<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1997
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AMERICAN GENERAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
TEXAS 6719 74-0483432
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
JON P. NEWTON, ESQ.
VICE CHAIRMAN AND GENERAL COUNSEL
AMERICAN GENERAL CORPORATION
2929 ALLEN PARKWAY 2929 ALLEN PARKWAY
HOUSTON, TEXAS 77019 HOUSTON, TX 77019
(713) 522-1111 (713) 522-1111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
---------------
COPIES OF ALL COMMUNICATIONS TO:
MORRIS J. KRAMER, ESQ. PAUL S. BIRD, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP DEBEVOISE & PLIMPTON
919 THIRD AVENUE 875 THIRD AVENUE
NEW YORK, NY 10022 NEW YORK, NY 10022
(212) 735-3000 (212) 909-6000
WILLIAM R. DERRY, JR., ESQ.
MAYS & VALENTINE, L.L.P.
NATIONSBANK CENTER
1111 EAST MAIN STREET
RICHMOND, VA 23219
(804) 697-1375
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger described in the enclosed Proxy Statement/Prospectus
have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.50 per share........ 15,000,000 shares(1) Not Applicable $603,852,296.60 $49,968.00(2)
- ---------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Also includes associated Series A Junior Participating Preferred Stock
Purchase Rights, which Rights (a) are not currently separable from the
shares of Common Stock and (b) are not currently exercisable.
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the value of the sum of (i) the 8,060,660 shares of Home Beneficial Class
A Common Stock (Voting) to be received by the Registrant pursuant to the
acquisition of Home Beneficial Corporation by the Registrant computed in
accordance with Rule 457(f)(2) on the basis of the book value of such
securities computed as of December 31, 1996 and (ii) the 8,992,910 shares
of Home Beneficial Class B Common Stock (Non-Voting) to be received by the
Registrant pursuant to the acquisition of Home Beneficial Corporation by
the Registrant computed in accordance with Rule 457(c) on the basis of the
average of the high and low prices reported on the National Association of
Securities Dealers Automated Quotation/National Market System on March 14,
1997. Pursuant to Rule 457(b), the fee has been reduced by $133,017.85
paid on January 24, 1997 upon the filing under the Securities Exchange Act
of 1934, as amended, of preliminary copies of Home Beneficial
Corporation's proxy materials included herein.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
<PAGE>
CROSS REFERENCE SHEET PURSUANT TO
ITEM 501(B) OF REGULATION S-K, SHOWING THE LOCATION IN THE PROXY
STATEMENT/PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4.
<TABLE>
<CAPTION>
LOCATION IN PROXY
S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
--------------------------- -----------------------------
<C> <C> <S>
A. INFORMATION ABOUT THE TRANSACTION.
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page of
Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Available Information;
Incorporation of Certain
Documents by Reference; Table
of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Summary of Proxy
Statement/Prospectus; Summary
Historical Financial Data of
American General; Summary
Historical Financial Data of
Home Beneficial; Selected
Historical Financial Data of
American General; Selected
Historical Financial Data of
Home Beneficial; Selected Pro
Forma Per Share Data; Risk
Factors
4. Terms of the Transaction................... Summary of Proxy
Statement/Prospectus; The
Proposed Merger; Comparison
of Shareholder Rights
5. Pro Forma Financial Information............ *
6. Material Contracts with the Company Being
Acquired.................................. Summary of Proxy
Statement/Prospectus; The
Proposed Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ *
8. Interests of Named Experts and Counsel..... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... *
B. INFORMATION ABOUT THE REGISTRANT.
10. Information With Respect to S-3
Registrants............................... Incorporation of Certain
Documents by Reference;
Certain Information Regarding
American General; Selected
Historical Financial Data of
American General
11. Incorporation of Certain Information by
Reference................................. Incorporation of Certain
Documents by Reference
12. Information With Respect to S-2 or S-3
Registrants............................... *
13. Incorporation of Certain Information by
Reference................................. *
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants ........ *
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED.
15. Information With Respect to S-3
Companies................................. Incorporation of Certain
Documents by Reference;
Certain Information Regarding
Home Beneficial; Selected
Historical Financial Data of
Home Beneficial
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN PROXY
S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
--------------------------- -----------------------------
<C> <C> <S>
16. Information With Respect to S-2 or S-3
Companies................................. *
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies................. *
D. VOTING AND MANAGEMENT INFORMATION.
18. Information if Proxies, Consents or
Authorizations Are to be Solicited........ Cover Page of Proxy
Statement/Prospectus;
Incorporation of Certain
Documents by Reference;
Summary of Proxy
Statement/Prospectus; The
Special Meeting; The Proposed
Merger
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited, or
in an Exchange Offer...................... *
</TABLE>
- --------
* Omitted because not required, inapplicable or answer is negative.
<PAGE>
[LOGO OF HOME BENEFICIAL CORPORATION APPEARS HERE]
HOME BENEFICIAL CORPORATION
3901 WEST BROAD STREET P.O. BOX 27572 RICHMOND, VIRGINIA 23261
March , 1997
Dear Fellow Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Home Beneficial Corporation ("Home Beneficial"), to be held at the principal
executive offices of Home Beneficial, 3901 West Broad Street, Richmond,
Virginia 23230, at 10:00 a.m., local time, on April , 1997, and any
adjournment or postponement thereof (the "Special Meeting"). A Notice of the
Special Meeting, a proxy card for each class of shares you own, and a Proxy
Statement/Prospectus containing information about the matters to be acted upon
are enclosed. All holders of outstanding shares of Home Beneficial's Class A
Common Stock (Voting), par value $.3125 per share ("Home Beneficial Voting
Common Stock"), and Home Beneficial's Class B Common Stock (Non-Voting), par
value $.3125 per share ("Home Beneficial Non-Voting Common Stock") ("Home
Beneficial Voting Common Stock" and "Home Beneficial Non-Voting Common Stock"
are collectively referred to as the "Home Beneficial Common Stock"), as of the
close of business on February 14, 1997 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting.
