim..........................7 ARTICLE 3 POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE.....................................................................7 SECTION 3.1 Powers and Duties of Preferred Guarantee Trustee..............................7 SECTION 3.2 Certain Rights of Preferred Guarantee Trustee.................................9 SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee........................11 ARTICLE 4 PREFERRED GUARANTEE TRUSTEE....................................................................11 SECTION 4.1 Preferred Guarantee Trustee; Eligibility.....................................11 SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustee......................................................................12 ARTICLE 5 GUARANTEE......................................................................................13 SECTION 5.1 Guarantee....................................................................13 SECTION 5.2 Waiver of Notice and Demand..................................................13 SECTION 5.3 Obligations Not Affected.....................................................13 SECTION 5.4 Rights of Holders............................................................15 SECTION 5.5 Guarantee of Payment.........................................................15 SECTION 5.6 Subrogation..................................................................15 SECTION 5.7 Independent Obligations......................................................16 ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION......................................................16 SECTION 6.1 Limitation of Transactions...................................................16 SECTION 6.2 Ranking......................................................................16
i 23 ARTICLE 7 TERMINATION.......................................17 SECTION 7.1 Termination............................17 ARTICLE 8 INDEMNIFICATION...................................17 SECTION 8.1 Exculpation............................17 SECTION 8.2 Indemnification........................17 ARTICLE 9 MISCELLANEOUS.....................................18 SECTION 9.1 Successors and Assigns.................18 SECTION 9.2 Amendments.............................18 SECTION 9.3 Notices................................18 SECTION 9.4 Benefit................................19 SECTION 9.5 Governing Law..........................19 ii 24 CROSS REFERENCE TABLE* Section of Trust Section of Indenture Act of Guarantee 1939, as amended Agreement 310(a)..........................................................4.1(a) 310(b)..........................................................4.1(c) 310(c)....................................................Inapplicable 311(a)..........................................................2.2(b) 311(b)..........................................................2.2(b) 311(c)....................................................Inapplicable 312(a)..........................................................2.2(a) 312(b)..........................................................2.2(b) 312(c).............................................................2.9 313(a).............................................................2.3 313(b).............................................................2.3 313(c).............................................................2.3 313(d).............................................................2.3 314(a).............................................................2.4 314(b)....................................................Inapplicable 314(c).............................................................2.5 314(d)....................................................Inapplicable 314(e).............................................................2.5 314(f)....................................................Inapplicable 315(a)..................................................3.1(d); 3.2(a) 315(b)..........................................................2.7(a) 315(c)..........................................................3.1(c) 315(d)..........................................................3.1(d) 316(a).....................................................2.6; 5.4(a) 317(a).......................................................2.10; 5.4 318(a)..........................................................2.1(b) - ------------------------------------ * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not have any bearing upon the interpretation of any of its terms or provisions. iii EX-4.5 5 EXHIBIT 4.5 1 COMMON SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as of _________, 1996, is executed and delivered by American Financial Group, Inc., an Ohio corporation (the "Guarantor"), and _______________, as trustee (the "Common Guarantee Trustee"), for the benefit of the Holders (as defined herein) of the Common Securities (as defined herein) of American Financial Capital Trust I, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to the Declaration (as defined herein), the Issuer is issuing on the date hereof 4,000,000 preferred securities, having an aggregate liquidation amount of $100,000,000, designated the ____% Trust Originated Preferred Securities (the "Preferred Securities") and ______ common securities, having an aggregate liquidation amount of $________, designated the ___% Trust Originated Common Securities (the "Common Securities"); WHEREAS, as incentive for the Holders to purchase the Common Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Common Securities Guarantee, to pay to the Holders of the Common Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and WHEREAS, the Guarantor is also executing and delivering a guarantee agreement (as amended, modified or supplemented from time to time, the "Preferred Securities Guarantee") in substantially identical terms to this Common Securities Guarantee for the benefit of the holders of the Preferred Securities, except that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of Holders of the Common Securities to receive Guarantee Payments under this Common Securities Guarantee are subordinated to the rights of holders of the Preferred Securities to receive payments under the Preferred Securities Guarantee. NOW, THEREFORE, in consideration of the purchase by each Holder of Common Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Common Securities Guarantee for the benefit of the Holders. ARTICLE 1 INTERPRETATION AND DEFINITIONS SECTION 1.1 Interpretation and Definitions. In this Common Securities Guarantee, unless the context otherwise requires: (a) capitalized terms used in this Common Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; 1 2 (b) a term defined anywhere in this Common Securities Guarantee has the same meaning throughout; (c) all references to "the Common Securities Guarantee" or "this Common Securities Guarantee" are to this Common Securities Guarantee as modified, supplemented or amended from time to time; (d) all references in this Common Securities Guarantee to Articles and Sections are to Articles and Sections of this Common Securities Guarantee, unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Common Securities Guarantee, unless otherwise defined in this Common Securities Guarantee or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Affiliate" has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder. "Business