SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Check the appropriate box:
[x] Preliminary Proxy Statement
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
American Annuity Group, Inc.
(Name of Registrant as Specified In Its Charter)
American Annuity Group, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: ftnt. 1
4) Proposed maximum aggregate value of transaction:
[FN]
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it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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PRELIMINARY COPY
AMERICAN ANNUITY GROUP, INC.
250 East Fifth Street
Cincinnati, Ohio 45202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 14, 1994
To Our Stockholders:
You are invited to attend the Annual Meeting of Stockholders of American
Annuity Group, Inc. ("AAG" or the "Company"). The meeting will be held in
the Ludlow Room of the Cincinnatian Hotel, Fifth and Vine Streets,
Cincinnati, Ohio at 10:00 A.M. (Eastern Time) on Tuesday, June 14, 1994.
The purposes of the meeting are:
1. To elect nine directors;
2. To approve the AAG 1994 Stock Option Plan;
3. To approve the AAG 1994 Directors' Stock Appreciation Rights
Plan;
4. To ratify the issuance of Common Stock of AAG in exchange for its
Series A Preferred Stock.
5. To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
Carl H. Lindner
Chairman of the Board
Dated: May 10, 1994
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY FORM IN THE
ENVELOPE PROVIDED WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING. YOU MAY
REVOKE YOUR PROXY AT A LATER DATE OR ATTEND THE MEETING AND VOTE IN PERSON.
PROXY STATEMENT
AMERICAN ANNUITY GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 14, 1994
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of AAG for use at the Annual Meeting of
Stockholders to be held at 10:00 A.M. (Eastern Time) on Tuesday, June 14,
1994, and any adjournment thereof. The Company will pay the cost of
soliciting proxies.
The approximate mailing date of these proxy materials is May 15, 1994.
Outstanding Voting Securities of AAG
Outstanding Voting Securities of AAG
Holders of record of AAG Common Stock at the close of business on April
15, 1994 (the "Record Date") will be entitled to notice of the Annual
Meeting and to vote at the Annual Meeting and at any adjournments thereof.
At the Record Date, 39,141,080 shares of Common Stock were issued and
outstanding.
Holders of Common Stock are entitled to one vote per share on each matter
to be voted on at the Annual Meeting.
Principal Stockholders
Principal Stockholders
As of the Record Date, the only person known to the Company to own
beneficially more than 5% of AAG's Common Stock was American Financial
Corporation and its subsidiaries (collectively "AFC"), One East Fourth
Street, Cincinnati, Ohio 45202, which beneficially owned 31,319,629 shares,
which represented approximately 80% of the number of shares outstanding as
of the Record Date.
AFC and Carl H. Lindner, the beneficial owner of 40.8% of AFC's common
stock and the Chairman of its Board of Directors and its Chief Executive
Officer, share voting and investment power with respect to the shares of AAG
Common Stock owned by AFC. AFC and Carl H. Lindner may be deemed to be
controlling persons of AAG.
Action to be Taken at the Meeting
Action to be Taken at the Meeting
All shares represented by a properly executed proxy will, unless
previously revoked, be voted at the Annual Meeting or any adjournments
thereof in accordance with the directions on the proxy. Unless a contrary
direction is indicated, such shares will be voted for the nine nominees for
director named herein and in favor of Proposals 2, 3 and 4.
Management knows of no other matter to be presented at the Annual Meeting
upon which a vote may be taken, but it is intended that as to any such other
matter the proxy holders will vote in accordance with their judgment as to
the best interest of AAG. Should any of the nominees for election as a
director become unable to stand for election, which is not anticipated, it
is intended that the proxy holders will vote for the election of such other
person as the Board of Directors may recommend.
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees for Director Nominees for Director
Directors will be elected to hold office until the next annual meeting and
until their successors are elected and qualified.
The number of directors to be elected at the Annual Meeting is nine. The
nine directors so elected will, upon such election, constitute the entire
Board of Directors.
In accordance with AAG's Certificate of Incorporation ("Certificate"), the
only candidates eligible for election at the meeting of stockholders are
candidates nominated by or at the direction of the Board of Directors and
candidates nominated at the meeting by a stockholder who has complied with
the procedures set forth in the Certificate. The Certificate requires that
a stockholder wishing to make a nomination must have first given the
Secretary of AAG at least five and not more than thirty days' prior written
notice setting forth or accompanied by (a) the name and residence of the
stockholder and each nominee specified in the notice, (b) a representation
that the stockholder was a holder of record of AAG Common Stock and intended
to appear, in person or by proxy, at the meeting to nominate the persons
specified in the notice and (c) the consent of each such nominee to serve as
director if so elected.
The nominees to the Board of Directors are CARL H. LINDNER, S. CRAIG
LINDNER, ROBERT A. ADAMS, A. LEON FERGENSON, RONALD G. JOSEPH, JOHN T.
LAWRENCE III, WILLIAM R. MARTIN, ALFRED W. MARTINELLI and RONALD F. WALKER.
See "MANAGEMENT" for a description of the background, securities holdings,
remuneration and other information relating to the nominees. The nine
nominees receiving the highest numbers of votes will be elected as
directors.
The Board of Directors recommends that stockholders vote FOR the election
of the nine nominees as directors. The Company has been informed that AFC
intends to vote its shares FOR the above nominees.
PROPOSAL 2: APPROVAL OF THE AMERICAN ANNUITY
GROUP, INC. 1994 STOCK OPTION PLAN
On March 2, 1994, the Board of Directors adopted, subject to approval of
AAG stockholders at the Annual Meeting, the American Annuity Group, Inc.,
1994 Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan
provides for the issuance of both incentive stock options ("Incentive Stock
Options") and non-qualified stock options ("Nonqualified Stock Options") to
certain officers and key management personnel ("Key Employees").
The following description is qualified in its entirety by reference to the
text of the Stock Option Plan which is set forth in Annex 1 to this Proxy
Statement.
Purpose of the Plan
Purpose of the Plan
The purpose of the Stock Option Plan is to promote the interests of AAG
and its stockholders by providing a means for selected Key Employees of AAG
and its subsidiaries to acquire a propriety interest in AAG, thereby
strengthening AAG's ability to attract capable management personnel and
provide an inducement for Key Employees to remain employed by AAG or its
subsidiaries and to perform at their maximum levels.
Eligibility
Eligibility
Options under the Stock Option Plan may be granted to Key Employees of AAG
and its subsidiaries.
Securities to be Utilized
Securities to be Utilized
The maximum number of shares of AAG Common Stock for which options may be
granted under the Stock Option Plan is 1,500,000 (subject to antidilution
provisions). Shares delivered by AAG pursuant to the exercise of options
may be authorized but unissued shares of Common Stock, previously acquired
treasury shares or a combination thereof. Shares subject to options which
expire or are terminated shall again be available for the granting of other
options under the Stock Option Plan.
Plan Administration and Termination
Plan Administration and Termination
The Stock Option Plan will be administered by the Organization and Policy
Committee (the "Committee") comprised of not less than two "outside
directors," as such term is defined in P. Reg. 1.162-27(e)(3) of the Income
Tax Regulations (or such comparable definition in the final Income Tax
Regulations). Each member shall also be a "disinterested person" as defined
in Section 16b-3(c)(2)(i) of the Securities Exchange Act of 1934 (the
"Exchange Act"). The Board of Directors, unless the Board of Directors
delegates such authority to the Committee, will have the ability to amend
the Stock Option Plan at any time without further stockholder approval
unless such amendment would cause the Stock Option Plan to cease to satisfy
any applicable conditions of Rule 16b-3. Unless earlier terminated, the
Stock Option Plan will continue in effect until March 2, 2004.
Price, Exercise Period and Vesting of Options
The Committee will determine the exercise price for options granted under
the Stock Option Plan. The exercise price for a Nonqualified Stock Option
may be less than the Fair Market Value per Share but must not be less than
the par value per share of Common Stock (the "Par Value"). The exercise
price for an Incentive Stock Option must not be less than the greater of (i)
100% of the Fair Market Value per share of Common Stock on the date of grant
or (ii) the Par Value. The Fair Market Value of the Common Stock will be
the closing price of AAG Common Stock on the New York Stock Exchange
Composite Tape for the most recent day of trading. On April 25, 1994, the
closing price of AAG Common Stock was $9.13.
Twenty percent of the shares underlying an option will become exercisable
upon the first anniversary of the date of grant, and twenty percent will
vest on each anniversary thereafter.
Generally, payment for shares purchased upon exercise of an option is to
be made in cash. The Committee, however, may permit payment by (i) delivery
of shares of AAG Common Stock already owned by the Optionee having a Fair
Market Value equal to the cash option price of the shares; (ii) a
combination of share delivery and cash payment or (iii) any other method.
Federal Income Tax Consequences
Federal Income Tax Consequences
Incentive Stock Options. The Company intends that certain of the options
granted under the plan will qualify as incentive stock options under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). Assuming
that the options are so qualified, the tax consequences of the plan will
vary depending on whether certain holding period requirements are met.
If an optionee acquiring stock pursuant to an incentive stock option does
not dispose of the stock until at least one year after the transfer of the
stock to the optionee and at least two years from the date of grant of the
option, then, subject to the alternative minimum tax rules discussed below,
there will be no tax consequences to the optionee or the Company when the
incentive stock option is granted or when it is exercised.
If stock acquired upon exercise of an option is sold by the optionee and
the holding period requirements described in the preceding paragraph have
not been met, the federal income tax consequences to the optionee and the
Company will be as follows: first, the optionee will be required to report,
on his or her federal income tax return for the year in which the sale
occurs, additional compensation income equal to the difference between the
Fair Market Value of the stock at the time of exercise of the option and the
purchase price at which the stock was acquired (the Company will generally
be entitled to a compensation deduction in an equivalent amount). Next, for
purposes of determining gain or loss upon sale of the stock an amount equal
to this compensation income will be added to the exercise price of the stock
and the total will be the optionee's adjusted basis of the stock. Gain or
loss will be determined, based upon the difference between the optionee's
adjusted basis of the stock and the net proceeds of the sale, and the
optionee will be required to report such gain or loss as long-term or short-
term (depending on how long the optionee held the stock) capital gain or
loss on his or her federal income tax return for the year in which the sale
occurs.
Although an optionee who receives an Incentive Stock Option under the plan
realizes no taxable income when the optionee receives or exercises the
Incentive Stock Option, the difference between the Fair Market Value of the
stock on the date of exercise and the exercise price results in an
adjustment in computing alternative minimum taxable income for purposes of
Sections 55 et. seq. of the Code, which may trigger alternative minimum tax
consequences for optionees. Any alternative minimum tax that is payable may
ultimately be credited against taxes owed upon disposition of the stock.
Nonqualified Options. The Company may also grant Nonqualified Options
under the plan. In general, there will be no tax consequences to the
optionee or the Company when the option is granted. Upon exercise of the
option, the optionee will be required to report, on his or her federal
income tax return for the year in which the exercise occurs, additional
compensation income equal to the difference between the Fair Market Value of
the stock at the time of exercise of the option and the exercise price (the
Company will generally be entitled to a compensation deduction in an
equivalent amount.)
The foregoing is only a summary of the federal income tax rules applicable
to options granted under the plan and is not intended to be complete. In
addition, this summary does not discuss the effect of the income or other
tax laws of any state or foreign country in which a participant may reside.
The Board of Directors recommends that stockholders vote FOR the proposal
to approve the AAG 1994 Stock Option Plan. The Company has been informed
that AFC intends to vote its shares FOR approval of the AAG 1994 Stock
Option Plan. Option Plan.