At the Special Meeting, Home Beneficial's shareholders will be asked to
consider and vote upon a proposal to approve and adopt an Agreement and Plan
of Merger, dated as of December 22, 1996, and amended as of January 22, 1997
and as of March 3, 1997 (as so amended, the "Merger Agreement"), by and among
Home Beneficial, American General Corporation, a Texas corporation ("American
General"), and AGC Life Insurance Company, a Missouri corporation and a wholly
owned subsidiary of American General ("AGC Life"). Pursuant to the Merger
Agreement, Home Beneficial will be merged (the "Merger") with and into AGC
Life, which will continue in existence as a wholly owned subsidiary of
American General.
In the Merger, and as more fully described in the accompanying Proxy
Statement/Prospectus and in the Merger Agreement included as Annex A thereto,
each share of Home Beneficial Common Stock outstanding prior to the effective
time of the Merger (other than dissenting shares) will be converted into,
exchanged for and represent the right to receive any of the following: (i) a
fraction (the "Exchange Ratio") of a share of common stock (together with the
attached American General Preferred Share Purchase Rights), par value $.50 per
share ("American General Common Stock"), of American General (the "Stock
Consideration"), calculated by dividing (x) $39.00 by (y) the average of the
high and low sales prices of American General Common Stock as reported in The
Wall Street Journal during the ten consecutive New York Stock Exchange (the
"NYSE") trading days (each, a "Trading Day") ending on (and including) the
fifth NYSE Trading Day prior to the effective time of the Merger (the "Trading
Average"); or (ii) cash in the amount of $39.00, without any interest thereon
(the "Cash Consideration"). If the Trading Average of American General Common
Stock falls below $35.00 per share and the Merger is consummated, the Exchange
Ratio becomes fixed and a maximum of 1.1143 shares of American General Common
Stock would be exchangeable for each share of Home Beneficial Common Stock.
Under the Merger Agreement, the Board of Directors of Home Beneficial has the
right, but not the obligation, to terminate the Merger Agreement if the
Trading Average is below $35.00 per share. The Merger Agreement does not
provide for the Exchange Ratio to become fixed at any Trading Average greater
than $35.00 and, therefore, there is no minimum number (or fraction) of shares
of American General Common Stock that would be exchangeable for each share of
Home Beneficial Common Stock.
As indicated in the enclosed Proxy Statement/Prospectus, in order to make a
valid election to receive Stock Consideration and/or Cash Consideration with
respect to your shares of Home Beneficial Common Stock, you must submit an
election form and transmittal letter to the exchange agent for the Merger,
First Chicago Trust Company of New York (the "Exchange Agent"), by 5:00 p.m.
on April , 1997 (unless extended, the "Election Deadline"). The Exchange
Ratio will be determined prior to the Election Deadline. Therefore, if you
wish to obtain information regarding the Exchange Ratio prior to sending in an
election form, you should call the Exchange Agent at (201) 324-0137 or
Corporate Investor Communications, Inc., the Information Agent for
<PAGE>
the Merger, at (800) 932-8478. The election form, transmittal letter and
related instructions that you will be receiving from the Exchange Agent
contain important information concerning the timing and procedures for making
your election. Please read such materials carefully. Any extension of the
Election Deadline will be announced in a news release delivered to the Dow
Jones News Service.
Home Beneficial shareholders will be entitled to elect to receive Stock
Consideration and/or Cash Consideration with respect to shares held by them,
but such elections will be subject to certain allocation procedures described
more fully in the accompanying Proxy Statement/Prospectus and in the Merger
Agreement included as Annex A thereto, which procedures provide generally that
(i) no more than 50% of the Home Beneficial Common Stock may be converted into
Cash Consideration and (ii) no more than 75% of the Home Beneficial Common
Stock may be converted into Stock Consideration. The Merger is intended to
qualify as a tax-free transaction for federal income tax purposes to American
General, AGC Life, Home Beneficial and, except to the extent they receive cash
in the Merger, the Home Beneficial shareholders.
The accompanying Proxy Statement/Prospectus provides a detailed description
of the proposed Merger. We urge you to read and consider it carefully. A Form
of Election/Letter of Transmittal with which you can elect to receive Stock
Consideration and/or Cash Consideration in exchange for your Home Beneficial
Common Stock is being mailed to holders of record of Home Beneficial Common
Stock with the accompanying Proxy Statement/Prospectus.
American General, with assets of $66 billion and shareholders' equity of
$5.6 billion as of December 31, 1996, is one of the nation's largest
diversified financial services organizations. Headquartered in Houston, it is
a leading provider of retirement services, consumer loans, and life insurance
to nine million households.
HOME BENEFICIAL'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. The Board
reached this decision after careful consideration of a number of factors,
including the opinion of Goldman, Sachs & Co. ("Goldman Sachs"), Home
Beneficial's financial advisor, to the effect that the consideration to be
issued in the Merger is fair to Home Beneficial shareholders. The full opinion
of Goldman Sachs, dated as of the date of the accompanying Proxy
Statement/Prospectus, is included as Annex B to the accompanying Proxy
Statement/Prospectus, and shareholders are urged to read the opinion in its
entirety.
The affirmative votes of the holders of more than two-thirds of the
aggregate number of shares of Home Beneficial Voting Common Stock and Home
Beneficial Non-Voting Common Stock entitled to vote and voting together as a
single group and the affirmative votes of the holders of more than two-thirds
of the shares of Home Beneficial Voting Common Stock voting as a separate
voting group are required to approve the Merger Agreement.
In view of the importance of the action to be taken at the Special Meeting,
we urge you to read the enclosed material carefully and to complete, sign and
date the enclosed proxy card and return it promptly in the enclosed prepaid
envelope whether or not you plan to attend the Special Meeting. If you attend
the Special Meeting, you may vote your shares personally whether or not you
have previously submitted a proxy. Your prompt cooperation will be greatly
appreciated.
Sincerely yours,
/s/ R. W. Wiltshire, Jr.
R.W. Wiltshire, Jr.