Day" means any day other than a day on which banking institutions in New York, New York are authorized or required by law to close. "Common Guarantee Trustee" means _____________________, until a Successor Common Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Common Securities Guarantee and thereafter means each such Successor Common Guarantee Trustee. "Corporate Trust Office" means the office of the Common Guarantee Trustee at which the corporate trust business of the Common Guarantee Trustee shall at any particular time, be principally administered, which office at the date of execution of this Common Securities Guarantee is located at _______________________________, Attention: Corporate Trust Services Division; telecopy no. ___________________. "Covered Person" means any Holder or beneficial owner of Common Securities. "Debentures" means the series of subordinated deferrable interest debentures to be issued by the Guarantor designated the ____% Junior Subordinated Debentures due 2026 held by the Property Trustee (as defined in the Declaration) of the Issuer. "Declaration" means the Declaration of Trust, dated as of September __, 1996, as amended, modified or supplemented from time to time, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer. 2 3 "Guarantee Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Common Securities Guarantee. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Common Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) that are required to be paid on such Common Securities to the extent the Issuer shall have funds available therefor, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the "Redemption Price") to the extent the Issuer has funds available therefor, with respect to any Common Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the distribution of Debentures to the Holders in exchange for Common Securities as provided in the Declaration or the redemption of all the Common Securities upon maturity or redemption of the Debentures as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Common Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of Holders of the Common Securities to receive Guarantee Payments under this Common Securities Guarantee are subordinated to the rights of holders of the Preferred Securities to receive payments under the Preferred Securities Guarantee. "Holder" shall mean any holder, as registered on the books and records of the Issuer of any Common Securities. "Indemnified Person" means the Common Guarantee Trustee, any Affiliate of the Common Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Common Guarantee Trustee. "Indenture" means the Indenture dated as of _____, 1996, among the Guarantor (the "Debenture Issuer") and ____________________, as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the Property Trustee (as defined in the Declaration) of the Issuer. "Majority in Liquidation Amount of the Common Securities" means, except as provided in the terms of the Common Securities or by the Trust Indenture Act, Holder(s) of outstanding Common Securities, voting separately as a class, who are the record holders of more than 50% of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Common Securities. "Officers' Certificate" means, with respect to any Person, a certificate signed by two Authorized Officers (as defined in the Declaration) of such Person. Any Officers' Certificate 3 4 delivered with respect to compliance with a condition or covenant provided for in this Common Securities Guarantee shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Responsible Officer" means, with respect to the Common Guarantee Trustee, any officer within the Corporate Trust Office of the Common Guarantee Trustee, including any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Common Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Common Guarantee Trustee" means a successor Common Guarantee Trustee possessing the qualifications to act as Common Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time to time, or any successor legislation. 4 5 ARTICLE 2 TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application. (a) This Common Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Common Securities Guarantee and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Common Securities Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders of Securities. (a) The Guarantor shall provide the Common Guarantee Trustee with a list, in such form as the Common Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Common Securities ("List of Holders"), (i) within one Business Day after January 1 and June 30 of each year and current as of such date, and (ii) at any other time, within 30 days of receipt by the Guarantor of a written request from the Common Guarantee Trustee for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Common Guarantee Trustee; provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Common Guarantee Trustee by the Guarantor. The Common Guarantee Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it, provided that it may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Common Guarantee Trustee shall comply with its obligations under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by Common Guarantee Trustee. Within 60 days after May 15 of each year (commencing with the year of the first anniversary of the issuance of the Common Securities), the Common Guarantee Trustee shall provide to the Holders of the Common Securities such reports as are required by Section 313 of the Trust Indenture Act; if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Common Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Common Guarantee Trustee. The Guarantor shall provide to the Common Guarantee Trustee such documents, reports and information as required by Section 314 (if any) of the Trust Indenture Act and the compliance 5 6 certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. SECTION 2.5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Common Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Common Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)( 1) may be given in the form of an Officers' Certificate. SECTION 2.6 Guarantee Event of Default; Waiver. The Holders of a Majority in Liquidation Amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Guarantee Event of Default and its consequences. Upon such waiver, any such Guarantee Event of Default shall cease to exist, and any Guarantee Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Common Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Guarantee Event of Default or impair any right consequent thereon. SECTION 2.7 Guarantee Event of Default; Notice. (a) The Common Guarantee Trustee shall, within 90 days after the occurrence of a Guarantee Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Common Securities, notices of all Guarantee Events of Default actually known to a Responsible Officer of the Common Guarantee Trustee, unless such defaults have been cured before the giving of such notice; provided, that the Common Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Common Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Common Securities. (b) The Common Guarantee Trustee shall not be deemed to have knowledge of any Guarantee Event of Default unless the Common Guarantee Trustee shall have received written notice thereof or a Responsible Officer of the Common Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge thereof. SECTION 2.8 Conflicting Interests. The Declaration shall be deemed to be specifically described in this Common Securities Guarantee for the purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. 