PROPOSAL 3: APPROVAL OF THE AMERICAN ANNUITY GROUP
1994 DIRECTORS' STOCK APPRECIATION RIGHTS PLAN
The purpose of the American Annuity Group 1994 Directors' Stock
Appreciation Rights Plan is to advance the interests of AAG and its
stockholders by affording non-employee members of AAG's Board of Directors
an opportunity to participate in a stock-based investment vehicle through
the grant of stock appreciation rights ("SARs"). SARs do not require the
issuance of shares as do stock options, but the grant of SARs does, under
current accounting standards, require that the Company record a charge to
earnings on a current basis to the extent that SARs are "in-the-money". The
Company believes that this Plan will give an incentive to non-employee
members of the Board to increase revenues and profits.
On March 2, 1994, the Board of Directors adopted the 1994 Directors Stock
Appreciation Rights Plan (the "Directors SAR Plan") subject to approval by
AAG's stockholders. The following is a brief description of the material
provisions of the Directors SAR Plan. Stockholders are urged to carefully
review the copy of the complete Directors SAR Plan attached hereto as Annex
2.
The Directors SAR Plan provides that SARs will be granted to directors of
AAG who are not also employees of AAG or its subsidiaries ("Eligible
Directors"). The Directors SAR Plan will provide for automatic grants of
SARs to Eligible Directors. On the effective date of the Directors SAR
Plan, each Eligible Director was granted 10,000 SARs. On each March 1
thereafter, each Eligible Director will be granted 1,000 SARs. Each person
elected as a director of AAG who was not a director on the effective date of
the Directors SAR Plan and qualifies as an Eligible Director will be granted
10,000 SARs on the date of election. The Board of Directors has initially
appointed the Organization and Policy Committee to administer the SAR Plan.
The aggregate number of SARs which may be granted pursuant to the
Directors SAR Plan is limited to 500,000 subject to adjustment in the case
of stock dividends, stock splits and similar events. In general, the SARs
are designed to compensate recipients based on the increase in market value
of AAG Common Stock over the term of an SAR. SARs are granted with a
specific grant price (the "SAR Grant Price") which is equal to the average
of the means between the high and low sales prices for shares of AAG Common
Stock for the ten consecutive trading days immediately preceding the date of
grant. For the initial grant of SARs, the SAR Grant Price was $9.62. On
April 25, 1994, the closing price of AAG Common Stock on the New York Stock
Exchange Composite Tape was $9.13.
SARs will expire ten years after the date of grant and generally vest 20%
on each anniversary of the date of grant beginning with the first
anniversary. As a result, SARs generally become fully vested on the fifth
anniversary of grant. The Directors SAR Plan provides for acceleration of
the vesting schedule in the case of (i) the termination of service as a
director of a holder of an SAR for any reason other than cause within one
year following certain merger or acquisition transactions involving the
Company or a change of control of the Company, (ii) upon termination of
service as a director of a holder of an SAR because of retirement, death or
disability, (iii) certain merger or acquisition transactions involving the
Company if provision is not made for the assumption of the SARs by the
acquiring corporation and (iv) at the discretion of the committee
administering the Director SAR Plan.
SARs may be exercised, to the extent vested, during certain window periods
immediately following the release by the Company of quarterly results of
operations, so long as the recipient of the SAR remains a director of the
Company or one of its subsidiaries. The Director SAR Plan contains
exceptions to the general rule that SARs may be exercised only while the
recipient remains a director, including exceptions for termination as a
director resulting from retirement, death or disability. In the case of
these exceptions, SARs held by the former director will remain exercisable
for some period of time following termination of employment.
Upon exercise, the holder of an SAR is entitled to be paid an amount (the
"Spread") equal to (x) the number of SARs being exercised, times (y) the SAR
Exercise Price less the SAR Grant Price. For purposes of calculating the
Spread, the SAR Exercise Price is equal to the average of the high and low
sales prices of AAG Common Stock on the date of exercise. The Director SAR
Plan provides that 50% of the Spread will be paid in cash to the holder.
The other half of the Spread will be paid to the holder in any combination
of the following, as determined by the committee administering the Directors
SAR Plan: (i) AAG Common Stock (with AAG Common Stock valued at the SAR
Exercise Price) or (ii) cash deferred over 10 years with equal annual
payments of principal plus interest at 10% per annum.
The Directors SAR Plan provides that it may be amended from time to time
by the Board of Directors without the approval of stockholders, except in
certain cases. Stockholder approval will be required to (i) increase the
number of SARs which may be granted under the Directors SAR Plan, (ii)
change the manner in which the SAR Grant Price is calculated, (iii) change
the class of persons eligible to be granted SARs or (iv) make any other
amendment which would require stockholder approval in order for the
Directors SAR Plan to remain an exempted plan under Rule 16b-3 under the
Exchange Act.
Persons who receive SARs incur no federal income tax liability at the time
of grant. Persons exercising SARs recognize taxable income, and the Company
receives a tax deduction, equal to the amount of cash received by such
person plus the value of AAG Common Stock received. Such person's basis in
the AAG Common Stock received is equal to the fair market value of the stock
on the date of receipt.
On March 2, 1994, 10,000 SARs were granted to Messrs. Fergenson, Joseph,
Lawrence, Martin, Martinelli and Walker at an SAR Grant Price of $9.62. The
grant, as well as the Director SAR Plan itself, is subject to stockholder
approval. In future years, each non-employee director will receive 1,000
SARs per year. No other persons are eligible to receive benefits under the
Directors SAR Plan. The total number of SARs granted in future years will
depend on the number of non-employee directors. Based on the current number
of non-employee directors, 6,000 SARs will be granted annually.
The Board of Directors recommends that stockholders vote FOR the proposal
to approve the AAG 1994 Directors' Stock Appreciation Rights Plan. The
Company has been informed that AFC intends to vote its shares FOR approval
of the AAG 1994 Directors' Stock Appreciation Rights Plan.
PROPOSAL 4: RATIFICATION OF THE ISSUANCE OF 3,238,162 SHARES
OF COMMON STOCK OF AAG IN EXCHANGE FOR
450,000 SHARES OF SERIES A PREFERRED STOCK OF AAG
The Company consummated a securities exchange (the "Exchange") on March
31, 1994, pursuant to which the Company issued 3,238,162 shares of its
Common Stock to Great American Insurance Company ("GAI"), a wholly-owned
subsidiary of AFC, in exchange for all 450,000 outstanding shares of the
Company's Series A Preferred Stock. As part of the Exchange, the Company
agreed to pay the accrued dividend on the Series A Preferred Stock payable
April 1, 1994. Concurrent with the Exchange, the Company issued an
additional 809,578 shares of its Common Stock to three unaffiliated entities
in exchange for approximately $7.1 million principal amount of the Company's
11 % Senior Subordinated Notes due 2003. After giving effect to these two
transactions, AFC's beneficial ownership of the Company's Common Stock
remained at 80.01%.
The Company's Series A Preferred Stock was issued to GAI on December 31,
1992, in connection with the acquisition of Great American Life Insurance
Company, in exchange for $45 million cash. The Series A Preferred Stock had
a redemption value of $45 million and provided for cumulative dividends at
the rate of 7% per annum. The Series A Preferred Stock was initially
recorded at $29.4 million (given an imputed dividend rate of 12% through
2007) with the amount of $15.6 million credited to capital surplus. If the
Series A Preferred Stock remained outstanding after January 1, 2008, the
Company and its subsidiaries would have become subject to substantial
limitations on their ability to borrow funds, issue stock or pay common
stock dividends.
A Special Committee of the Board of Directors, comprised of Messrs.
Fergenson and Martinelli, was appointed to consider the fairness of the
transaction. The agreement between the Company and GAI provided that the
consideration paid by the Company to acquire the Series A Preferred Stock
would be subject to an adjustment if the Special Committee determined, after
receipt of an opinion of an investment banking firm retained to consider the
transactions, that the transactions, taken as a whole, were not fair to the
Company's stockholders other than AFC and its affiliates. The Board of
Directors, acting through the Special Committee, determined that the
Exchange and the concurrent acquisition of approximately $7.1 million of the
Company's outstanding indebtedness were in the best interest of the
Company's stockholders other than AFC and its affiliates, primarily because
these transactions (i) increased the Company's common stockholders' equity
by approximately $37 million and (ii) reduced the Company's fixed charges
for Preferred Stock dividends and interest by approximately $4 million.
Moreover, the Special Committee believed that common equity was generally
viewed by investors as a more preferential type of equity than preferred
equity. The Special Committee also relied on the provision which provided
for an adjustment in the consideration paid to acquire the Series A
Preferred Stock if the Special Committee determined the transactions were
not fair to the Company's independent stockholders.
The Special Committee retained the investment banking firm of Bear,
Stearns & Co. to render an opinion as to the fairness to the stockholders of
the Company other than AFC and its affiliates, of the Exchange and the
concurrent exchange of Common Stock for indebtedness. On April 22, 1994,
Bear, Stearns & Co. rendered its opinion to the Special Committee that the
transactions, taken as a whole, were fair to the independent stockholders of
the Company. Thereafter, the Special Committee determined that no
adjustment in the consideration paid to acquire the Series A Preferred Stock
was required.
Under applicable law, consummation of the transactions did not require
approval of the Company's stockholders. However, the New York Stock
Exchange, which lists the Common Stock for trading, has conditioned listing
the Common Stock issued to GAI on stockholder ratification of the Exchange.
The vote required to ratify the Exchange is a majority of the votes actually
cast on the issue.
The Board of Directors recommends that stockholders vote FOR the proposal
to ratify the issuance of 3,238,162 shares of Common Stock of AAG in
exchange for 450,000 shares of Series A Preferred Stock of AAG. The Company
has been informed that AFC intends to vote FOR ratification of the Exchange.
MANAGEMENT
The directors and executive officers of AAG are:
Director or
Name Age* Position Officer Since
Carl H. Lindner 75 Chairman of the Board 1987
and
Chief Executive
Officer
S. Craig Lindner 39 Director and President 1993
Robert A. Adams 48 Director, Executive Vice 1992
President and Chief
Operating Officer
A. Leon Fergenson 81 Director 1987
Ronald G. Joseph 57 Director 1994
John T. Lawrence 42 Director 1994
III
William R. Martin 65 Director 1994
Alfred W. 66 Director 1987
Martinelli
Ronald F. Walker 56 Director 1987
John B. Berding 31 Senior Vice President - 1993
Investments
William J. Maney 44 Senior Vice President - 1993
Treasurer and Chief
Financial Officer
Mark F. Muething 34 Senior Vice President, 1993
General Counsel and
Secretary
Jeffrey S. Tate 37 Senior Vice President 1993
<FN>
* As of May 1, 1994
Carl H. Lindner has been Chairman of the Board since 1987. Mr. Lindner
also serves as Chairman of the Board and Chief Executive Officer of AFC, a
diversified financial services company, and Chairman of the Board of the
following public companies: American Premier Underwriters, Inc. ("APZ")
(formerly The Penn Central Corporation); American Financial Enterprises,
Inc. ("AFEI"); Chiquita Brands International, Inc.; General Cable
Corporation and Great American Communications Company ("GACC"). He also
serves as Chief Executive Officer or in a similar capacity with the
following companies: APZ, a company engaged primarily in specialty, property
and casualty insurance businesses; AFEI, a company whose assets consist
primarily of investments in AAG, APZ and General Cable and Chiquita Brands,
a leading international marketer, processor and producer of quality fresh
and processed food products. AFC owns a substantial beneficial interest
(over 20%) in all of these companies. Mr. Lindner is the father of S. Craig
Lindner.
S. Craig Lindner was elected a director of AAG on March 26, 1993. During
the past five years, Mr. Lindner has been Senior Executive Vice President of
American Money Management Corporation ("AMM"), a subsidiary of AFC which
provides investment services for AFC and its affiliated companies, including
AAG, and he continues to serve in that position. He is also a director of
APZ, Chiquita, General Cable and GACC.
Robert A. Adams was elected a director of AAG on October 28, 1993. Mr.