President and Chief Executive
Officer
If you have questions or need assistance in voting your shares, you should
contact Corporate Investor Communications, Inc. at the phone number listed
below.
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
(800) 932-8478
<PAGE>
[LOGO OF HOME BENEFICIAL CORPORATION APPEARS HERE]
HOME BENEFICIAL CORPORATION
3901 WEST BROAD STREET P.O. BOX 27572 RICHMOND, VIRGINIA 23261
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL , 1997
----------------
March , 1997
To the Shareholders of
HOME BENEFICIAL CORPORATION
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Home
Beneficial Corporation, a Virginia corporation ("Home Beneficial"), will be
held on April , 1997, at 10:00 a.m., local time, at the principal executive
offices of Home Beneficial, 3901 West Broad Street, Richmond, Virginia 23230,
and any adjournments or postponements thereof (the "Special Meeting"), for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of December 22, 1996, and amended as of
January 22, 1997 and as of March 3, 1997 (as so amended, the "Merger
Agreement"), by and among Home Beneficial, American General Corporation, a
Texas corporation ("American General"), and AGC Life Insurance Company, a
Missouri corporation and a wholly owned subsidiary of American General
("AGC Life"). Pursuant to the Merger Agreement, Home Beneficial will be
merged (the "Merger") with and into AGC Life, which will continue in
existence as a wholly owned subsidiary of American General. In the Merger,
and as more fully described in the accompanying Proxy Statement/Prospectus
and in the Merger Agreement included as Annex A thereto, each share of Home
Beneficial's Class A Common Stock (Voting), par value $0.3125 per share
("Home Beneficial Voting Common Stock"), and each share of Home
Beneficial's Class B Common Stock (Non-Voting), par value $0.3125 per share
("Home Beneficial Non-Voting Common Stock" and, together with the Home
Beneficial Voting Common Stock, the "Home Beneficial Common Stock"),
outstanding prior to the effective time of the Merger (other than
dissenting shares) will be converted into, exchanged for and represent the
right to receive any of the following: (i) a fraction (the "Exchange
Ratio") of a share of common stock (together with the attached American
General Preferred Share Purchase Rights), par value $.50 per share
("American General Common Stock"), of American General (the "Stock
Consideration"), calculated by dividing (x) $39.00 by (y) the average of
the high and low sales prices of American General Common Stock as reported
in The Wall Street Journal during the ten consecutive New York Stock
Exchange (the "NYSE") trading days (each, a "Trading Day") ending on (and
including) the fifth NYSE Trading Day prior to the effective time of the
Merger (the "Trading Average"); and/or (ii) cash in the amount of $39.00,
without any interest thereon (the "Cash Consideration"). If the Trading
Average of American General Common Stock falls below $35.00 per share and
the Merger is consummated, the Exchange Ratio becomes fixed and a maximum
of 1.1143 shares of American General Common Stock would be exchangeable for
each share of Home Beneficial Common Stock. Under the Merger Agreement, the
Board of Directors of Home Beneficial has the right, but not the
obligation, to terminate the Merger Agreement if the Trading Average is
below $35.00 per share. The Merger Agreement does not provide for the
Exchange Ratio to become fixed at any Trading Average greater than $35.00
and, therefore, there is no minimum number (or fraction) of shares of
American General Common Stock that would be exchangeable for each share of
Home Beneficial Common Stock. Home Beneficial shareholders will be entitled
to elect to
<PAGE>
receive Stock Consideration and/or Cash Consideration with respect to
shares held by them, but such elections will be subject to certain
allocation procedures described more fully in the accompanying Proxy
Statement/Prospectus and in the Merger Agreement included as Annex A
thereto, which procedures provide generally that (i) no more than 50% of
the Home Beneficial Common Stock may be converted into Cash Consideration
and (ii) no more than 75% of the Home Beneficial Common Stock may be
converted into Stock Consideration.
2. To transact such other business as may properly come before the
Special Meeting.
The affirmative votes of the holders of more than two-thirds of the
aggregate number of shares of Home Beneficial Voting Common Stock and Home
Beneficial Non-Voting Common Stock entitled to vote and voting together as a
single group and the affirmative vote of the holders of more than two-thirds
of the shares of Home Beneficial Voting Common Stock voting as a separate
group are required to approve the Merger Agreement.
Only holders of record of shares of Home Beneficial Common Stock as of the
close of business on February 14, 1997 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting; provided, however, that holders
of Home Beneficial Non-Voting Common Stock shall have the right to vote only
with respect to the approval and adoption of the Merger Agreement. The list of
Home Beneficial shareholders entitled to vote at the Special Meeting will be
available for examination for ten days prior to the Special Meeting at the
principal executive offices of Home Beneficial, 3901 West Broad Street,
Richmond, Virginia 23230.
Holders of Home Beneficial Voting Common Stock who object to the Merger will
be entitled to dissenters' rights in accordance with the Virginia Stock
Corporation Act ("VSCA"). A copy of the relevant provisions of the VSCA is
included as Annex C to the enclosed Proxy Statement/Prospectus.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ADDRESSED ENVELOPE ENCLOSED.
PERSONS WHO HOLD BOTH HOME BENEFICIAL VOTING COMMON STOCK AND HOME
BENEFICIAL NON-VOTING COMMON STOCK ARE RECEIVING TWO PROXY FORMS, ONE FOR EACH
CLASS OF STOCK. SUCH SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN AND
RETURN BOTH PROXIES SO THAT ALL THEIR SHARES WILL BE REPRESENTED AT THE
SPECIAL MEETING.
By Order of the Board of Directors
/s/ J.M. Wiltshire, Jr.
J.M. Wiltshire, Jr.
Corporate Secretary
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY.
FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OF QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 18, 1997
HOME BENEFICIAL CORPORATION
PROXY STATEMENT
----------
AMERICAN GENERAL CORPORATION
PROSPECTUS
----------
This Proxy Statement and Prospectus ("Proxy Statement/Prospectus") relates to
the proposed merger (the "Merger") of Home Beneficial Corporation, a Virginia
corporation ("Home Beneficial"), with and into AGC Life Insurance Company ("AGC
Life"), a Missouri corporation and wholly owned subsidiary of American General
Corporation, a Texas corporation ("American General"), pursuant to an Agreement
and Plan of Merger, dated as of December 22, 1996, and amended as of January
22, 1997 and as of March 3, 1997 (as so amended, the "Merger Agreement"), by
and among Home Beneficial, American General and AGC Life.
In the Merger, Home Beneficial would be merged with and into AGC Life, which
would continue in existence as a wholly owned subsidiary of American General,
and each share of Home Beneficial's Class A Common Stock (Voting), par value
$0.3125 per share ("Home Beneficial Voting Common Stock"), and each share of
Home Beneficial's Class B Common Stock (Non-Voting), par value $0.3125 per
share ("Home Beneficial Non-Voting Common Stock" and, together with the Home
Beneficial Voting Common Stock, the "Home Beneficial Common Stock"),
outstanding prior to the effective time of the Merger (other than dissenting
shares), will be converted into, exchanged for and represent the right to
receive any of the following: (i) a fraction (the "Exchange Ratio") of a share
of common stock (together with the attached American General Preferred Share
Purchase Rights), par value $.50 per share ("American General Common Stock"),
of American General (the "Stock Consideration"), calculated by dividing (x)
$39.00 by (y) the average of the high and low sales prices (the "Average
Purchaser Price"), of American General Common Stock as reported in The Wall
Street Journal during the ten consecutive New York Stock Exchange (the "NYSE")
trading days (each, a "Trading Day") ending on (and including) the fifth
Trading Day prior to the effective time of the Merger (the "Trading Average");
and/or (ii) cash in the amount of $39.00, without any interest thereon (the
"Cash Consideration" and, together with the Stock Consideration the "Merger
Consideration"). If the Trading Average of American General Common Stock falls
below $35.00 per share and the Merger is consummated, the Exchange Ratio
becomes fixed and a maximum of 1.1143 shares of American General Common Stock
would be exchangeable for each share of Home Beneficial Common Stock. Under the
Merger Agreement, the Board of Directors of Home Beneficial has the right, but
not the obligation, to terminate the Merger Agreement if the Trading Average is
below $35.00 per share. The Merger Agreement does not provide for the Exchange
Ratio to become fixed at any Trading Average greater than $35.00 and,
therefore, there is no minimum number (or fraction) of shares of American
General Common Stock that would be exchangeable for each share of Home
Beneficial Common Stock. Home Beneficial shareholders will be entitled to elect
to receive Stock Consideration and/or Cash Consideration with respect to shares
held by them, but such elections will be subject to certain allocation
procedures described more fully in this Proxy Statement/Prospectus and in the
Merger Agreement included as Annex A hereto, which provide generally that (i)
no more than 50% of the Home Beneficial Common Stock may be converted into Cash
Consideration, and (ii) no more than 75% of the Home Beneficial Common Stock
may be converted into Stock Consideration.
A Form of Election/Letter of Transmittal with which Home Beneficial
shareholders can elect to receive Stock Consideration and/or Cash Consideration
for their Home Beneficial shares accompanies this Proxy Statement/Prospectus.
In order to elect Stock Consideration and/or Cash Consideration, each holder of
Home Beneficial Common Stock must submit a Form of Election/Letter of
Transmittal to First Chicago Trust Company of New York (the "Exchange Agent")
by no later than 5:00 p.m. New York City time on April , 1997 (unless
extended, the "Election Deadline"). The Exchange Ratio will be determined prior
to the Election Deadline. Home Beneficial shareholders who wish to obtain
information regarding the Exchange Ratio prior to making their elections should
call the Exchange Agent at (201) 324-0137 or Corporate Investor Communications,
Inc., the Information Agent for the Merger, at (800) 932-8478. The Form of
Election/Letter of Transmittal accompanying this Proxy Statement/Prospectus
contains important information concerning the timing and procedures for making
an election. Please read such materials carefully. Any extension of the
Election Deadline will be announced in a news release delivered to the Dow
Jones News Service.
On March 14, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus, the closing price of the American General
Common Stock as reported on the NYSE Composite Tape was $42.375 per share, and
the closing price of the Home Beneficial Non-Voting Common Stock as reported by
the Nasdaq National Market (the "Nasdaq") was $38.25 per share. There is no
established trading market for the Home Beneficial Voting Common Stock.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being sent to Home Beneficial shareholders on or about March , 1997.
IN REVIEWING THIS PROXY STATEMENT/PROSPECTUS, HOME BENEFICIAL SHAREHOLDERS
SHOULD CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE HEADING "RISK
FACTORS" ON PAGE 33.
----------
THE SHARES OF AMERICAN GENERAL COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE
MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY STATE INSURANCE DEPARTMENT,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION
OR ANY STATE INSURANCE DEPARTMENT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MARCH , 1997.
<PAGE>
This Proxy Statement/Prospectus constitutes both the proxy statement of Home
Beneficial relating to the solicitation of proxies by its Board of Directors
for use at a special meeting of Home Beneficial shareholders to be held on
April , 1997 to approve the Merger (the "Special Meeting") and the prospectus
of American General included as part of a Registration Statement filed with
the Securities and Exchange Commission (the "Commission") with respect to the
shares of American General Common Stock (including the attached American
General Preferred Share Purchase Rights) issuable in the Merger to holders of
Home Beneficial Common Stock.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
AMERICAN GENERAL OR HOME BENEFICIAL. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF
A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF AMERICAN
GENERAL OR HOME BENEFICIAL SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
HOWEVER, IF ANY MATERIAL CHANGE OCCURS DURING THE PERIOD THAT THIS PROXY
STATEMENT/PROSPECTUS IS REQUIRED TO BE DELIVERED, THIS PROXY
STATEMENT/PROSPECTUS WILL BE AMENDED AND SUPPLEMENTED ACCORDINGLY. ALL
INFORMATION REGARDING AMERICAN GENERAL AND ITS SUBSIDIARIES IN THIS PROXY
STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY AMERICAN GENERAL, AND ALL
INFORMATION REGARDING HOME BENEFICIAL AND ITS SUBSIDIARIES IN THIS PROXY
STATEMENT/PROSPECTUS HAS BEEN SUPPLIED BY HOME BENEFICIAL.