6 7 SECTION 2.9 Disclosure of Information. The disclosure of information as to the names and addresses of the Holders of the Common Securities in accordance with Section 312 of the Trust Indenture Act, regardless of the source from which such information was derived, shall not be deemed to be a violation of any existing law, or any law hereafter enacted which does not specifically refer to Section 312 of the Trust Indenture Act, nor shall the Common Guarantee Trustee be held accountable by reason of mailing any material pursuant to a request made under Section 312(b) of the Trust Indenture Act. SECTION 2.10 Common Guarantee Trustee May File Proofs of Claim. Upon the occurrence of a Guarantee Event of Default, the Common Guarantee Trustee is hereby authorized to (a) recover judgment, in its own name and as trustee of an express trust, against the Guarantor for the whole amount of any Guarantee Payments remaining unpaid and (b) file such proofs of claim and other papers or documents as may be necessary or advisable in order to have its claims and those of the Holders of the Common Securities allowed in any judicial proceedings relative to the Guarantor, its creditors or its property. ARTICLE 3 POWERS, DUTIES AND RIGHTS OF COMMON GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of Common Guarantee Trustee. (a) This Common Securities Guarantee shall be held by the Common Guarantee Trustee on behalf of the Issuer for the benefit of the Holders of the Common Securities, and the Common Guarantee Trustee shall not transfer this Common Securities Guarantee to any Person except a Holder of Common Securities exercising his or her rights pursuant to Section 5.4(b) or to a Successor Common Guarantee Trustee on acceptance by such Successor Common Guarantee Trustee of its appointment to act as Successor Common Guarantee Trustee. The right, title and interest of the Common Guarantee Trustee in and to this Common Securities Guarantee shall automatically vest in any Successor Common Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Common Guarantee Trustee. (b) If a Guarantee Event of Default actually known to a Responsible Officer of the Common Guarantee Trustee has occurred and is continuing, the Common Guarantee Trustee shall enforce this Common Securities Guarantee for the benefit of the Holders of the Common Securities. (c) The Common Guarantee Trustee, before the occurrence of any Guarantee Event of Default and after the curing of all Guarantee Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Common Securities Guarantee, and no implied covenants shall be read into this Common Securities Guarantee against 7 8 the Common Guarantee Trustee. In case a Guarantee Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Common Guarantee Trustee, the Common Guarantee Trustee shall exercise such of the rights and powers vested in it by this Common Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Common Securities Guarantee shall be construed to relieve the Common Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Guarantee Event of Default and after the curing or waiving of all such Guarantee Events of Default that may have occurred: (A) the duties and obligations of the Common Guarantee Trustee shall be determined solely by the express provisions of this Common Securities Guarantee, and the Common Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Common Securities Guarantee, and no implied covenants or obligations shall be read into this Common Securities Guarantee against the Common Guarantee Trustee; and (B) in the absence of bad faith on the part of the Common Guarantee Trustee, the Common Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Common Guarantee Trustee and conforming to the requirements of this Common Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Common Guarantee Trustee, the Common Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Common Securities Guarantee; (ii) the Common Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Common Guarantee Trustee, unless it shall be proved that the Common Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Common Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in Liquidation Amount of the Common Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Common Guarantee Trustee, or 8 9 exercising any trust or power conferred upon the Common Guarantee Trustee under this Common Securities Guarantee; and (iv) no provision of this Common Securities Guarantee shall require the Common Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Common Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Common Securities Guarantee or indemnify, reasonably satisfactory to the Common Guarantee Trustee, against such risk or liability is not reasonably assured to it. SECTION 3.2 Certain Rights of Common Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Common Guarantee Trustee may conclusively rely, and shall be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Common Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Common Securities Guarantee, the Common Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Common Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Common Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or registration thereof). (v) The Common Guarantee Trustee may consult with counsel, and the written advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Common Guarantee Trustee shall have the 9 10 right at any time to seek instructions concerning the administration of this Common Securities Guarantee from any court of competent jurisdiction. (vi) The Common Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Common Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Common Guarantee Trustee such security and indemnity, reasonably satisfactory to the Common Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Common Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Common Guarantee Trustee; provided, that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the Common Guarantee Trustee, upon the occurrence of a Guarantee Event of Default, of its obligation to exercise the rights and powers vested in it by this Common Securities Guarantee. (vii) The Common Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Common Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Common Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Common Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Common Guarantee Trustee or its agents hereunder shall bind the Holders of the Common Securities, and the signature of the Common Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Common Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Common Securities Guarantee, both of which shall be conclusively evidenced by the Common Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Common Securities Guarantee the Common Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Common Guarantee Trustee (i) may request instructions from the Holders of a Majority in Liquidation Amount of the Common Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions 10 11 are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (b) No provision of this Common Securities Guarantee shall be deemed to impose any duty or obligation on the Common Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Common Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Common Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee. The recitals contained in this Common Securities Guarantee shall be taken as the statements of the Guarantor, and the Common Guarantee Trustee does not assume any responsibility for their correctness. The Common Guarantee Trustee makes no representation as to the validity or sufficiency of this Common Securities Guarantee. ARTICLE 4 COMMON GUARANTEE TRUSTEE SECTION 4.1 Common Guarantee Trustee; Eligibility. (a) There shall be at all times be a Common Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Common Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Common Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). 