Adams was elected Executive Vice President and Chief Operating Officer of
the Company on December 31, 1992. For more than five years prior to
election as an officer of the Company, he was Senior Vice President and a
director of GAI, a wholly-owned subsidiary of AFC engaged in the property
and casualty insurance business. He also served as Treasurer of GAI until
October 1991.
A. Leon Fergenson has been a director of AAG since 1987. During the past
five years, Mr. Fergenson has been a private investor and a director of
various corporations. He is also a director of Buckeye Management Company,
an APZ subsidiary which is the sole general partner of Buckeye Partners,
L.P., a limited partnership engaged principally in pipeline transportation
of petroleum products, Sequa Corporation and several mutual funds managed by
Neuberger & Berman, Inc.
Ronald G. Joseph was elected a director of AAG on March 2, 1994. During
the past five years, Mr. Joseph has been President of Columbia Development,
a Cincinnati-based company which owns automobile dealerships and various
real estate development projects.
John T. Lawrence III was elected a director of AAG on March 2, 1994. Mr.
Lawrence has been a Senior Vice President with Kidder Peabody & Co., a
national investment banking firm, since January 1993. Prior thereto for
more than five years he was a Senior Vice President with Prudential
Securities Inc. He is also a director of Spelling Entertainment Group Inc.
("Spelling").
William R. Martin was elected a director of AAG on March 2, 1994.
Although currently retired, during the past five years Mr. Martin was
President of both Tominy, Inc. and M.B. Computing, Inc., which are each
privately held software development companies. Mr. Martin is also a
director of General Cable.
Alfred W. Martinelli has been a director of AAG since 1987. During the
past five years, Mr. Martinelli has been Vice Chairman of the Board of
Directors of APZ and Chairman of the Board and Chief Executive Officer of
Buckeye Management Company. He is also a director of Spelling.
Ronald F. Walker has been a director of AAG since 1987. During the past
five years, Mr. Walker has been President and Chief Operating Officer and a
director of AFC. He was President and Chief Operating Officer of APZ from
March 1987 to February 1992, and a director of APZ from May 1982 to February
1992. In addition, he has served as President and Chief Executive Officer
and a director of General Cable since July 1, 1992. Mr. Walker is also a
director of AFEI, Chiquita and Tejas Gas Corporation.
John B. Berding was elected an officer of AAG on March 26, 1993. During
the past five years, he has been an investment analyst and, since February
1992, a Vice President of AMM, and he continues to serve in that position.
William J. Maney was elected an officer of AAG effective on February 15,
1993. Prior thereto for more than five years he was Vice President -
Accounting of GAI.
Mark F. Muething was elected an officer of AAG on October 28, 1993. Prior
thereto, he was a partner (from October 1991 to October 1993) and an
associate (from August 1984 to October 1991) with Keating, Muething &
Klekamp, a Cincinnati-based law firm.
Jeffrey S. Tate was elected an officer of AAG effective on February 15,
1993. Prior thereto, he served as Vice President (from May 1990 to December
1992) and Assistant Vice President (from February 1988 to May 1990) of GAI.
In December 1993, GACC completed a comprehensive financial restructuring
that included a prepackaged plan of reorganization filed in November of that
year under Chapter 11 of the Bankruptcy Code. Although not a director or
officer of GACC during 1993, Carl H. Lindner had been Chairman of the Board
and Chief Executive Officer of GACC prior to 1993 and was again elected
Chairman of the Board of GACC in January 1994.
Holdings of Management Holdings of Management
Information concerning AAG's Common Stock beneficially owned by each
director and executive officer and all directors and executive officers as a
group as of April 15, 1994, is shown in the following table:
Amount and Nature of
Beneficial
Name Ownership(a) Percent of Class
Robert A. Adams 10,000 *
A. Leon Fergenson 3,111 *
Ronald G. Joseph 2,000 *
John T. Lawrence III 2,000 *
Carl H. Lindner 31,319,629 (b) 80%
S. Craig Lindner -- --
William S. Martin -- --
Alfred W. Martinelli 4 *
Ronald F. Walker 15,000 *
John B. Berding 1,000 *
William J. Maney 1,000 *
Mark F. Muething 2,000 *
Jeffrey S. Tate 500 *
All Directors and Execu-
tive Officers as a Group
(13 persons) 31,356,244 80.1%
[FN]
* Less than 1%
(a) Unless otherwise indicated, the persons named have sole voting and
investment power over the shares listed opposite their names.
(b) Mr. Lindner may be deemed to own beneficially the shares set forth
under "Principal Stockholders" for AFC, of which Mr. Lindner is
Chairman of the Board and Chief Executive Officer and a principal
shareholder.
Committees and Meetings of the Board of Directors
AAG's Board of Directors held seven meetings in 1993 and took action in
writing on five occasions.
Audit Committee. The Audit Committee consists of three members: William
R. Martin (Chairman), A. Leon Fergenson and John T. Lawrence III, none of
whom is an officer or employee of AAG or any of its subsidiaries. The
Committee's functions include: recommending to the Board of Directors the
firm to be appointed as independent accountants to audit the financial
statements of AAG and its subsidiaries and to provide other audit-related
services and recommending the terms of such firm's engagement; reviewing the
scope and results of the audit with the independent accountants; reviewing
with management and the independent accountants AAG's interim and year-end
operating results; reviewing the adequacy and implementation of the internal
accounting and auditing procedures of AAG; and reviewing the non-audit
services to be performed by the independent accountants and considering the
effect of such performance on the accountants' independence. The Audit
Committee held five meetings in 1993.
Executive Committee. The Executive Committee consists of three members:
S. Craig Lindner (Chairman), Carl H. Lindner and Robert A. Adams. The
Committee is generally authorized to exercise the powers of the Board of
Directors between meetings of the Board of Directors, except that the
Committee's authority does not extend to certain fundamental matters, such
as amending the By-laws of AAG, filling vacancies in the Board of Directors,
declaring a dividend, electing or removing the Company's principal officers,
adopting or approving a plan of merger, consolidation or sale of a
substantial portion of the Company's assets, dissolution or reorganization
of AAG or establishing or designating any class or series of AAG stock (or
fixing or determining the relative rights and preferences thereof). The
Executive Committee did not meet in 1993 but did take action in writing on
one occasion.
Organization and Policy Committee. The Organization and Policy Committee
consists of three members: Ronald F. Walker (Chairman), Ronald G. Joseph
and Alfred W. Martinelli, none of whom is an officer or employee of AAG or
any of its subsidiaries. The Committee's functions include: reviewing the
duties and responsibilities of the Company's principal officers; reviewing
and making recommendations to the Board of Directors with respect to the
compensation of the Company's principal officers; reviewing the Company's
compensation and personnel policies; administering bonus and stock option
plans; reviewing and making recommendations to the Board of Directors with
respect to employee retirement policies; and supervising, reviewing and
reporting to the Board of Directors on the performance of the management
committee responsible for the administration and investment management of
the Company's pension and savings plans. The Committee also reviews and
advises the Board of Directors with respect to the nomination of candidates
for election to the Board of Directors. The Committee will consider
stockholder suggestions for nominees for director. Suggestions for Director
consideration may be submitted to the Secretary of AAG at its principal
executive offices. Suggestions received by the Secretary's office by
December 31 will be considered by the Committee. Stockholders may also make
nominations for director by complying with the procedures described above
under the caption "Nominees for Director". The Organization and Policy
Committee held two meetings in 1993.
Compensation of Directors
Compensation of Directors
Officers of AAG do not receive any additional compensation for serving as
members of the Board of Directors or any of its committees. Directors who
are not employees of AAG receive an annual fee of $20,000 for Board
membership and an annual fee of $5,000 for serving as Chairman of a Board
Committee. In addition, directors who are not employees of AAG are paid a
fee of $1,500 for attendance at each Board meeting, and $750 for attendance
at each committee meeting. All directors are reimbursed for expenses
incurred in attending board and committee meetings.
Compensation of Executive Officers
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to AAG and its subsidiaries
for the three years ended December 31, 1993 paid to those persons who were,
at December 31, 1993, (i) the chief executive officer, and (ii) the other
four most highly compensated executive officers of AAG. The table also sets
forth information with respect to two additional individuals who were
executive officers during the year but were not serving as such at the end
of the year.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation
Compensation
All Other
Name and Principal Other
Position Annual Securities Compensati
Salary Bonus Compensati Underlying on (i)
Year on(h) Options/SARs
Carl H. Lindner 1993 $100,000 -- -- -- --
Chairman of the 1992 $70,556 -- -- -- --
Board and 1991 -- -- -- -- --
Chief Executive
Officer (a)
S. Craig Lindner 1993 $193,282 $304,808 $53 125,000 --
President (b) 1992 -- -- -- -- --
1991 -- -- -- -- --
Robert A. Adams 1993 $425,000 $428,123 $4,160 125,000 $30,000
Executive Vice 1992 -- -- -- -- --
President 1991 -- -- -- -- --
and Chief Operating
Officer (c)
William J. Maney 1993 $125,202 $122,981 $4,464 35,000 $14,150
Senior Vice 1992 -- -- -- -- --
President, 1991 -- -- -- -- --
Treasurer and Chief
Financial Officer
(d)
Jeffrey S. Tate 1993 $113,085 $98,693 $1,937 35,000 $13,030
Senior Vice 1992 -- -- -- -- --
President (e) 1991 -- -- -- -- --
Jovite LaBonte 1993 $325,000 $246,250 $8,222 50,000 $30,000
President and Chief 1992 $337,500 $406,250 -- -- $30,000
Executive 1991 $324,038 $206,250 -- -- $30,000
Officer, Great
American Life
Insurance Company
(f)
Augustus I. duPont 1993 $175,000 -- $6,645 -- $325,291
Vice President, 1992 $167,639 $225,000 -- -- $27,126
General 1991 $150,000 $45,000 -- 5,000 $10,219
Counsel and
Secretary (g)
<FN>
(a) Carl H. Lindner was elected Chief Executive Officer of AAG on April
19, 1992, and in such capacity he is paid an annual salary of
$100,000. Mr. Lindner did not participate in any other compensation
plans of AAG.
(b) S. Craig Lindner was elected President of AAG on March 26, 1993.
(c) Mr. Adams was elected Executive Vice President and Chief Operating
Officer of AAG effective on December 31, 1992 in connection with the
acquisition of Great American Life Insurance Company from GAI.
(d) Mr. Maney was elected Senior Vice President, Treasurer and Chief
Financial Officer of AAG effective on February 15, 1993.
(e) Mr. Tate was elected Senior Vice President of AAG effective on
February 15, 1993.
(f) Mr. LaBonte retired on December 31, 1993.
(g) Mr. duPont resigned his position on October 28, 1993. The 5,000
shares underlying Mr. duPont's options were granted to him pursuant
to the Company's 1987 Stock Option Plan which has been discontinued.
(h) The amounts listed under "Other Annual Compensation" include the
value of automobile and homeowners insurance coverage provided
pursuant to the Executive Insurance Program and the premiums paid for
group life coverage in excess of $50,000 per individual, respective-
ly, for each person as follows: Mr. Adams - $2,942 and $1,218, Mr.
Maney - $4,036 and $428, Mr. Tate - $1,692 and $245 and Mr. LaBonte -
$4,939 and $3,283. The amount for Mr. Lindner reflects premiums paid
for group life coverage in excess of $50,000.
(i) Amounts listed under "All Other Compensation" for each of the named
persons for 1993, other than Mr. duPont, reflect amounts contributed
by AAG to the AFC ESORP. For Mr. duPont, the amount for 1993
reflects severance paid upon resignation. For prior years, the
amounts reflect benefits paid to Mr. duPont pursuant to plans which
were in place prior to the acquisition of Great American Life
Insurance Company ("GALIC").