AVAILABLE INFORMATION
American General is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Commission. Home Beneficial is subject to the informational
requirements of Sections 13 and 15(d) of the Exchange Act and in accordance
therewith files reports and other information with the Commission. Copies of
such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the following Regional Offices of the Commission: Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a Web Site at http://www.sec.gov. that contains reports and
other information regarding registrants that file electronically with the
Commission. In addition, materials filed by American General may be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005 and The
Pacific Stock Exchange, Incorporated, 301 Pine Street, San Francisco,
California 94104, and materials filed by Home Beneficial may be inspected at
the offices of Nasdaq, Reports Section, 1735 K Street N.W., Washington, D.C.
20006.
American General has filed with the Commission a Registration Statement on
Form S-4 (together with any amendments or supplements thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of American General Common Stock
to be issued pursuant to the Merger Agreement. This Proxy Statement/Prospectus
does not contain all the information set forth in the Registration Statement,
certain portions of which have been omitted pursuant to the rules and
regulations of the Commission. Such additional information may be obtained
from the Commission's principal office in Washington, D.C. Statements
contained in this Proxy Statement/Prospectus as to the contents of any
contract or other document referred to herein are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by American General (File
No. 1-7981) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
(1) Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in the Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.
(2) Annual Report on Form 10-K for the fiscal year ended December 31,
1995.
(3) Proxy Statement relating to American General's 1996 annual meeting of
shareholders.
(4) Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 1996, June 30, 1996 and September 30, 1996.
(5) Current Reports on Form 8-K dated October 24, 1996, December 23,
1996, February 12, 1997 and February 21, 1997.
(6) The description of American General Common Stock contained in the
Registration Statement on Form 8-B dated June 25, 1980, as amended by
Amendment No. 1 on Form 8 dated December 22, 1983.
(7) The description of American General Preferred Share Purchase Rights
contained in the Registration Statement on Form 8-A dated July 31, 1989, as
amended by Amendment No. 1 on Form 8 dated August 7, 1989.
(8) All documents subsequently filed by American General pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the later of
the last possible date on which elections may be made as described herein
or the date of the final adjournment of the Special Meeting.
The following documents filed with the Commission by Home Beneficial (File
No. 0-5562) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended December 31,
1996 as amended by Form 10-K/A filed on March 17, 1997.
(2) All documents subsequently filed by Home Beneficial pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the later of
the last possible date on which elections may be made as described herein
or the date of the final adjournment of the Special Meeting.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document, which also is or
is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS RELATING
TO AMERICAN GENERAL AND HOME BENEFICIAL THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS
OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST OF SUCH PERSON. REQUESTS FOR SUCH DOCUMENTS RELATING
TO AMERICAN GENERAL SHOULD BE DIRECTED TO AMERICAN GENERAL CORPORATION, 2929
ALLEN PARKWAY, HOUSTON, TEXAS 77019-2155, ATTENTION: INVESTOR RELATIONS,
TELEPHONE NUMBER (713) 831-1949; AND REQUESTS FOR SUCH DOCUMENTS RELATING TO
HOME BENEFICIAL SHOULD BE DIRECTED TO HOME BENEFICIAL CORPORATION, 3901 WEST
BROAD STREET, RICHMOND, VIRGINIA 23230, ATTENTION: CORPORATE SECRETARY,
TELEPHONE NUMBER (804) 358-8431. TO ASSURE TIMELY DELIVERY OF SUCH DOCUMENTS,
REQUESTS FOR SUCH DOCUMENTS SHOULD BE MADE NO LATER THAN APRIL , 1997.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 3
SUMMARY OF PROXY STATEMENT/PROSPECTUS....................................... 6
The Companies.............................................................. 6
The Special Meeting........................................................ 7
The Proposed Merger........................................................ 8
SUMMARY HISTORICAL FINANCIAL DATA OF AMERICAN GENERAL....................... 17
SUMMARY HISTORICAL FINANCIAL DATA OF HOME BENEFICIAL........................ 18
CERTAIN INFORMATION REGARDING AMERICAN GENERAL.............................. 19
General.................................................................... 19
Recent Developments........................................................ 19
Recent Results............................................................. 20
Retirement Services........................................................ 20
Consumer Finance........................................................... 22
Life Insurance............................................................. 23
SELECTED HISTORICAL FINANCIAL DATA OF AMERICAN GENERAL...................... 26
CERTAIN INFORMATION REGARDING HOME BENEFICIAL............................... 28
General.................................................................... 28
Products and Services...................................................... 28
Recent Results............................................................. 28
SELECTED HISTORICAL FINANCIAL DATA OF HOME BENEFICIAL....................... 29
SELECTED PRO FORMA PER SHARE DATA........................................... 30
MARKET PRICE DATA AND DIVIDENDS............................................. 31
RISK FACTORS................................................................ 33
Determination of Exchange Ratio............................................ 33
Tax Consequences Involved in Making Elections.............................. 33
Fluctuations in American General's Consumer Finance Segment Earnings....... 33
Information Concerning Forward-Looking Statements.......................... 34
THE SPECIAL MEETING......................................................... 35
General.................................................................... 35
Record Date................................................................ 35
Quorum..................................................................... 35
Votes Required; Voting Rights.............................................. 35
Dissenters' Rights......................................................... 36
Solicitation of Proxies.................................................... 36
THE PROPOSED MERGER......................................................... 38
General.................................................................... 38
Closing; Effective Time.................................................... 38
</TABLE>
<TABLE>
<S> <C>
Conversion of Shares....................................................... 38
Fractional Shares.......................................................... 39
Shareholder Elections...................................................... 39
Certain Election Considerations............................................ 40
Procedures for Shareholder Elections....................................... 40
Allocation Rules........................................................... 41
Allocation of American General Common Stock Available for Election........ 41
Allocation of Cash Available for Election................................. 42
Allocation for Non-Electing Shares........................................ 42
Certain Allocation Adjustments............................................ 43
Illustration of Potential Effects of Allocation Procedures................ 43