11 12 (c) If the Common Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Common Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Common Guarantee Trustee. (a) Subject to Section 4.1(b), the Common Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Common Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Common Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Common Guarantee Trustee and delivered to the Guarantor. (c) The Common Guarantee Trustee appointed to office shall hold office until a Successor Common Guarantee Trustee shall have been appointed or until its removal or resignation. The Common Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Common Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Common Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Common Guarantee Trustee and delivered to the Guarantor and the resigning Common Guarantee Trustee. (d) If no Successor Common Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Common Guarantee Trustee may petition any court of competent jurisdiction for appointment of a Successor Common Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Common Guarantee Trustee. (e) No Common Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Common Guarantee Trustee. (f) Upon termination of this Common Securities Guarantee or removal or resignation of the Common Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Common Guarantee Trustee all amounts owing for fees and reimbursement of expenses which have accrued to the date of such termination, removal or resignation. 12 13 ARTICLE 5 GUARANTEE SECTION 5.1 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of this Common Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Notwithstanding anything to the contrary herein, the Guarantor retains all of its rights under the Indenture to (i) extend the interest payment period on the Debentures and the Guarantor shall not be obligated hereunder to make any Guarantee Payments during any Extended Interest Payment Period (as defined in the Indenture) with respect to the Distributions (as defined in the Declaration) on the Common Securities, and (ii) change the maturity date of the Debentures to the extent permitted by the Indenture. SECTION 5.3 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Common Securities Guarantee shall be absolute and unconditional and shall remain in full force and effect until the entire liquidation amount of all outstanding Common Securities shall have been paid and such obligation shall in no way be affected or impaired by reason of the happening from time to time of any event, including without limitation, the following, whether or not with notice to, or the consent of, the Guarantor: (a) The release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Common Securities to be performed or observed by the Issuer; (b) The extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Common Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with the Common Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment 13 14 period on the Debentures or any change to the maturity date of the Debentures permitted by the Indenture); (c) Any failure, omission, delay or lack of diligence on the part of the Property Trustee or the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Property Trustee or the Holders pursuant to the terms of the Common Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) The voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) Any invalidity of, or defect or deficiency in, the Common Securities; (f) The settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) Any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Common Guarantee Trustee or the Holders to give notice to, or obtain consent of the Guarantor or any other Person with respect to the happening of any of the foregoing. No setoff, counterclaim, reduction or diminution of any obligation, or any defense of any kind or nature that the Guarantor has or may have against any Holder shall be available hereunder to the Guarantor against such Holder to reduce the payments to it under this Common Securities Guarantee. SECTION 5.4 Rights of Holders. (a) The Holders of a Majority in Liquidation Amount of the Common Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Common Guarantee Trustee in respect of this Common Securities Guarantee or exercising any trust or power conferred upon the Common Guarantee Trustee under this Common Securities Guarantee. (b) If the Common Guarantee Trustee fails to enforce this Common Securities Guarantee, then any Holder of Common Securities may, subject to the subordination provisions of Section 6.2, institute a legal proceeding directly against the Guarantor to enforce the Common 14 15 Guarantee Trustee's rights under this Common Securities Guarantee without first instituting a legal proceeding against the Issuer, the Common Guarantee Trustee or any other person or entity. Notwithstanding the foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder of Common Securities may, subject to the subordination provisions of Section 6.2, directly institute a proceeding against the Guarantor for enforcement of the Common Securities Guarantee for such payment to the Holder of the Common Securities of the principal of or interest on the Debentures on or after the respective due dates specified in the Debentures, and the amount of the payment will be based on the Holder's pro rata share of the amount due and owing on all of the Common Securities. The Guarantor hereby waives any right or remedy to require that any action on this Common Securities Guarantee be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. SECTION 5.5 Guarantee of Payment. This Common Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders of Common Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Common Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Common Securities Guarantee, if at the time of any such payment, any amounts are due and unpaid under this Common Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Common Guarantee Trustee for the benefit of the Holders. SECTION 5.7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Common Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Common Securities Guarantee notwithstanding the occurrence of any event referred to in subsections 5.3(a) through 5.3(g), inclusive, hereof. 