SAR grants for the year ended December 31, 1993 for the Executive Officers
named in the Summary Compensation Table are as follows:
SAR GRANTS IN 1993
Potential Realizable
Value at
Assumed Annual Rates
of Stock Price
Individual Grants Appreciation for
SAR Term(a)
% of
Total
SARs
Granted Exerc
to ise
Employe or
es in Base Expirat
SARs Fiscal Price ion
Name Granted Year (b) Date(c) 0% 5% 10%
Carl H. Linder -- -- -- -- -- -- --
S. Craig 125,000 22.7% $9.00 3/26/2003 $125,000 $911,250 $2,117,175
Lindner
Robert A. 125,000 22.7% $9.00 3/26/2003 $125,000 $911,250 $2,117,175
Adams
William J. 35,000 6.4% $9.00 3/26/2003 $35,000 $255,150 $592,900
Maney
Jeffrey S. 35,000 6.4% $9.00 3/26/2003 $35,000 $255,150 $592,900
Tate
Jovite 50,000 9.1% $9.0012/31/1995 $50,000 $121,795 $199,830
LaBonte
(d)
Augustus -- -- -- -- -- -- --
I. duPont
<FN>
(a) The Potential Realizable Value is calculated based on a market price
for the AAG Common Stock on March 26, 1993, the date of grant of the
SARs, of $10.00 per share.
(b) The closing price for AAG Common Stock on March 26, 1993, the date of
grant of the SARs, was $10.00 per share.
(c) For each of the named individuals, other than Mr. LaBonte, 20% of the
SARs became exercisable on March 26, 1994 and 20% become exercisable
on each anniversary of the date of grant thereafter.
(d) Mr. LaBonte retired on December 31, 1993. As a result, his SARs
terminate two years after such date.
SARs exercised during the year ended December 31, 1993 from the Executive
Officers named in the Summary Compensation Table are as follows:
AGGREGATED SAR EXERCISES IN 1993
AND SAR VALUES AT DECEMBER 31, 1993
Value of
Unexercised
Number of In-the-Mon-
Securities ey SARs at
Underlying Fiscal Year
Unexercised End (a)
SARs at Fis-
cal Year End Exercis-
able/
Name SARs Value Exercisable/ Unexercisab
Exercised Realized Unexercisable le
Carl H. -- --
Lindner -- --
S. Craig 0 0 0/125,000 0/$125,000
Lindner
Robert A. 0 0 0/125,000 0/$125,000
Adams
William J. 0 0 0/35,000 0/$35,000
Maney
Jeffrey S. 0 0 0/35,000 0/$35,000
Tate
Jovite 0 0 50,000/0 $50,000/0
LaBonte (b)
Augustus I. -- -- -- --
duPont
<FN>
(a) The Value of Unexercised In-the-Money SARs at Fiscal Year End is
calculated based on a market price for AAG Common Stock on December
31, 1993 of $10.00 per share.
(b) Mr. LaBonte retired on December 31, 1993. As a result, his SARs
became fully vested on such date.
Organization and Policy Committee Report
The Organization and Policy Committee of AAG's Board of Directors consists
of three directors, none of whom is an employee of AAG or any of its
subsidiaries. The Committee's functions include reviewing and making
recommendations to the Board of Directors with respect to the compensation
of each officer of the Company whose annual base salary exceeds $200,000.
Until March 1994, the Committee's authority extended to the compensation of
AAG's principal officers and every other officer whose annual base salary
exceeded $125,000. AAG's cash compensation for executive officers in 1993
was comprised principally of annual base salaries and payments pursuant to
the 1993 Corporate Bonus Plan. The grant of stock appreciation rights to
executive officers provided long-term incentive based compensation. In
determining compensation for executive officers, the Committee does not make
comparisons with other companies.
Annual Base Salaries. The Committee approves annual base salaries and
salary increases for executive officers that are appropriate for their
positions and levels of responsibilities. The Committee does not generally
consider the Company's performance in establishing annual base salaries for
executive officers.
1993 Corporate Bonus Plan. Each of the named executive officers, other
than Carl H. Lindner and Augustus I. duPont, was eligible to participate in
the 1993 Corporate Bonus Plan (the "Bonus Plan"). The Bonus Plan
compensates participants based on the financial and operational performance
of the Company. Under the Bonus Plan, the Organization and Policy Committee
established a target bonus for each participant based on such person's
duties and responsibilities with the Company and expected contributions
during the year. The Committee also established financial and operation
goals for the Company, with the financial goals accounting for 60% of the
bonus potential and the operational goals accounting for the other 40%.
Based on the attainment of these goals, participants in the Bonus Plan could
earn up to 125% of the target bonus amounts. The bonuses reported in the
Summary Compensation Table for 1993 are amounts awarded to participating
executive officers in December 1993. Bonuses were paid at the rate of 120%
of the target bonus amounts and were based on assessments of the achievement
of the financial and operational goals established by the Committee. The
principal factor in evaluating the Company's operational goals was the
successful relocation of GALIC's offices from Los Angeles to Cincinnati and
the addition of a substantial number of new employees.
Compensation of the Chief Executive Officer. In April 1992, the
Organization and Policy Committee approved an annual base salary of $100,000
for Carl H. Lindner, Chief Executive Officer of the Company. In
establishing this salary, the Committee considered Mr. Lindner's numerous
management responsibilities with AFC and its affiliates. In establishing
Mr. Lindner's salary, the Committee did not specifically consider the
Company's performance. During 1993, Mr. Lindner did not participate in any
other compensation plans or arrangements of AAG.
Stock Appreciation Rights. SARs represent a performance-based portion of
the Company's compensation system. The Committee believes that the
Company's stockholders' interests are well served by aligning the interests
of the Company's executive officers with those of stockholders by the grant
of SARs. SARs are granted at exercise prices equal to the average of the
market price for AAG Common Stock for the ten trading days preceding the
date of grant and become exercisable at the rate of 20% per year. The
Committee believes that these features provide executive officers with
substantial incentives to maximize AAG's long-term success.
Internal Revenue Code Section 162. Newly enacted provisions of the
Internal Revenue Code provide that compensation in excess of $1 million per
year paid to the Chief Executive Officer as well as other executive officers
listed in the compensation table will not be deductible unless the
compensation is "performance based" and the related compensation is
approved by stockholders. The new law applies to compensation paid in 1994.
It was not considered by the Committee in determining 1993 compensation.
Members of the Organization and Policy Committee:
Ronald F. Walker (Chairman)
Ronald G. Joseph
Alfred W. Martinelli
Performance Graph. The following graph compares the cumulative total
stockholder return on AAG Common Stock with the cumulative total return of
the Dow Jones Industrial Average ("Dow Jones"), Standard & Poor's 500 Stock
Index ("S&P 500") and the Standard & Poor's Life Insurance Industry Index
("S&P Life") from the end of 1988 to the end of 1993. The Company had
previously utilized an index comprised of companies engaged in electronic
component manufacturing. The companies included in this index were: AMP,
Inc., AUGAT, Inc., CTS Corporation, Molex, Inc., Thomas & Bates Corporation
and Vishay Intertechnology, Inc. However, the Company discontinued using
this index (which was $172.84 at the end of 1993) as the result of the sale
of its manufacturing operations and the acquisition of GALIC. The graph
assumes $100 invested on December 31, 1988 in AAG Common Stock, the S&P 500,
the S&P Life and the Dow Jones, including reinvestment of dividends.
[GRAPH SUBMITTED UNDER COVER OF FORM SE]
Organization and Policy Committee Interlocks and Insider Participation.
The members of the Organization and Policy Committee are Ronald F. Walker
(Chairman), Ronald G. Joseph and Alfred W. Martinelli, none of whom was
during 1993 or prior years an officer or employee of AAG or any of its
subsidiaries. Mr. Walker is President and Chief Operating Officer of AFC
which owned all of the outstanding capital stock of GALIC prior to the
acquisition of GALIC by AAG on December 31, 1992. As a result of
transactions relating to AAG's acquisition of GALIC, AFC beneficially owns
80.01% of the outstanding shares of AAG Common Stock. See "Certain Transac-
tions" for additional information concerning relationships between AAG and
AFC and their respective subsidiaries.
In addition, Carl H. Lindner, Chairman of the Board and Chief Executive
Officer of AAG, is Chairman of the Board and Chief Executive Officer of AFC.
AFC's Board of Directors sets the compensation which Mr. Walker receives
from AFC.
Certain Transactions
Certain Transactions
GALIC, a wholly-owned subsidiary of the Company, and AMM, a wholly-owned
subsidiary of AFC, are parties to an Investment Services Agreement pursuant
to which AMM provides investment and custodial services to GALIC with
respect to GALIC's investments in accordance with guidelines approved by
AAG's directors who are not affiliated with AFC. GALIC pays AMM an annual
fee of .10% of total invested assets, provided that such fee shall not
exceed the actual cost to AMM of providing such services, and GALIC
reimburses AMM for certain expenses. Payments made by GALIC to AMM for 1993
totalled $4.4 million.
AAG and GALIC are members of AFC's consolidated tax group. AAG and GALIC
have separate tax allocation agreements with AFC which designate how tax
payments are shared by members of the tax group. In general, both companies
compute taxes on a separate return basis. GALIC is obligated to make
payments to (or receive benefits from) AFC based on taxable income without
regard to temporary differences. In accordance with terms of AAG's inden-
tures, AAG receives GALIC's tax allocation payments for the benefit of AAG's
deductions arising from current operations. If GALIC's taxable income
(computed on a statutory accounting basis) exceeds a current period net
operating loss of AAG, the taxes payable by GALIC associated with the excess
are payable to AFC. If the AFC tax group utilizes any of AAG's net
operating losses or deductions that originated prior to 1993, AFC will pay
to AAG an amount equal to the benefit received.
During 1993, AAG incurred consolidated income tax expense of $20.0
million, which amount is recorded as a liability to AFC on AAG's year end
balance sheet. Pursuant to the tax allocation agreement, GALIC paid AAG
$53.6 million in tax allocation payments in 1993 (including $19.0 million
for 1992).
GAI leases office space in Cincinnati, Ohio from GALIC under a lease which
expires in March 2009. GAI paid rent of $1.0 million to GALIC in 1992. In
1993, AAG made rental payments of $63,000 and $250,000 to GAI and Chiquita,
respectively, for the sublease of certain office space in Cincinnati, Ohio.
In 1993, GALIC entered into a coinsurance agreement with Carillon Life
Insurance Company, a subsidiary of GAI, whereby GALIC ceded $2.6 million in
annuity reserves and transferred an equal amount of cash to Carillon.
It was determined in 1992 that the agreements governing the Company's 1987
spin-off from APZ obligate the Company to reimburse APZ for workers'
compensation claim payments which continue to be required with respect to
the Company's operations from 1978 to 1987. The largest such amount
outstanding at any one time since January 1, 1993 was $2.7 million. The
Company paid $1.0 million to APZ with respect to this liability during 1993
and the remainder of the obligation was paid in the first quarter of 1994.
In 1993, AAG paid GAI $3.2 million, reflecting the remaining liability for
the purchase of GALIC.
In connection with the GALIC purchase, GALIC's costs for state guarantee
funds are set at $1 million per year for a five-year period with respect to
insurance companies in receivership, rehabilitation, liquidation or similar
situation at December 31, 1992. For any year in which GALIC pays more than
$1 million to the various states, GAI will reimburse GALIC for the excess
assessments. For any year in which GALIC pays less than $1 million, AAG
will pay GAI the difference between $1 million and the assessed amounts.
GALIC paid $2.2 million in assessments in 1993 and, accordingly, has
recorded a receivable from GAI at December 31, 1993 of $1.2 million.
Proxies
Solicitation. Solicitation of proxies is being made by management at the
direction of AAG's Board of Directors, without additional compensation,
through the mail, in person and otherwise. The cost will be borne by AAG.
In addition, AAG will request brokers and other custodians, nominees and
fiduciaries to forward proxy soliciting material to the beneficial owners of
shares held of record by such persons, and AAG will reimburse them for their
expenses in so doing.