Exchange of Certificates................................................... 44
Background of the Merger................................................... 45
Recommendation of the Home Beneficial Board and Home Beneficial's Reasons
for the Merger............................................................ 48
Opinion of Home Beneficial's Financial Advisor............................. 50
American General's Reasons for the Merger.................................. 54
Interests of Certain Persons in the Merger................................. 54
General................................................................... 54
Indemnification of Home Beneficial Directors and Officers................. 54
Supplemental Executive Retirement Plan.................................... 54
Severance Plan............................................................ 55
Plans for Home Beneficial after the Merger................................. 55
The Merger Agreement....................................................... 56
The Merger................................................................ 56
Directors and Officers.................................................... 56
Charter and Bylaws........................................................ 56
Representations and Warranties............................................ 56
Conduct of Business Pending the Merger.................................... 57
Filings and Other Actions................................................. 58
Other Acquisition Proposals; Certain Fees................................. 59
Expenses.................................................................. 60
Indemnification and Insurance............................................. 60
Conditions to the Merger.................................................. 60
Termination............................................................... 61
Accounting Treatment....................................................... 62
Regulatory Filings and Approvals........................................... 62
Approval by Insurance Regulators.......................................... 63
Antitrust................................................................. 63
State Anti-Takeover Statutes............................................... 63
Operations After the Merger................................................ 64
Certain Federal Income Tax Consequences of the Merger...................... 64
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Receipt of Only American General Common Stock............................ 65
Receipt of Cash and American General Common Stock........................ 65
Receipt of Only Cash..................................................... 66
Additional Considerations................................................ 66
Withholding.............................................................. 66
Restrictions on Sales of Shares by Affiliates............................. 67
Stock Exchange Listing.................................................... 67
Rights of Dissenting Shareholders......................................... 67
Home Beneficial Non-Voting Common Stock.................................. 67
Home Beneficial Voting Common Stock...................................... 67
COMPARISON OF SHAREHOLDER RIGHTS........................................... 70
Authorized Capital Stock.................................................. 70
Voting Rights............................................................. 70
Voting Trust Agreement.................................................... 71
American General Preferred Share Purchase Rights.......................... 72
Amendments to Charter and Bylaws.......................................... 74
Preemptive Rights; Cumulative Voting...................................... 74
Boards of Directors....................................................... 74
Removal of Directors...................................................... 75
Newly-Created Directorships and Vacancies................................. 75
Nomination of Directors................................................... 75
Special Meetings of the Shareholders...................................... 76
Shareholder Action by Written Consent..................................... 76
Vote Required for Mergers................................................. 76
Vote Required for Sales of Assets......................................... 77
Anti-Takeover Statutes.................................................... 77
Virginia Affiliated Transactions Statute................................. 78
Control Share Acquisition Statute........................................ 78
Supermajority Voting Provision............................................ 78
Dissenters' Rights........................................................ 79
Limitation on Director's Liability........................................ 79
Indemnification........................................................... 80
Dividends................................................................. 80
SECURITY OWNERSHIP......................................................... 82
Security Ownership of Certain Beneficial Owners of American General....... 82
Security Ownership of Certain Stockholders, Directors and Management of
Home Beneficial.......................................................... 83
Management and 5% Stockholders........................................... 83
Voting Trust............................................................. 84
LEGAL MATTERS.............................................................. 85
EXPERTS.................................................................... 85
</TABLE>
ANNEX A--Agreement and Plan of Merger, dated as of December 22, 1996, as
amended (Composite Conformed Copy)
ANNEX B--Opinion of Goldman, Sachs & Co.
ANNEX C--Excerpts from the Virginia Stock Corporation Act Relating to
Dissenters' Rights
5
<PAGE>
SUMMARY OF PROXY STATEMENT/PROSPECTUS
The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. It is not, and is not intended to be, complete in
itself. Reference is made to, and this summary is qualified in its entirety by,
the more detailed information contained elsewhere in this Proxy
Statement/Prospectus, including the Annexes hereto which are a part of this
Proxy Statement/Prospectus. Shareholders are encouraged to read carefully all
of the information contained in this Proxy Statement/Prospectus.
HOME BENEFICIAL SHAREHOLDERS SHOULD CONSIDER CAREFULLY THE INFORMATION SET
FORTH HEREIN UNDER THE HEADING "RISK FACTORS" IN ADDITION TO THE OTHER
INFORMATION PRESENTED HEREIN.
THE COMPANIES
American General
Corporation............ American General is one of the largest diversified
financial services organizations in the United
States, with assets of $66 billion and shareholders'
equity of $5.6 billion as of December 31, 1996.
Headquartered in Houston, Texas, it is a leading
provider of retirement services, consumer loans and
life insurance to nine million households. American
General was incorporated as a general business
corporation under the laws of the State of Texas in
1980 and is the successor to American General
Insurance Company, an insurance company incorporated
under the laws of the State of Texas in 1926. The
principal executive offices of American General are
located at 2929 Allen Parkway, Houston, Texas 77019-
2155, and its telephone number is (713) 522-1111.
See "CERTAIN INFORMATION REGARDING AMERICAN
GENERAL."
AGC Life Insurance
Company................ AGC Life is a life insurance company and a direct,
wholly owned subsidiary of American General. AGC
Life was organized under the laws of the State of
Missouri in 1982 by American General to serve as an
insurance holding company and is engaged in owning
insurance subsidiaries and issuing and reinsuring
insurance policies. The statutory home office of AGC
Life is located at 222 Monroe Street, Jefferson
City, Missouri 65101, and the mailing address of AGC
Life is American General Center, Nashville,
Tennessee 37250-0001. Its telephone number is (615)
749-1000. See "CERTAIN INFORMATION REGARDING
AMERICAN GENERAL."