15 16 ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions. So long as any Common Securities remain outstanding, if there shall have occurred a Guarantee Event of Default or an event of default under the Declaration, then (a) the Guarantor shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock, (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Guarantor which rank pari passu with or junior to the Debentures and (c) the Guarantor shall not make any guarantee payments with respect to the foregoing (other than pursuant to this Common Securities Guarantee); provided, however, the Guarantor may declare and pay a stock dividend where the dividend stock is the same stock as that on which the dividend is being paid. SECTION 6.2 Ranking. This Common Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, except those liabilities of the Guarantor made pari passu or subordinate by their terms, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. If an Event of Default has occurred and is continuing under the Declaration, the rights of the Holders of the Common Securities to receive Guarantee Payments under this Common Securities Guarantee shall be subordinated to the rights of the holders of the Preferred Securities to receive payment of all amounts due and owing under the terms of the Preferred Securities Guarantee. ARTICLE 7 TERMINATION SECTION 7.1 Termination. This Common Securities Guarantee shall terminate upon (i) full payment of the Redemption Price of all Common Securities, (ii) upon the distribution of the Debentures to the Holders of all of the Common Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Common Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Common Securities must restore payment of any sums paid under the Common Securities or under this Common Securities Guarantee. 16 17 ARTICLE 8 INDEMNIFICATION SECTION 8.1 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Common Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Common Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Common Securities might properly be paid. SECTION 8.2 Indemnification. The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Common Securities Guarantee. ARTICLE 9 MISCELLANEOUS SECTION 9.1 Successors and Assigns. All guarantees and agreements contained in this Common Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Common Securities then outstanding. 17 18 SECTION 9.2 Amendments. Except with respect to any changes that do not adversely affect the rights of the Holders (in which case no consent of the Holders will be required), this Common Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in Liquidation Amount of the Common Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of, and action by written consent of the Holders of the Common Securities apply to the giving of such approval. SECTION 9.3 Notices. All notices provided for in this Common Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows: (a) If given to the Common Guarantee Trustee, at the Common Guarantee Trustee's mailing address set forth below (or such other address as the Common Guarantee Trustee may give notice of to the Guarantor and the Holders of the Common Securities): ___________________ ___________________ ___________________ ___________________ ___________________ (b) If given to the Guarantor, at the Guarantor's mailing addresses set forth below (or such other address as the Guarantor may give notice of to the Common Guarantee Trustee and the Holders of the Common Securities): American Financial Group, Inc. One East Fourth Street Cincinnati, Ohio 45202 Attn: Secretary Telecopy No. (513) 579-2113 (c) If given to any Holder of Common Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. 18 19 SECTION 9.4 Benefit. This Common Securities Guarantee is solely for the benefit of the Holders of the Common Securities and, subject to Section 3.1(a), is not separately transferable from the Common Securities. SECTION 9.5 Governing Law. THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO. IN WITNESS WHEREOF, this Common Securities Guarantee is executed as of the day and year first above written. AMERICAN FINANCIAL GROUP, INC., as Guarantor By:______________________________ Name:____________________________ Title:___________________________ ________________________________, as Common Guarantee Trustee By:______________________________ Name:____________________________ Title:___________________________ 19 20 - -------------------------------------------------------------------------------- COMMON SECURITIES GUARANTEE AGREEMENT AMERICAN FINANCIAL CAPITAL TRUST I Dated as of September __, 1996 - -------------------------------------------------------------------------------- 21 CROSS REFERENCE TABLE* Section of Trust Section of Indenture Act of Guarantee 1939, as amended Agreement 310(a).............................................4.1(a) 310(b).............................................4.1(c) 310(c).......................................Inapplicable 311(a).............................................2.2(b) 311(b).............................................2.2(b) 311(c).......................................Inapplicable 312(a).............................................2.2(a) 312(b).............................................2.2(b) 312(c)................................................2.9 313(a)................................................2.3 313(b)................................................2.3 313(c)................................................2.3 313(d)................................................2.3 314(a)................................................2.4 314(b).......................................Inapplicable 314(c)................................................2.5 314(d).......................................Inapplicable 314(e)................................................2.5 314(f).......................................Inapplicable 315(a).....................................3.1(d); 3.2(a) 315(b).............................................2.7(a) 315(c).............................................3.1(c) 315(d).............................................3.1(d) 316(a)........................................2.6; 5.4(a) 317(a)..........................................2.10; 5.4 318(a).............................................2.1(b) - ------------------------------------ * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not have any bearing upon the interpretation of any of its terms or provisions. 22 TABLE OF CONTENTS