Revocation. The execution of a proxy does not affect the right to vote in
person at the meeting, and a proxy may be revoked by the person giving it
prior to the exercise of the powers conferred by it. A stockholder may
revoke a proxy by communicating in writing to the Secretary of AAG at the
address indicated above or by duly executing and delivering a proxy bearing
a later date. In addition, persons attending the meeting in person may
withdraw their proxies. Unless a proxy is revoked or withdrawn, the shares
represented thereby will be voted or the votes withheld at the Annual
Meeting or any adjournments thereof in the manner described in this Proxy
Statement.
Quorum and Vote Required for Approval
The presence at the Annual Meeting, in person or by proxy, of the holders
of at least a majority of the shares of AAG Common Stock outstanding at the
Record Date shall constitute a quorum to consider Proposals 1, 2, 3 and 4.
In the event a quorum does not attend the Annual Meeting, those stockholders
who attend in person or by proxy may adjourn the meeting to such time and
place as they may determine.
The nine nominees receiving the highest number of votes will be elected as
directors.
The affirmative vote of the holders of at least a majority of the total
number of shares of AAG Common Stock represented at the Annual Meeting will
be required to adopt Proposal 2 (relating to the 1994 Stock Option Plan),
Proposal 3 (relating to the 1994 Directors' Stock Appreciation Rights Plan)
and Proposal 4 (relating to ratification of an exchange transaction).
With the exception of the election of directors, abstentions and broker
non-votes will have the same effect as a vote against any of the foregoing
proposals.
Independent Auditors
Independent Auditors
The accounting firm of Ernst & Young served as the Company's independent
auditors for the fiscal year ended December 31, 1993. Ernst & Young also
serves as independent auditors for AFC and many of its subsidiaries.
Representatives of that firm will attend the annual meeting and will be
given the opportunity to comment, if they so desire, and to respond to
appropriate questions that may be asked by stockholders. No auditor has yet
been selected for the current year since it is generally the practice of AFC
and its subsidiaries not to select independent auditors prior to the annual
stockholders meeting.
On February 11, 1993, pursuant to a recommendation by management and
approval by the Audit Committee of the Board of Directors, the Company
engaged Ernst & Young as its new auditors, replacing Deloitte & Touche.
Ernst & Young has served as the auditors of GALIC and AFC for more than 10
years, and this change gives continuity to the audit of AAG's only
significant subsidiary and enables AAG to better coordinate financial
reporting matters with AFC.
Neither Deloitte & Touche's report dated March 24, 1992 on the Company's
financial statements for the year ended December 31, 1991 nor its report
dated February 8, 1991 for the year ended December 31, 1990 contained an
adverse opinion or a disclaimer of opinion, and neither report was qualified
or modified as to uncertainty, audit scope or accounting principles.
During the Company's fiscal years ended December 31, 1991 and December 31,
1990, and the subsequent interim period, there were no disagreements with
Deloitte & Touche on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure which if not
resolved to Deloitte & Touche's satisfaction would have caused it to make
reference to the subject matter of the disagreement in connection with its
report.
During the Company's fiscal year ended December 31, 1991 and December 31,
1990, and the subsequent interim period: (a) Deloitte & Touche did not
advise the Company that there do not exist the internal controls necessary
for the Company to develop reliable financial statements; (b) Deloitte &
Touche did not advise the Company that information had come to Deloitte &
Touche's attention that led it to no longer be able to rely on management's
representations, or that made Deloitte & Touche unwilling to be associated
with the financial statements prepared by management; (c) Deloitte & Touche
did not advise the Company that Deloitte & Touche needed to expand
significantly the scope of its audit, or that information had come to
Deloitte & Touche's attention during such time period that if further
investigated may (i) materially impact the fairness or reliability of either
a previously issued audit report or the underlying financial statements, or
the financial statements issued or to be issued covering the fiscal periods
subsequent to the date of the most recent financial statements covered by an
audit report or (ii) cause Deloitte & Touche to be unwilling to rely on
management's representations or be associated with the Company's financial
statements; and (d) Deloitte & Touche did not advise the Company that
information had come to Deloitte & Touche's attention of the type described
in subparagraph (c) above, the issue not being resolved to Deloitte &
Touche's satisfaction prior to its dismissal.
The Company did not, during its fiscal years ended December 31, 1991 and
December 31, 1990, and the subsequent interim period, consult with Ernst &
Young regarding the application of accounting principles to a specified
transaction or the type of audit opinion that might be rendered on the
Company's financial statements.
Stockholder Proposals for 1995 Annual Meeting
Proposals of stockholders intended to be presented at the 1995 Annual
Meeting of Stockholders must be received by AAG not later than January 15,
1995 in order to be considered for inclusion in AAG's proxy statement and
form of proxy to that meeting. Any such proposal should be communicated in
writing to the Secretary of AAG at the address indicated above.
Documents Incorporated by Reference
Documents Incorporated by Reference
The Company's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1993 is hereby incorporated by reference into this Proxy
Statement as permitted by the provisions of Item 13 of Schedule 14A under
the Securities Exchange Act of 1934.
Annual Report and Form 10-K Report
Annual Report and Form 10-K Report
An annual report for the year ending December 31, 1993, containing
financial and other information about the Company has previously been
provided or is being concurrently provided to all stockholders.
The Company will send, without charge, a copy of its 1993 Annual Report on
Form 10-K (excluding exhibits), as filed with the Securities and Exchange
Commission, to any stockholder upon written request. Requests should be
sent to Mark F. Muething, Senior Vice President, General Counsel and
Secretary, P. O. Box 120, Cincinnati, Ohio 45201-0120.
Cincinnati, Ohio
May 10, 1994
ANNEX 1
AMERICAN ANNUITY GROUP, INC.
1994 STOCK OPTION PLAN
Section 1. Purpose. The purpose of the Plan is to promote the
interests of the Company and its stockholders by providing a means for
selected Key Employees of the Company and its Subsidiaries to acquire a
proprietary interest in the Company, thereby strengthening the Company's
ability to attract capable management personnel and providing an inducement
for Key Employees to remain in the employ of the Company or its Subsidiaries
and to perform at their maximum levels. It is intended that Options granted
pursuant to this Plan may be Incentive Stock Options or Nonqualified Stock
Options, as hereinafter set forth.
Section 2. Definitions. Unless the context clearly indicates
otherwise, the following terms, when used in this Plan, shall have the
meanings set forth below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time.
(c) "Committee" shall mean a committee of the Board which consists
solely of not less than two (2) "outside directors" (as defined in Section
3 hereof) appointed by the Board to administer the Plan and perform the
functions set forth in Section 3 of this Plan.
(d) "Common Stock" shall mean the Common Stock, par value One Dollar
($1.00) per share, of the Company, and any other stock or securities
resulting from the adjustment thereof or substitution therefor as
described in Section 12, 13 of this Plan.
(e) "Company" shall mean American Annuity Group, Inc., a Delaware
corporation.
(f) "Fair Market Value" with respect to the Common Stock as of any
date shall mean (i) in the event the Common Stock is listed on a national
securities exchange, the closing price as reported for composite
transactions on that date, or, if no sales occurred on that date, then the
closing price on the next preceding date on which such sales of Common
Stock occurred; (ii) in the event the Common Stock is not listed on a
national securities exchange, the mean between the high bid and low asked
prices reported for shares of Common Stock traded over-the-counter on that
date, or, if no bid and asked prices were reported on that date, then the
mean between the high bid and low asked prices on the next preceding date
on which such prices were reported; or (iii) in the event there are no
over-the-counter prices for the Common Stock and it is not listed on a
national securities exchange, the fair market value as determined by the
Committee in its discretion.
(g) "Incentive Stock Option" shall mean an Option granted under the
Plan and designated as such by the Committee which meets the requirements
of Section 422 of the Code.
(h) "Key Employee" shall mean a regular employee, whether or not a
director of the Company or a Subsidiary, who is an officer or holds a
managerial or other key position as determined by the Committee, and who,
in the judgment of the Committee, has demonstrated a capacity for making a
substantial contribution to the success of the business of the Company or
a Subsidiary.
(i) "Nonqualified Stock Option" shall mean an Option granted under
the Plan other than an Incentive Stock Option.
(j) "Option" shall mean, unless otherwise specifically limited under
any provision of this Plan, both an Incentive Stock Option and a
Nonqualified Stock Option granted pursuant to this Plan.
(k) "Option Price" shall mean the price at which Common Stock may be
purchased under an Option, as provided in Section 7(e) of this Plan.
(l) "Optionee" shall mean a Key Employee granted an Option under the
Plan.
(m) "Parent" shall mean any corporation which qualifies as a parent
corporation of the Company within the meaning of Section 424 of the Code.
(n) "Plan" shall mean the American Annuity Group, Inc. 1994 Stock
Option Plan.
(o) "Stock Option Agreement" shall mean the written agreement
between an Optionee and the Company evidencing the grant of an Option and
setting forth the terms and conditions of the grant.
(p) "Subsidiary" shall mean any corporation which qualifies as a
subsidiary corporation of the Company within the meaning of Section 424 of
the Code.
Section 3. Administration of the Plan.
(a) Committee. The Plan shall be administered by the Committee
which shall consist solely of not less than two (2) "outside directors,"
as such term is defined in P. Reg. 1.162-27(e)(3) of the Income Tax
Regulations (or such comparable definition in the final Income Tax
Regulations). Each member shall also be a "disinterested person" as
defined in Section 16b-3(c)(2)(i) promulgated under the Securities
Exchange Act of 1934 (the "1934 Act"). The members of the Committee shall
serve at the pleasure of the Board, which shall have the power, at any
time and from time to time, to remove members from the Committee or to add
members thereto. Vacancies on the Committee shall be filled by action of
the Board.
(b) Duties and Powers of the Committee. The Committee shall have
the full power and authority, but subject to and not inconsistent with the
express provisions of the Plan, to establish and administer the Plan and
to exercise all the powers and authorities either specifically granted to
it under the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority (i) to grant Options
which have received any requisite approval of the Board and to determine
which Options shall constitute Incentive Stock Options and which Options
shall constitute Nonqualified Stock Options; (ii) to determine the
employees to whom, and the time or times at which, Options shall be
granted; (iii) to determine the number of shares of Common Stock to be
covered by each Option; (iv) to determine the Option Price of Common Stock
subject to an Option; (v) to determine the duration of the exercise period
of Options and the time or times at which Options may be exercised and the
extent of exercisability of Options; (vi) to determine the terms and
provisions of Stock Option Agreements (which need not be identical)
entered into in connection with Options granted under the Plan, including
such terms and provisions as shall in the judgment of the Committee be
necessary or advisable in order to conform to any applicable laws or
regulations, as the same may be amended from time to time; and (vii) to
make all other determinations necessary or advisable for the
administration of the Plan. Subject to the express provisions of the
Plan, the Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Stock Option Agreement
in such manner and to the extent it shall determine in order to carry out
the purposes of the Plan.
The Committee shall have full power and authority to construe and
interpret the Plan and the respective Stock Option Agreements and to
establish, amend or rescind such rules, regulations and procedures as the
Committee deems necessary or appropriate for the proper administration of
the Plan.
The determinations of the Committee on the foregoing matters and any other
matters arising in connection with the construction, administration,
interpretation and effect of the Plan and of the Committee's rules and
regulations thereunder shall (except as otherwise specifically provided in
the Plan) be final, binding and conclusive.
(c) Committee Meetings and Actions. The Committee may select one of
its members as Chairman. The Committee shall hold its meetings at such
times and places as it shall determine. All decisions and determinations
of the Committee shall be made by not less than the affirmative vote of a
majority of its members. Actions may be taken by the Committee at a duly
conveyed meeting (including a meeting by telephone conference call) or by
unanimous written consent.