Home Beneficial
Corporation............ Home Beneficial, with assets of $1.4 billion and
shareholders' equity of $548.6 million as of
December 31, 1996, is a holding company with one
principal operating subsidiary engaged in the sale
and servicing of life insurance products. Home
Beneficial's operations are concentrated in the mid-
Atlantic United States and the District of Columbia.
Home Beneficial was incorporated as a general
business corporation under the laws of the
Commonwealth of Virginia in 1970 to serve as the
parent holding company for Home Beneficial Life
Insurance Company ("HBLIC"), which was organized
under the laws of the Commonwealth of Virginia in
1899. The principal executive offices of Home
Beneficial are located at 3901 West Broad Street,
Richmond, Virginia 23230, and its telephone number
is (804) 358-8431. See "CERTAIN INFORMATION
REGARDING HOME BENEFICIAL."
6
<PAGE>
Trading Markets and
Market Price Data...... Shares of Home Beneficial Non-Voting Common Stock are
listed and traded on Nasdaq under the symbol
"HBENB." There is no established trading market for
the Home Beneficial Voting Common Stock. Shares of
American General Common Stock are listed and traded
on the NYSE, The Pacific Stock Exchange, the London
Stock Exchange, the Basel Stock Exchange, the Geneva
Stock Exchange and the Zurich Stock Exchange under
the symbol "AGC." The closing price of Home
Beneficial Non-Voting Common Stock on December 20,
1996, the last full trading day prior to the public
announcement of the Merger, as reported by Nasdaq,
was $29.25 per share. The closing price of American
General Common Stock on December 20, 1996, the last
full trading day prior to the public announcement of
the Merger, as reported by the NYSE Composite Tape,
was $40.25 per share. On March 14, 1997, the most
recent practicable date prior to the printing of
this Proxy Statement/Prospectus, the closing price
of Home Beneficial Non-Voting Common Stock, as
reported by Nasdaq, was $38.25 per share, and the
closing price of American General Common Stock, as
reported by the NYSE Composite Tape, was $42.375 per
share. See "MARKET PRICE DATA AND DIVIDENDS."
THE SPECIAL MEETING
Time, Date and Place.... The Special Meeting will be held on April , 1997 at
10:00 a.m., at the principal executive offices of
Home Beneficial, 3901 West Broad Street, Richmond,
Virginia 23230.
Purpose of the Special
Meeting................ Holders of Home Beneficial Voting Common Stock and
holders of Home Beneficial Non-Voting Common Stock
will consider and vote upon a proposal to approve
and adopt the Merger Agreement among Home
Beneficial, American General and AGC Life. Holders
of Home Beneficial Voting Common Stock will also
consider and vote upon all other matters as may
properly be brought before the Special Meeting. See
"THE SPECIAL MEETING"; "THE PROPOSED MERGER."
Record Date............. Only shareholders of record of Home Beneficial Common
Stock at the close of business on February 14, 1997
(the "Record Date") are entitled to notice of and to
vote at the Special Meeting. On such date, there
were outstanding 8,060,660 shares of Home Beneficial
Voting Common Stock and 8,992,910 shares of Home
Beneficial Non-Voting Common Stock, held by 60 and
575 holders of record, respectively. See "THE
SPECIAL MEETING--Record Date."
Voting Rights........... Each share of Home Beneficial Voting Common Stock is
entitled to one vote with respect to all matters
presented at the Special Meeting. Under Virginia
law, each share of Home Beneficial Non-Voting Common
Stock also is entitled to one vote with respect to
the approval and adoption of the Merger Agreement at
the Special Meeting. See "THE SPECIAL MEETING--Votes
Required; Voting Rights."
7
<PAGE>
Quorum; Votes
Required............... The presence, in person or by proxy, at the Special
Meeting of the holders of a majority of the
aggregate number of shares of Home Beneficial Voting
Common Stock and Home Beneficial Non-Voting Common
Stock outstanding will be necessary to constitute a
quorum. The affirmative vote of the holders of more
than two-thirds of the aggregate number of shares of
Home Beneficial Voting Common Stock and Home
Beneficial Non-Voting Common Stock entitled to vote
and voting together as a single voting group and the
affirmative vote of the holders of more than two-
thirds of the shares of Home Beneficial Voting
Common Stock voting as a separate voting group are
required to approve the Merger Agreement.
Security Ownership of
HomeBeneficial's
Management............. As of the Record Date, the directors and executive
officers of Home Beneficial (9 persons) owned
beneficially an aggregate of 1,606,707 shares of the
Home Beneficial Voting Common Stock (constituting
approximately 19.9% of the outstanding shares of
Home Beneficial Voting Common Stock) and an
aggregate of 171,946 shares of Home Beneficial Non-
Voting Common Stock (constituting approximately 1.9%
of the outstanding shares of Home Beneficial Non-
Voting Common Stock). See "SECURITY OWNERSHIP--
Security Ownership of Certain Stockholders,
Directors and Management of Home Beneficial." To the
knowledge of American General, no executive officer
or director of American General owns any shares of
Home Beneficial Common Stock.
Revocability of Proxy... Any Home Beneficial shareholder who executes and
returns a proxy may revoke such proxy at any time
before it is voted by (i) notifying in writing the
Corporate Secretary of Home Beneficial at 3901 West
Broad Street, Richmond, Virginia 23230, (ii)
granting a subsequent proxy, or (iii) appearing in
person and voting at the Special Meeting. Attendance
at the Special Meeting will not in and of itself
constitute revocation of a proxy. A holder of shares
of both Home Beneficial Voting Common Stock and Home
Beneficial Non-Voting Common Stock will find
enclosed a separate form of proxy for each class of
stock and should sign and return both proxies.
THE PROPOSED MERGER
General................. At the Effective Time (as defined below), pursuant to
the Merger Agreement, Home Beneficial will be merged
with and into AGC Life, which would continue in
existence as a wholly owned subsidiary of American
General.