Page ---- ARTICLE 1 INTERPRETATION AND DEFINITIONS................................................................1 SECTION 1.1 Interpretation and Definitions.....................................................1 ARTICLE 2 TRUST INDENTURE ACT...........................................................................5 SECTION 2.1 Trust Indenture Act; Application...................................................5 SECTION 2.2 Lists of Holders of Securities.....................................................5 SECTION 2.3 Reports by Common Guarantee Trustee................................................5 SECTION 2.4 Periodic Reports to Common Guarantee Trustee.......................................5 SECTION 2.5 Evidence of Compliance with Conditions Precedent...................................6 SECTION 2.6 Guarantee Event of Default; Waiver.................................................6 SECTION 2.7 Guarantee Event of Default; Notice.................................................6 SECTION 2.8 Conflicting Interests..............................................................6 SECTION 2.9 Disclosure of Information..........................................................7 SECTION 2.10 Common Guarantee Trustee May File Proofs of Claim..................................7 ARTICLE 3 POWERS, DUTIES AND RIGHTS OF COMMON GUARANTEE TRUSTEE......................................................................7 SECTION 3.1 Powers and Duties of Common Guarantee Trustee......................................7 SECTION 3.2 Certain Rights of Common Guarantee Trustee.........................................9 SECTION 3.3 Not Responsible for Recitals or Issuance of Guarantee.............................11 ARTICLE 4 COMMON GUARANTEE TRUSTEE.....................................................................11 SECTION 4.1 Common Guarantee Trustee; Eligibility.............................................11 SECTION 4.2 Appointment, Removal and Resignation of Common Guarantee Trustee..................12 ARTICLE 5 GUARANTEE....................................................................................13 SECTION 5.1 Guarantee.........................................................................13 SECTION 5.2 Waiver of Notice and Demand.......................................................13 SECTION 5.3 Obligations Not Affected..........................................................13 SECTION 5.4 Rights of Holders.................................................................14 SECTION 5.5 Guarantee of Payment..............................................................15 SECTION 5.6 Subrogation.......................................................................15 SECTION 5.7 Independent Obligations...........................................................15 ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION....................................................16 SECTION 6.1 Limitation of Transactions........................................................16 SECTION 6.2 Ranking...........................................................................16
i 23 ARTICLE 7 TERMINATION..................................................................................16 SECTION 7.1 Termination.......................................................................16 ARTICLE 8 INDEMNIFICATION..............................................................................17 SECTION 8.1 Exculpation.......................................................................17 SECTION 8.2 Indemnification...................................................................17 ARTICLE 9 MISCELLANEOUS................................................................................17 SECTION 9.1 Successors and Assigns............................................................17 SECTION 9.2 Amendments........................................................................18 SECTION 9.3 Notices...........................................................................18 SECTION 9.4 Benefit...........................................................................19 SECTION 9.5 Governing Law.....................................................................19
ii EX-4.7 6 EXHIBIT 4.7 1 This Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of The Depositry Trust Company, a New York corporation (the "Depositary"), or a nominee of the Depositary. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depositary or its nominee only in the limited circumstances described in the Declaration and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. Unless this Preferred Security Certificate is presented by an authorized representative of the Depositary to the Trust or its agent for registration of transfer, exchange or payment, and any Preferred Security Certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of the Depositary (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES - 1 - - _____________ - CUSIP NO. ________________ CERTIFICATE EVIDENCING PREFERRED SECURITIES OF AMERICAN FINANCIAL CAPITAL TRUST I ____% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRS"SM) (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY) AMERICAN FINANCIAL CAPITAL TRUST I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder") is the registered owner of preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the __% Trust Originated Preferred Securities(sm) (liquidation amount $25 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities represented hereby are issued and shall in all respects by subject to the provisions of the Declaration of Trust of the Trust dated as of September __, 1996, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Preferred Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the 2 Declaration. The Holder is entitled to the benefits of the Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Preferred Securities as evidence of indirect beneficial ownership in the Debentures. IN WITNESS WHEREOF, the Trust has executed this certificate this _______ day of September, 1996. AMERICAN FINANCIAL CAPITAL TRUST I By:______________________ Name:____________________ Title: Regular Trustee By:______________________ Name:____________________ Title: Regular Trustee 3 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocable appoints ________________________________________________________________________________ ________________________________________________________________________________ _________________agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:_____________ Signature:_______________________________________ (Sign exactly as your name appears on the other side of this Preferred Security Certificate) EX-4.8 7 EXHIBIT 4.8 1 Certificate Number Number of Common Securities -1- -___________- Certificate Evidencing Common Securities of AMERICAN FINANCIAL CAPITAL TRUST I ___% Trust Originated Common Securities (liquidation amount $25 per Common Security) American Financial Capital Trust I, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that American Financial Group, Inc. (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the ___% Trust Originated Common Securities (liquidation amount $25 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Declaration of Trust of the Trust dated as of September __, 1996, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Sponsor at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. 