Section 4. Eligibility. Options under the Plan may be granted only to
Key Employees of the Company and its Subsidiaries. More than one Option may
be granted to the same Optionee and be outstanding concurrently hereunder.
Section 5. Shares Subject to the Plan.
(a) Aggregate Number of Shares Available. Subject to the
adjustments provided for in Section 12, 13 of this Plan, the aggregate
number of shares of Common Stock for which Options may be granted under
the Plan shall be One Million Five Hundred Thousand (1,500,000) shares.
Shares delivered by the Company pursuant to exercises of Options may be
authorized but unissued shares of Common Stock, issued shares of Common
Stock which have been reacquired by the Company, or a combination thereof,
as the Board or the Committee shall from time to time determine.
(b) Maximum Number of Options. The maximum number of Options which
may be granted under the Plan to any individual during any calendar year
is Two Hundred Fifty Thousand (250,000).
(c) Effect of Expiration of Options. In the event that any
outstanding Option under the Plan for any reason expires or is terminated
without having been exercised in full, the shares of Common Stock subject
to but not issued under such Option shall again be available for the
granting of Options under the Plan.
(d) Effect of Exercises. If all or any portion of an Option is
exercised, the shares with respect to which such Option is exercised,
shall not thereafter be available for the granting of other Options under
the Plan
Section 6. Stock Options Agreements. Each Option shall be evidenced
by a written Stock Option Agreement, which shall be executed by the Company
and the Optionee, containing such terms and conditions, not inconsistent
with the Plan, as shall be determined by the Committee. Stock Option
Agreements evidencing Incentive Stock Options shall contain such terms and
conditions, among others, as may be necessary in the opinion of the
Committee to qualify them as an incentive stock option under the Code.
Section 7. Terms and Conditions of Options. Each Option granted under
the Plan shall comply with and be subject to the following terms and
conditions, as well as such other terms and conditions as may be determined
by the Committee and specified in the related Stock Option Agreement:
(a) Number of Shares. The number of shares of Common Stock to which
an Option relates shall be determined by the Committee and specified in
the related Stock Option Agreement.
(b) Type of Option. Each Stock Option Agreement shall specify the
type of Option granted and evidenced thereby, i.e., whether the Option is
an Incentive Stock Option or a Nonqualified Stock Option.
(c) Date of Grant; Exercise Period. The date of grant of any Option
shall be the date on which the Committee shall award the Option (or the
earlier date, if applicable, that the Board specifically approves such
grant) if an immediate grant of such Option is contemplated, or the date
contemplated as the date of grant if the Committee imposes a condition on
the granting of such Option. Options granted under the Plan shall be for
such periods as may be determined by the Committee and set forth in the
related Stock Option Agreements, subject to the provisions of Section 9
hereof regarding early termination upon the occurrence of certain events
and subject to the further provisions of this paragraph 7(c). The
exercise period of an Incentive Stock Option shall not exceed Ten (10)
years from the date of grant of such Option.
(d) Vesting of Options. Unless otherwise established by the
Committee, all Options shall become exercisable upon the first anniversary
of the date of grant to the extent of Twenty Percent (20%) of the total
shares covered by the Option with an additional Twenty Percent (20%) of
the total shares covered by the Option becoming exercisable on each
succeeding anniversary. This right of exercise shall be cumulative and
shall be exercisable in whole or in part.
(e) Option Price. The Option Price per share of the Common Stock
subject to an Option granted under the Plan shall be determined by the
Committee at the time the Option is granted, and shall be subject to the
following conditions:
(i) Nonqualified Stock Options - The Option Price per
share of Common Stock subject to a Nonqualified Stock Option may
be less than the Fair Market Value per share of the Common Stock
on the date of grant, but shall not be less than the par value
per share of Common Stock.
(ii) Incentive Stock Options - The Option Price per share
of Common Stock subject to an Incentive Stock Option shall not
be less than the greater of (a) One Hundred Percent (100%) of
the Fair Market Value per share of the Common Stock on the date
of grant, or (b) the par value per share of the Common Stock.
Section 8. Method of Exercise; Payment of Option Price
(a) Method of Exercise. An Option may be exercised as to any or all
full shares of Common Stock as to which the Option has become exercisable
in accordance with the terms of the related Stock Option Agreement and the
provisions of this Plan by delivering to the Company written notice of
such exercise in the manner hereinafter specified in Section 18, provided,
however, that an Option may not be exercised at any one time as to less
than One Thousand (1,000) shares (or such number of shares as to which the
Option is then exercisable if such number of shares is less than One
Thousand (1,000) shares). Such written notice shall specify the number of
shares of Common Stock with respect to which the Option is being exercised
and shall be accompanied by payment in full of the Option Price for such
shares. The date of exercise of an Option or portion thereof shall be the
date of receipt by the Company of such written notice as determined in
accordance with the provisions of Section 18 of the Plan.
(b) Payment of Option Price. Payment for shares purchased upon
exercise of an Option may be made
(i) in cash (including a check, bank draft or money order), or
(ii) with the approval of the Committee, by delivering to the
Company shares of Common Stock already owned by the Optionee
("Previously Held Shares") having a Fair Market Value (determined as
of the day preceding the date on which the Option is exercised) equal
to the cash Option Price of the shares of Common Stock as to which
the Option is being exercised, or
(iii) with the approval of the Committee, by a combination of
the methods described in (i) and (ii) above, or
(iv) with the approval of the Committee, by any other method or
in any other form authorized by the Committee and reflected in the
related Stock Option Agreement or in any written notice relative
thereto as may be from time to time delivered by the Committee to the
Optionee. The Company, in its sole discretion, may establish
procedures whereby a Key Employee, subject to the requirements of
Rule 16b-3, Regulation T, federal income tax laws and other federal,
state and local tax and securities laws, can exercise an Option or a
portion thereof without making a direct payment of the option price
to the Company; provided, however, that these cashless exercise
procedures shall not apply to Incentive Stock Options which are
outstanding on the date the Company establishes such procedures
unless the application of such procedures to such Options is
permitted pursuant to the Code and the regulations thereunder without
affecting the Options' qualification under Code Section 422 as
Incentive Stock Options. If the Company so elects to establish a
cashless exercise program, the Company shall determine, in its sole
discretion, and from time to time, such administrative procedures and
policies as it deems appropriate and such procedures and policies
shall be binding on any Employee wishing to utilize the cashless
exercise program.
Section 9. Death, Disability or Other Termination of Employment
(a) Death. In the event an Optionee dies (i) while in the employ of
the Company or a Subsidiary or (ii) within Three (3) months of the
termination of such employment (other than termination for cause or
voluntary termination without the consent of the Company or the
Subsidiary, as the case may be), his Option may be exercised, solely to
the extent that the Optionee was entitled to exercise the Option at the
date of his death or, if earlier, the date of his termination, by the
person or persons to whom such Optionee's rights under the Option shall
pass by will or the laws of descent and distribution, at any time or from
time to time within One (1) year after the date of Optionee's death or
prior to the expiration of the period for which the Option was granted,
whichever is the shorter period.
(b) Disability. In the event an Optionee's employment by the
Company or a Subsidiary is terminated because of the Optionee's permanent
disability, the Optionee may exercise his Option, solely to the extent
that he was entitled to do so at the date of termination of his
employment, at any time or from time to time within One (1) year after the
date of such termination of employment or prior to the expiration of the
period for which the Option was granted, whichever is the shorter period.
(c) Other Termination of Employment. In the event the Optionee's
employment by the Company or a Subsidiary is terminated other than by
death or permanent disability as provided by paragraphs (a) and (b),
respectively, of this Section 9 and other than for cause or by the
voluntary action of the Optionee without the consent of the Company or
Subsidiary employing the Optionee, the Optionee may exercise his Option,
solely to the extent that he was entitled to do so at the date of
termination of his employment, at any time or from time to time within
Three (3) months after the date of such termination of employment or prior
to the expiration of the period for which the Option was granted,
whichever is the shorter period. In the event the Optionee's employment
by the Company or a Subsidiary is terminated for cause or by the voluntary
action of the Optionee without the consent of the Company or Subsidiary
employing the Optionee, his Option shall terminate at the date of
termination of his employment.
(d) Failure to Exercise. To the extent an Option or any portion
thereof is not exercised within the limited period provided in paragraphs
(a), (b) or (c) of this Section 9, whichever is applicable, all rights
pursuant to such Option will cease and terminate at the expiration of such
period.
(e) Matters Relating to Termination of Employment. The Committee in
its absolute discretion shall determine the effect of all matters and
questions relating to the termination of employment of an Optionee,
including, but not limited to, questions as to whether a termination of
employment resulted from permanent disability or was voluntary or
involuntary on the part of the Optionee and questions of whether
particular leaves of absence constitute terminations employment.
Section 10. Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the Plan, the
Committee in its discretion may modify, extend or renew outstanding Options
granted under the Plan, or accept the surrender of outstanding Options (to
the extent not theretofore exercised) and authorize the granting of new
Options hereunder in substitution therefor. Notwithstanding the foregoing,
however, no modification (other than adjustments as provided by Section
12, 13 hereof) of an Option shall, without the consent of the Optionee,
alter or impair any rights or obligations under any Option theretofore
granted to such Optionee.
If the terms of an Incentive Stock Option are "modified, extended or
renewed" within the meaning of Section 424(h) of the Code and
interpretations thereunder, such modification, extension or renewal shall be
considered the granting of a new Incentive Stock Option.
Section 11. Withholding Taxes. The Company shall be entitled to
require, as a condition to its delivery of shares of Common Stock upon the
exercise of an Option, that the Optionee pay to the Company an amount
sufficient to satisfy all present or estimated future federal, state and
local withholding tax requirements related thereto.
Subject to the further provisions of this Section 11 and to the approval
of the Committee, an Optionee may elect to satisfy applicable withholding
tax liabilities by (i) having the Company withhold from the shares of Common
Stock otherwise issuable to the Optionee upon his exercise of an Option that
number of shares of Common Stock having a Fair Market Value on the day
preceding the date of such exercise sufficient to satisfy the amount of such
tax liabilities or (ii) delivering to the Company that number of Previously
Held Shares having a Fair Market Value on the day preceding the date of such
exercise sufficient to satisfy the amount of such tax liabilities. Any such
election will be irrevocable and must be made prior to the date the Option
exercise becomes taxable. In addition, if the Optionee is a director or an
officer of the Company within the meaning of Section 16(b) of the 1934 Act,
such election may not be made within Six (6) months of the grant of the
Option (except that this limitation will not apply in the event of the death
or disability of the Optionee prior to the expiration of the Six (6) month
period), and such election shall be made either in the Ten (10) day "window
period" following the release of the Company's quarterly or annual summary
earnings statement as provided by Rule 16b-3(e)(iii) under the 1934 Act, or
at least Six (6) months prior to the date the Option exercise becomes
taxable.
The Company intends that this Section 11 shall comply with the
requirements of Rule 16b-3 under the 1934 Act, as the same may be
interpreted or amended from time to time during the term of the Plan.
Should any provision of this Section 11 not be necessary to comply with the
requirements of the Rule or should any additional provisions be necessary
for this Section 11 to so comply, the Committee may amend the Plan to add to
or modify the provisions of the Plan accordingly.