2 IN WITNESS WHEREOF, the Trust has executed this certificate this ______ day of September, 1996. AMERICAN FINANCIAL CAPITAL TRUST I By:______________________ Name:____________________ Title: Regular Trustee By:______________________ Name:____________________ Title: Regular Trustee 3 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocable appoints ________________________________________________________________________________ ________________________________________________________________________________ __________________________________________________________agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:_________________________ Signature:____________________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) EX-23.1 8 EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) and related Prospectus of American Financial Group, Inc. for the registration of 4,600,000 Preferred Securities of American Financial Capital Trust I and to the incorporation by reference therein of our report dated March 15, 1996, with respect to the consolidated financial statements and schedules of American Financial Group, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 1995, filed with the Securities and Exchange Commission. ERNST & YOUNG LLP Cincinnati, Ohio September 20, 1996 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement on Form S-3 of American Financial Group, Inc. for the registration of 4,600,000 Preferred Securities of American Financial Capital Trust I of (a) the report of Deloitte & Touche LLP dated February 15, 1995 (March 23, 1995 with respect to the acquisition of American Financial Corporation as discussed in Note B to the financial statements) relating to the consolidated financial statements of American Premier Underwriters, Inc. and (b) the report of Deloitte & Touche dated February 18, 1994 relating to the consolidated financial statements of General Cable Corporation, both appearing in the American Financial Group, Inc. Annual Report on Form 10-K for the year ended December 31, 1995, and to the reference to Deloitte & Touche LLP and Deloitte & Touche under the heading "Experts" in the Prospectus, which is part of such Registration Statement. DELOITTE & TOUCHE LLP Cincinnati, Ohio September 20, 1996 EX-25.1 9 EXHIBIT 25.1 1 Exhibit 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) / / THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) AMERICAN FINANCIAL GROUP, INC. (Exact name of obligor as specified in its charter) Ohio 31-1422526 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) One East Fourth Street Cincinnati, Ohio 45202 (Address of principal executive offices) (Zip code) % Subordinated Debentures due 2026 (Title of the indenture securities) ================================================================================ 2 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. (See Note on page 3.) 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE COMMISSION'S RULES OF PRACTICE. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 3 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. 3 4 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 23rd day of September, 1996. THE BANK OF NEW YORK By: /s/ Byron Merino -------------------------- Name: Byron Merino Title: Assistant Treasurer 5 Exhibit 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS ............................................ in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin ............................... $ 2,461,550 Interest-bearing balances ....................... 835,563 Securities: Held-to-maturity securities ..................... 802,064 Available-for-sale securities ................... 2,051,263 Federal funds sold in domestic offices of the bank: Federal funds sold ................................ 3,885,475 Loans and lease financing receivables: Loans and leases, net of unearned income .................27,820,159 LESS: Allowance for loan and lease losses ..............509,817 LESS: Allocated transfer risk reserve......................1,000 Loans and leases, net of unearned income, allowance, and reserve ................ 27,309,342 Assets held in trading accounts ................... 837,118 Premises and fixed assets (including capitalized leases) ............................. 614,567 Other real estate owned ........................... 51,631 Investments in unconsolidated subsidiaries and associated companies ....................................... 225,158 Customers' liability to this bank on acceptances outstanding ......................... 800,375 Intangible assets ................................. 436,668 Other assets ...................................... 1,247,908 ----------- Total assets ...................................... $41,558,682 =========== LIABILITIES Deposits: In domestic offices ............................. $18,851,327 Noninterest-bearing .......7,102,645 Interest-bearing .........11,748,682 In foreign offices, Edge and Agreement subsidiaries, and IBFs ................ 10,965,604 Noninterest-bearing ..........37,855 Interest-bearing .........10,927,749 Federal funds purchased and secu- rities sold under agreements to re- purchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ......................... 1,224,886 Securities sold under agreements to repurchase ................................. 29,728 Demand notes issued to the U.S. ................... Treasury ........................................ 118,870 Trading liabilities ............................... 673,944 Other borrowed money: With original maturity of one year or less ....................................... 2,713,248 With original maturity of more than one year ...................................... 20,780 Bank's liability on acceptances exe- cuted and outstanding ........................... 803,292 Subordinated notes and debentures ................. 1,022,860 Other liabilities ................................. 1,590,564 ----------- Total liabilities ................................. 38,015,103 ----------- EQUITY CAPITAL Common stock ...................................... 942,284 Surplus ........................................... 525,666 Undivided profits and capital reserves ........................................ 2,078,197 Net unrealized holding gains (losses) on available-for-sale securities ...................................... 3,197 Cumulative foreign currency transla- tion adjustments ................................ ( 5,765) ----------- Total equity capital .............................. 3,543,579 ----------- Total liabilities and equity capital ......................................... $41,558,682 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot Thomas A. Renyi Directors Alan R. Griffith EX-25.2 10 EXHIBIT 25.2 1 Exhibit 25.2 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) / / ---------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------------------- AMERICAN FINANCIAL CAPITAL TRUST I (Exact name of obligor as specified in its charter) Delaware Applied for (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) One East Fourth Street Cincinnati, Ohio 45202 (Address of principal executive offices) (Zip code) ---------------------- % Trust Originated Preferred Securities (Title of the indenture securities) ================================================================================ 2 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. (See Note on page 3.) 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE COMMISSION'S RULES OF PRACTICE. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 3 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. - 3 - 4 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 23rd day of September, 1996. THE BANK OF NEW YORK By: /s/ Byron Merino Name: Byron Merino Title: Assistant Treasurer 5 Exhibit 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS ............................................ in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin ............................... $ 2,461,550 Interest-bearing balances ....................... 835,563 Securities: Held-to-maturity securities ..................... 802,064 Available-for-sale securities ................... 2,051,263 Federal funds sold in domestic offices of the bank: Federal funds sold ................................ 3,885,475 Loans and lease financing receivables: Loans and leases, net of unearned income .................27,820,159 LESS: Allowance for loan and lease losses ..............509,817 LESS: Allocated transfer risk reserve......................1,000 Loans and leases, net of unearned income, allowance, and reserve ................ 27,309,342 Assets held in trading accounts ................... 837,118 Premises and fixed assets (including capitalized leases) ............................. 614,567 Other real estate owned ........................... 51,631 Investments in unconsolidated subsidiaries and associated companies ....................................... 225,158 Customers' liability to this bank on acceptances outstanding ......................... 800,375 Intangible assets ................................. 436,668 Other assets ...................................... 1,247,908 ----------- Total assets ...................................... $41,558,682 =========== LIABILITIES Deposits: In domestic offices ............................. $18,851,327 Noninterest-bearing .......7,102,645 Interest-bearing .........11,748,682 In foreign offices, Edge and Agreement subsidiaries, and IBFs ................ 10,965,604 Noninterest-bearing ..........37,855 Interest-bearing .........10,927,749 Federal funds purchased and secu- rities sold under agreements to re- purchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ......................... 1,224,886 Securities sold under agreements to repurchase ................................. 29,728 Demand notes issued to the U.S. ................... Treasury ........................................ 118,870 Trading liabilities ............................... 673,944 Other borrowed money: With original maturity of one year or less ....................................... 2,713,248 With original maturity of more than one year ...................................... 20,780 Bank's liability on acceptances exe- cuted and outstanding ........................... 803,292 Subordinated notes and debentures ................. 1,022,860 Other liabilities ................................. 1,590,564 ----------- Total liabilities ................................. 38,015,103 ----------- EQUITY CAPITAL Common stock ...................................... 942,284 Surplus ........................................... 525,666 Undivided profits and capital reserves ........................................ 2,078,197 Net unrealized holding gains (losses) on available-for-sale securities ...................................... 3,197 Cumulative foreign currency transla- tion adjustments ................................ ( 5,765) ----------- Total equity capital .............................. 3,543,579 ----------- Total liabilities and equity capital ......................................... $41,558,682 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot Thomas A. Renyi Directors Alan R. Griffith EX-25.3 11 EXHIBIT 25.3 1 Exhibit 25.3 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) / / ---------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------------------- AMERICAN FINANCIAL GROUP, INC. (Exact name of obligor as specified in its charter) Ohio 31-1422526 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) One East Fourth Street Cincinnati, Ohio 45202 (Address of principal executive offices) (Zip code) ---------------------- Guarantee of Preferred Securities of American Financial Capital Trust I (Title of the indenture securities) ================================================================================ 2 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. (See Note on page 3.) 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND RULE 24 OF THE COMMISSION'S RULES OF PRACTICE. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 3 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. - 3 - 4 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 23rd day of September, 1996. THE BANK OF NEW YORK By: /s/ Byron Merino -------------------------- Name: Byron Merino Title: Assistant Treasurer 5 Exhibit 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS ............................................ in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin ............................... $ 2,461,550 Interest-bearing balances ....................... 835,563 Securities: Held-to-maturity securities ..................... 802,064 Available-for-sale securities ................... 2,051,263 Federal funds sold in domestic offices of the bank: Federal funds sold ................................ 3,885,475 Loans and lease financing receivables: Loans and leases, net of unearned income .................27,820,159 LESS: Allowance for loan and lease losses ..............509,817 LESS: Allocated transfer risk reserve......................1,000 Loans and leases, net of unearned income, allowance, and reserve ................ 27,309,342 Assets held in trading accounts ................... 837,118 Premises and fixed assets (including capitalized leases) ............................. 614,567 Other real estate owned ........................... 51,631 Investments in unconsolidated subsidiaries and associated companies ....................................... 225,158 Customers' liability to this bank on acceptances outstanding ......................... 800,375 Intangible assets ................................. 436,668 Other assets ...................................... 1,247,908 ----------- Total assets ...................................... $41,558,682 =========== LIABILITIES Deposits: In domestic offices ............................. $18,851,327 Noninterest-bearing .......7,102,645 Interest-bearing .........11,748,682 In foreign offices, Edge and Agreement subsidiaries, and IBFs ................ 10,965,604 Noninterest-bearing ..........37,855 Interest-bearing .........10,927,749 Federal funds purchased and secu- rities sold under agreements to re- purchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ......................... 1,224,886 Securities sold under agreements to repurchase ................................. 29,728 Demand notes issued to the U.S. ................... Treasury ........................................ 118,870 Trading liabilities ............................... 673,944 Other borrowed money: With original maturity of one year or less ....................................... 2,713,248 With original maturity of more than one year ...................................... 20,780 Bank's liability on acceptances exe- cuted and outstanding ........................... 803,292 Subordinated notes and debentures ................. 1,022,860 Other liabilities ................................. 1,590,564 ----------- Total liabilities ................................. 38,015,103 ----------- EQUITY CAPITAL Common stock ...................................... 942,284 Surplus ........................................... 525,666 Undivided profits and capital reserves ........................................ 2,078,197 Net unrealized holding gains (losses) on available-for-sale securities ...................................... 3,197 Cumulative foreign currency transla- tion adjustments ................................ ( 5,765) ----------- Total equity capital .............................. 3,543,579 ----------- Total liabilities and equity capital ......................................... $41,558,682 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot Thomas A. Renyi Directors Alan R. Griffith -----END PRIVACY-ENHANCED MESSAGE-----