Section 12. Cash Payments for Taxes. The Committee may, in its sole
discretion, provide in a Stock Option Agreement that the Company will make a
cash payment to the Key Employee covered thereby equal to the aggregate of
the amount of federal, state and local income taxes which such Key Employee
would be required to pay to each such taxing authority attributable to the
realization of taxable income, if any, as a result of the receipt of Shares
pursuant to the exercise of any Option (other than an Incentive Stock
Option) granted under the Plan. The Committee may, in its discretion,
require the Key Employee to make an election to be taxed immediately under
Section 83(b) of the Code as a condition to receiving such payment. In
computing the amount of such payment, it shall be assumed that every Key
Employee granted an Option under the Plan is subject to tax by each taxing
authority at the highest marginal tax rate in the respective taxing
jurisdiction of such Key Employee (provided that the highest marginal tax
rate for federal income tax purposes shall be determined under Section 1 of
the Code), taking into account the city and state in which such Key Employee
resides, but giving effect to the tax benefit, if any, which such Key
Employee may enjoy to the extent that any such tax is deductible in
determining the tax liability of any other taxing jurisdiction (disregarding
the effects of Code Section 68 in determining deductibility for federal
income tax purposes). Likewise, the Committee may, in its sole discretion,
provide in a Stock Option Agreement that the Company will make a cash
payment to the Key Employee covered thereby equal to the amount of excise
taxes (i.e., an "excise tax gross-up payment") which such Key Employee would
be required to pay pursuant to Section 4999 of the Code as a result of all
or any part of such Key Employee's Option being treated as an "excess
parachute payment" within the meaning of Section 280G(b) of the Code. In
addition to the foregoing, the Committee may, in its discretion, increase
each cash payment due to a Key Employee hereunder, such that each Key
Employee who receives Shares and/or an excise tax gross-up payment pursuant
to any Option granted under this Plan shall receive such Shares and/or
excise tax gross-up payment net of all income and/or excise taxes imposed on
such Key Employee on account of the receipt of such Shares and/or excise tax
gross-up payment.
Section 13. Adjustments Upon Changes in Capitalization. The total
number and character of shares available for Options under the Plan, the
number and character of shares subject to outstanding Options and the Option
Price shall be appropriately adjusted by the Committee in the event of any
change in the number or character of outstanding shares of Common Stock
resulting from a stock dividend, subdivision or combination of shares or
reclassification. In the event of a merger or consolidation of the Company
or a tender offer for shares of Common Stock, the Committee may make such
adjustments with respect to Options under the Plan and take such other
actions as it deems necessary or appropriate to reflect, or in anticipation
of, such merger, consolidation or tender offer, including, without
limitation, the substitution of new Options, the termination or adjustment
of outstanding Options, the acceleration of Options, or the removal of
limitations or restrictions on outstanding Options.
Section 14. Nontransferability. No Option granted under the Plan shall
be transferable by an Optionee otherwise then by will or by the laws of
descent and distribution, and an Option may be exercised, during the
lifetime of the Optionee, only by the Optionee.
Section 15. No Right to Continued Employment. Nothing in this Plan or
in any Option granted hereunder shall confer upon an Optionee any right to
continue in the employ of the Company or a Subsidiary nor interfere or
affect in any way the right of the Company or a Subsidiary to terminate an
Optionee's employment at any time for any reason.
Section 16. Rights as a Shareholder. An Optionee shall have no rights
as a shareholder with respect to any shares of Common Stock subject to an
Option until the date of issuance to him of a stock certificate or
certificates for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property)
or distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as provided in Section 12, 13
hereof.
Section 17. Compliance with Law and Other Conditions. The obligation
of the Company to issue or deliver shares of Common Stock upon the exercise
of Options shall be subject to all applicable laws, regulations, rules and
approvals of applicable governmental and regulatory authorities.
Notwithstanding any other provisions of this Plan or any Stock Option
Agreements, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of an Option prior to the fulfillment of the following conditions:
(i) The listing, or approval for listing upon notice of issuance, of
such shares on any securities exchange on which the Common Stock is then
listed;
(ii) The registration or other qualification of such shares under any
state or federal securities law or regulation which the Committee shall,
in its absolute discretion upon the advice of counsel, deem necessary or
advisable; and
(iii) The obtaining of any other consent, approval, permit or
other clearance from any state or federal governmental or regulatory
agency which the Committee shall, in its absolute discretion upon the
advice of counsel, determine to be necessary or advisable.
With respect to Options granted to any Optionee who is an officer of the
Company or is otherwise subject to Section 16 of the 1934 Act, the Committee
may, in its absolute discretion at the time of the granting of an Option or
the exercise thereof, make such provisions as may be necessary to assure
compliance with Rule 16b-3 under the 1934 Act.
Section 18. Notices. Whenever any notice is required or permitted to
be given under the Plan or any Stock Option Agreement, such notice must be
in writing and personally delivered or sent by courier or by mail. Any such
notice shall be deemed effectively given or delivered upon personal deliver
or Twenty-Four (24) hours after delivery to a courier service which
guarantees overnight delivery or Five (5) days after deposit with the U.S.
Post Office, by registered or certified mail, return receipt requested,
postage prepaid, addressed to the person who is to receive such notice at
the address which such person has theretofore specified by written notice
delivered in accordance herewith. The Company or an Optionee may change, at
any time and from time to time, by written notice to the other, the address
which it or he had theretofore specified for receiving notices. Until
changed in accordance herewith, the Company and each Optionee shall specify
as its or his address for receiving notices the address set forth in the
Stock Option Agreement pertaining to the shares of Common Stock to which
such notice relates.
Section 19. Amendment, Suspension or Termination of the Plan. The Plan
may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board, unless the board
delegates such authority to the Committee; provided, however, that except as
expressly authorized by the Plan, neither the Board nor the Committee shall,
without the approval of the holders of a majority of the outstanding shares
of the Company's stock entitled to vote thereon, effect any change to the
Plan if such change would cause the Plan to cease to satisfy any applicable
conditions of Rule 16b-3.
Further, no such amendment, suspension or termination, other than
adjustments for changes in capitalization as provided in Section 12, 13
hereof, shall adversely affect or impair any outstanding Option without the
written consent of the Optionee affected thereby.
Section 20. Effective Date; Duration.
(a) Effective Date. The Plan shall become effective upon the date of its
adoption by the Board provided that, within Twelve (12) months after the
date the Plan is adopted by the Board, the Plan is approved and adopted by
the holders of a majority of the outstanding shares of stock of the Company
entitled to vote thereon. If the Plan shall not be subsequently approved
and adopted by the shareholders of the Company as specified herein, the Plan
and all Options granted hereunder shall be null and void and any obligation
pursuant to the subsequent exercise of any Option previously granted shall
not be binding upon the Company. To the extent an Optionee has already
purchased and paid for any shares received under the Plan, the Optionee may
retain the ownership of said shares; however, the prior exercise of said
Option shall not constitute the exercise of an Incentive Stock Option.
(b) Duration. Unless earlier terminated by the Board or the Committee
pursuant to the provisions of the Plan, the Plan shall terminate on the
tenth anniversary of its effective date as hereinbefore specified. No
Options shall be granted under the Plan after such termination date.
ANNEX 2
AMERICAN ANNUITY GROUP, INC.
1994 DIRECTORS STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE 1. PURPOSE
The purpose of the American Annuity Group 1994 Directors Stock Apprecia-
tion Rights Plan (the "Plan") is to aid American Annuity Group (the
"Company") in attracting and retaining directors of outstanding competence,
dedication and loyalty. Consistent with this objective, the Plan provides
for the grant to non-employee directors of Stock Appreciation Rights
("SARs") pursuant to the terms and conditions hereinafter set forth. As
used herein, the term "Subsidiary" means any domestic or foreign
corporation, at least 50% of the outstanding voting stock or voting power of
which is beneficially owned, directly or indirectly, by the Company.
2. EFFECTIVE DATE
2. EFFECTIVE DATE
The Plan was approved by the Board of Directors of the Company (the "Board
of Directors") and became effective on March 2, 1994 (the "Effective
Date").
3. ADMINISTRATION
3. ADMINISTRATION
The Plan shall be administered by the Organization and Policy Committee of
the Board of Directors or such other committee appointed by the Board of
Directors (the "Committee"). The Committee will consist of three or more
directors who may also be eligible to participate in the Plan.
4. ELIGIBILITY
4. ELIGIBILITY
SARs under the Plan shall be granted only to persons who are directors of
the Company and who are not employees of the Company or a Subsidiary. No
SARs under the Plan shall be granted to any person who is an employee of the
Company or a Subsidiary.
5. GRANT OF SARs
5. GRANT OF SARs
SARs shall automatically be granted pursuant to the terms of this Section
without further action by the Board of Directors. The date on which SARs
are granted hereunder shall be referred to herein as the "Date of Grant."
5.1 On the Effective Date, each person serving as a director of the
Company who is not an employee of the Company or a Subsidiary shall be
granted 10,000 SARs.
5.2 On each March 1 following the Effective Date during the term of the
Plan, each person serving as a director of the Company on such date who is
not an employee of the Company or a Subsidiary shall be granted 1,000 SARs.
5.3 Each person who is elected as a director of the Company, who (i) was
not a director of the Company on the Effective Date, and (ii) is not an
employee of the Company or a Subsidiary on the date of election as a
director, shall be granted 10,000 SARs on the date such person is elected a
director.
5.4 All SARs granted pursuant to the Plan shall have an SAR Grant Price
determined pursuant to Section 7.1 hereof.
6. AVAILABLE SARs
6. AVAILABLE SARs
6.1 The stock subject to the SARs granted under the Plan shall be the
Common Stock, $1.00 par value, of the Company ("Common Stock"). Each SAR
shall be deemed to equal one share of Common Stock, and except as otherwise
required or permitted by Paragraph 6.2, the aggregate number of SARs which
may be granted under the Plan shall not exceed 500,000. If an SAR expires,
terminates, is forfeited or is otherwise surrendered, in whole or in part,
the shares allocable to such SAR shall again become available for SARs under
the Plan.
6.2 The aggregate number of SARs pursuant to the provisions of the Plan
shall be proportionately adjusted for any increase or decrease in the number
of issued shares of Common Stock resulting from any stock dividend, stock
split or similar event and may, in the sole discretion of the Board of
Directors of the Company, be similarly adjusted for any other capital
adjustment (including a reclassification of shares or recapitalization or
reorganization of the Company) or the distribution to holders of shares of
Common Stock of rights, warrants, assets or evidences of indebtedness.
7. TERMS AND CONDITIONS OF SARs
7. TERMS AND CONDITIONS OF SARs
Each SAR granted pursuant to the Plan shall be evidenced by a written
agreement (the "Agreement") between the Company and the person to whom the
SAR is granted (the "Grantee") in such form or forms as the Committee, from
time to time, shall prescribe, which shall comply with and be subject to the
terms and conditions of this Paragraph 7. In addition, the Committee may,
in its absolute discretion, include in any such Grant other terms,
conditions and provisions that are not inconsistent with the express
provisions of the Plan.
7.1 SAR Grant Price. The initial price at which each SAR may be granted
on the Effective Date shall be $9.62. Thereafter, the price at which each
SAR is granted under the Plan shall be the average of the means between the
high and low sales prices for shares of the Common Stock for the ten
consecutive trading days immediately preceding the Date of Grant as reported
on the New York Stock Exchange Composite Tape (or the principal market on
which the Common Stock is traded, if the Common Stock is not listed on that
exchange at any time during such ten day period). The price at which an SAR
is granted is the "SAR Grant Price." Notwithstanding the foregoing, if the
number of shares of Common Stock subject to any SAR is adjusted pursuant to
Paragraph 6.2 hereof, a corresponding adjustment shall be made to the SAR
Grant Price.
7.2 Duration of SARs. Each SAR granted under the Plan shall expire and
all rights pursuant thereto shall cease on the date which shall be the tenth
anniversary of the Date of Grant (the "Expiration Date").
7.3 Vesting of SARs. Each SAR granted hereunder may be exercised to the
extent that the Grantee is vested in such SAR. The SARs will vest according
to the following schedule:
Number of Years the Grantee has remained Shares
a director of the Company following represented by
the Date of Grant an SAR in which
a Grantee is
Vested
Under one . . . . . . . . . . . . . . . . 0%
At least one but less than two . . . . . 20%
At least two but less than three . . . . 40%
At least three but less than four . . . . 60%
At least four but less than five . . . . 80%
Five or more . . . . . . . . . . . . . . 100%
Anything contained in this Paragraph 7.3 to the contrary notwithstanding,
a Grantee shall become fully (100%) vested in each of his or her SARs under
the following circumstances: (i) upon termination of the Grantee's service
as a director of the Company for reasons of death, Disability or Retirement
(as such terms are defined in Paragraphs 7.7.4 and 7.7.5); (ii) if the
Committee, in its sole discretion, determines that acceleration of the SAR
vesting schedule would be desirable for the Company; or (iii) if such SARs
vest pursuant to Paragraph 7.4.
7.4 Merger, Consolidation, Etc. If the Company shall, pursuant to action
by its Board of Directors, at any time propose to merge into, consolidate
with, or sell or otherwise transfer all or substantially all of its assets
to another corporation and provision is not made pursuant to the terms of
such transaction for the assumption by the surviving, resulting or acquiring
corporation of outstanding SARs or for substitution of new SARs therefor,
the Committee shall cause written notice of the proposed transaction to be
given to each Grantee not less than twenty days prior to the anticipated
effective date of the proposed transaction, and his or her SARs shall become
fully (100%) vested and, prior to a date specified in such notice, which
shall be not more than ten days prior to the anticipated effective date of
the proposed transaction, each Grantee shall have the right to exercise his
or her SARs. Each Grantee, by so notifying the Company in writing, may in
exercising his or her SARs, condition such exercise upon, and provide that
such exercise shall become effective at the time of, but immediately before,
the consummation of the transaction. If the transaction is consummated,
each SAR, to the extent not previously exercised before the date specified
in the foregoing notice, shall terminate on the effective date of such
consummation. If the transaction is abandoned, (i) any SAR not exercised
shall continue to be available for exercise in accordance with other
provisions of the Plan and (ii) to the extent that any SAR not exercised
before such abandonment shall have vested solely by operation of this
Paragraph 7.4, such vesting shall be deemed annulled, and the vesting
schedule set forth in or pursuant to Paragraph 7.3 shall be reinstituted, as
of the date of such abandonment.
7.5 Exercise of SARs. A person entitled to exercise an SAR may exercise
it to the extent vested pursuant to Paragraph 7.3 in whole or in part during
any period beginning on the third business day following the date of release
of the financial data specified in Rule 16b-3(e)(1)(ii) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and ending on the
twelfth business day following such date (the "Window Period"), by
delivering to the Secretary of the Company written notice (the "Notice")
specifying the number of SARs being exercised. Upon exercise of an SAR by a
Grantee, the Company will pay the Grantee an amount (the "Spread") equal to
(i) the excess of the Exercise Price over the SAR Grant Price multiplied by
(ii) the number of shares represented by the SAR or portion thereof being
exercised. The "Exercise Price" shall be the average of the means between
the high and low sales prices of shares of Common Stock for the ten
consecutive trading days immediately preceding the Notice as reported on the
New York Stock Exchange Composite Tape (or the principal market on which the
Common Stock is traded, if the Common Stock is not listed on such exchange
at any time during such ten day period). Payment by the Company upon
exercise of an SAR shall be in the manner provided below.
7.5.1 The Company shall pay 50% of the Spread in cash to the
Grantee, subject to any applicable tax withholding provisions, within ten
business days after the exercise of the SAR.
7.5.2 The Company shall have the option to pay the remaining 50%
of the Spread in any combination of cash or shares of Common Stock. The
number of shares of Common Stock to be issued shall be determined by
dividing the portion of the Spread being paid in Shares by the Exercise
Price. To the extent that the Company chooses to pay a portion of the
Spread in shares of Common Stock, the Company will deliver a certificate
registered in the name of the Grantee for the number of such shares to the
Grantee within twenty business days after the exercise of the SAR. The
Company may include a legend on any stock certificate issued hereunder to
reflect any restrictions provided for in Paragraph 8 hereof. In no event
shall the Company issue shares of Common Stock in partial payment of a
Spread if (i) Article Twelfth of the Company's Certificate of
Incorporation as in existence at the Effective Date or any substantially
similar successor provision shall be in effect and (ii) the issuance of
Shares would cause the Grantee to beneficially own 4.75% or more of the
Company's outstanding Shares. To the extent that the Company chooses to
pay the remaining 50% of the Spread in cash, such payment shall be paid
over a period of ten years. Such deferred cash payment shall bear
interest at a rate of 10%, and the Company shall make ten equal annual
payments of principal plus accrued interest payable on each January 15.
7.6 Nontransferability. SARs shall not be transferable other than by
will or the laws of descent and distribution and may be exercised, during
the lifetime of the Grantee, only by the Grantee.
7.7 Termination of Service as a Director. Unless otherwise determined by
the Committee, the following rules shall apply in the event of Grantee's
termination of service as a director of the Company.
7.7.1 Except as provided in Paragraph 7.7.4 or 7.7.5, in the
event of a Grantee's termination of service as a director of the Company
either (1) as a result of his removal as a director for cause or (2) as a
result of resignation of the director, his or her SAR shall immediately
terminate.
7.7.2 In the event of the Grantee's termination of service as a
director under circumstances other than those specified in Paragraph 7.7.1
hereof and for reasons other than death, Disability (as defined in
Paragraph 7.7.4) or Retirement (as defined in Paragraph 7.7.5), his or her
SARs shall terminate on the date which is 90 days from the date of such
termination of service as a director or on its Expiration Date, whichever
shall first occur; provided, however, that if the Grantee is subject to
the provisions of Section 16(a) of the Exchange Act on the date of
termination of service as a director, such SARs shall terminate (x) on the
date which is the end of the first Window Period following the later of 90
days from the date of such termination of service as a director or six
months and ten days after the date of Grant of such SARs or (y) on its
Expiration Date, whichever shall first occur.
7.7.3 In the event of the death of a Grantee while he or she is
serving as a director of the Company, such SAR shall terminate on the
first anniversary of the Grantee's death or on its Expiration Date,
whichever shall first occur.
7.7.4 In the event of the Grantee's termination of service as a
director due to mental or physical infirmity of the Company
("Disability"), his or her SARs shall terminate on first anniversary of
such Disability, or on its Expiration Date, whichever shall first occur.
7.7.5 In the event that the Grantee's service as a director
terminates after five or more years of service as a director
("Retirement"), his or her SARs shall terminate on the second anniversary
of the date of such Retirement or on its Expiration Date, whichever shall
first occur.
7.7.6 Anything contained in this Paragraph 7.7 to the contrary
notwithstanding, an SAR may only be exercised following the Grantee's
termination of service as a director for reasons other than death,
Disability or Retirement if, and to the extent that, such SAR was
exercisable immediately prior to such termination service as a director.
7.8 No Rights as Stockholder or to Continue as a Director. No Grantee
shall have any rights as a stockholder of the Company with respect to any
shares of Common Stock prior to the date of issuance to him or her of a
certificate representing such shares issued pursuant to Paragraph 7.5.2, and
neither the Plan nor any SAR granted under the Plan shall confer upon a
Grantee any right to continue to serve as a director.
8. ISSUANCE OF SHARES; RESTRICTIONS
8.1 Unless any shares of Common Stock to be issued by the Company under
the Plan have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and, in the case of any Grantee who may be deemed an
"affiliate" of the Company as defined in Rule 405 under the Securities Act,
such shares have been registered under the Securities Act for resale by such
Grantee, or unless the Company has determined that an exemption from
registration is available, the Company may require prior to and as a
condition of the issuance of any shares of Common Stock that the person
receiving such shares hereunder furnish the Company with a written
representation in a form prescribed by the Committee to the effect that such
person is acquiring such shares solely with a view to investment for his or
her own account and not with a view to the resale or distribution of all or
any part thereof, and that such person will not dispose of any of such
shares otherwise than in accordance with the provisions of Rule 144 under
the Securities Act unless and until either the shares are registered under
the Securities Act or the Company is satisfied that an exemption from such
registration is available.
8.2 Anything contained herein to the contrary notwithstanding, the
Company shall not be able to issue any shares of Common Stock under the Plan
unless and until the Company is satisfied that such sale or issuance
complies with (i) all applicable requirements of the New York Stock Exchange
(or the governing body of the principal market in which the Common Stock is
traded, if the Common Stock is not then listed on that exchange), (ii) all
applicable provisions of the Securities Act and (iii) all other laws or
regulations by which the Company is bound or to which the Company is
subject.
9. TERM OF THE PLAN
9. TERM OF THE PLAN
Unless the Plan has been sooner terminated pursuant to Paragraph 10
hereof, the Plan shall terminate on, and no SARs shall be granted after the
tenth anniversary of the Effective Date. The provisions of the Plan,
however, shall continue thereafter to govern all SARs theretofore granted,
until the exercise, expiration or cancellation of the SARs.
10. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors at any time may terminate or suspend the Plan or
amend it from time to time in such respects as it deems desirable; provided
that, without the further approval of the stockholders no amendment shall
(i) increase the maximum aggregate number of SARs which may be granted under
the Plan, (ii) change the SAR Grant Price provided for in Paragraph 7.1
hereof, (iii) change the eligibility provisions of Paragraph 4 hereof or
(iv) make any other amendment which in the opinion of counsel to the Company
must be approved by the Company's stockholders in order to remain an
exempted plan under Rule 16b-3, and provided further that, subject to the
provisions of Paragraph 8 hereof, no termination of or amendment to the Plan
shall adversely affect the rights of any participant without the consent of
such participant, as the case may be. In addition, the provisions of the
Plan shall not be amended more than once every six months, other than to
comport with changes to the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
11. STOCKHOLDER APPROVAL
11. STOCKHOLDER APPROVAL
This Plan and any Grants made hereunder are conditioned upon approval of
the Plan at the 1994 Annual Meeting of Stockholders of the Company. If such
approval is not obtained, the Plan and any Grants made hereunder shall
automatically terminate and be of no further force or effect and a Grantee
shall have no rights under the Plan or any Grant.
PRELIMINARY COPY
AMERICAN ANNUITY GROUP, INC.
Proxy for Annual Meeting
Registration Name and Address
The undersigned hereby appoints William J. Maney and Mark F. Muething and
each of them, proxies of the undersigned, each with the power of
substitution, to vote all shares of Common Stock which the undersigned would
be entitled to vote at the Annual Meeting of Shareholders of American
Annuity Group, Inc. to be held on June 14, 1994 at 10:00 a.m., Eastern
Daylight Savings Time, and any adjournment of such meeting.
The Board of Directors recommends a vote FOR each of the following
Proposals:
1. Election of Directors
/ / FOR AUTHORITY to elect the / / WITHHOLD AUTHORITY to
nominees listed below (except vote for every nominee
those whose names have been listed below
crossed out)
Robert A. Adams John T. Lawrence William R. Martin
A. Leon Fergenson Carl H. Lindner Alfred W. Martinelli
Ronald G. Joseph S. Craig Lindner Ronald F. Walker
2. Approval of AAG's 1994 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of AAG's 1994 Directors' Stock Appreciation Rights Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. Ratification of Appointment of Ernst & Young to audit the 1994
Consolidated Financial Statements of AAG.
/ / FOR / / AGAINST / / ABSTAIN
5. Ratification of the issuance of 3,238,162 shares of Common Stock of
AAG in exchange for 450,000 shares of Series A Preferred Stock of
AAG.
/ / FOR / / AGAINST / / ABSTAIN
DATE: ___________________, 1994 SIGNATURE: __________________________
SIGNATURE: __________________________
(if held jointly) Important: Please
sign exactly as name appears hereon
indicating, where proper, official
position or representative capacity. In
case of joint holders, all should sign.
This proxy when properly executed will be voted in the manner dictated
herein by the above signed shareholder. If no direction is made, this proxy
will be voted FOR each Proposal. To vote your shares, please mark, sign,
date and return this proxy form using the enclosed envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.