Closing; Effective
Time................... The Merger will become effective upon the execution
and filing of Articles of Merger with the Virginia
State Corporation Commission in accordance with the
Virginia Stock Corporation Act (the "VSCA") and with
the Secretary of State of the State of Missouri in
accordance with The General and Business Corporation
Law of Missouri (the "MGBCL"), or at such later time
as may be designated in such filings
8
<PAGE>
as the effective time of the Merger (the "Effective
Time"). Such filings will be made as soon as
practicable after the date of the closing of the
Merger (the "Closing" or the "Closing Date"). The
Closing will take place on the date of or as soon as
practicable following the approval of the Merger
Agreement by Home Beneficial shareholders and the
satisfaction or waiver of the other conditions to
each party's obligation to consummate the Merger.
See "THE PROPOSED MERGER--Closing; Effective Time."
Conversion of Shares.... In the Merger, each share of Home Beneficial Common
Stock outstanding prior to the Effective Time (other
than dissenting shares) will be converted into,
exchanged for and represent the right to receive any
of the following: (i) a fraction (the Exchange
Ratio) of a share of American General Common Stock
(together with the attached American General
Preferred Share Purchase Rights), calculated by
dividing (x) $39.00 by (y) the average of the high
and low sales prices of American General Common
Stock as reported in The Wall Street Journal during
the ten consecutive NYSE Trading Days ending on (and
including) the fifth Trading Day prior to the
Effective Time of the Merger (the Trading Average);
and/or (ii) $39.00 in cash. If the Trading Average
of American General Common Stock falls below $35.00
per share and the Merger is consummated, the
Exchange Ratio becomes fixed and a maximum of 1.1143
shares of American General Common Stock would be
exchangeable for each share of Home Beneficial
Common Stock. Under the Merger Agreement, the Board
of Directors of Home Beneficial (the "Home
Beneficial Board") has the right, but not the
obligation, to terminate the Merger Agreement if the
Trading Average is below $35.00 per share. The
Merger Agreement does not provide for the Exchange
Ratio to become fixed at any Trading Average greater
than $35.00 and, therefore, there is no minimum
number (or fraction) of shares of American General
Common Stock that would be exchangeable for each
share of Home Beneficial Common Stock. For an
illustration of what the Exchange Ratio would be at
Trading Averages of $35, $40, $45 and $50 per share
of American General Common Stock, the potential
number of shares of American General Common Stock
exchangeable at such Exchange Ratios based on
certain assumptions and the percentage of American
General Common Stock outstanding after the Merger
represented by such shares, see "THE PROPOSED
MERGER--Conversion of Shares." For a discussion of
certain of the factors that may be taken into
account by the Home Beneficial Board in connection
with determining whether it would exercise its right
to terminate the Merger Agreement, see "THE PROPOSED
MERGER--The Merger Agreement--Termination."
Election Procedures;
Form of Election....... Subject to certain allocation procedures described
below, record holders of Home Beneficial Common
Stock as of the Record Date will be entitled to
elect to receive Stock Consideration and/or Cash
Consideration in exchange for their shares of Home
Beneficial Common Stock. All such elections are to
be made pursuant to a Form of
9
<PAGE>
Election/Letter of Transmittal ("Election Form"),
which is being mailed to holders of Home Beneficial
Common Stock as of the Record Date along with this
Proxy Statement/Prospectus. Shareholders who acquire
shares of Home Beneficial Common Stock after the
Record Date may obtain copies of the Election Form
from Corporate Investor Communications, Inc., the
Information Agent, by calling (800) 932-8478.
Allocation of Merger
Consideration.......... Shareholder elections as to the form of Merger
Consideration to be received will be subject to
certain limitations described below under "THE
PROPOSED MERGER--Procedures for Shareholder
Elections" and "--Allocation Rules." Generally, the
allocation provisions provide that (i) no more than
50% of the Home Beneficial Common Stock may be
converted into Cash Consideration and (ii) no more
than 75% of the Home Beneficial Common Stock may be
converted into Stock Consideration.
Election Deadline....... To be effective, an Election Form must be returned,
properly completed and accompanied by the stock
certificate(s) as to which the election is being
made (or by an appropriate guarantee of delivery) in
accordance with the instructions therein, to First
Chicago Trust Company of New York, as exchange agent
(the "Exchange Agent"), no later than 5:00 p.m., New
York City time on April , 1997 (unless extended,
the "Election Deadline"). Elections will be
revocable at any time prior to the Election
Deadline. Any extension of the Election Deadline
will be announced in a news release delivered to the
Dow Jones News Service. See "THE PROPOSED MERGER--
Procedures for Shareholder Elections" and "--
Allocation Rules."
Certain Election
Considerations......... In making an election for Stock Consideration and/or
Cash Consideration, Home Beneficial shareholders are
urged to consider the following factors: (i) because
the Exchange Ratio will be determined based on an
average market price of the American General Common
Stock during the ten Trading Days ending on and
including the fifth Trading Day prior to the
Effective Time, no assurance can be given that the
product of the Exchange Ratio and the market price
of a share of American General Common Stock will not
be higher or lower than $39.00 at the Effective Time
of the Merger; (ii) in the event that such average
market price during such ten Trading Day period
falls below $35.00 per share and the Closing occurs,
the Stock Consideration will be worth less than
$39.00 per share of Home Beneficial Common Stock;
and (iii) there may be materially different tax
consequences involved in electing to receive Stock
Consideration and/or Cash Consideration, as
described below under "THE PROPOSED MERGER--Certain
Federal Income Tax Consequences of the Merger." See
"THE PROPOSED MERGER--Opinion of Home Beneficial's
Financial Advisor" for a discussion of the valuation
of the American General Common Stock.
10
<PAGE>
NONE OF AMERICAN GENERAL, HOME BENEFICIAL, THE
AMERICAN GENERAL BOARD OF DIRECTORS (THE "AMERICAN
GENERAL BOARD") OR THE HOME BENEFICIAL BOARD MAKES
ANY RECOMMENDATION AS TO WHETHER SHAREHOLDERS SHOULD
ELECT TO RECEIVE STOCK CONSIDERATION AND/OR CASH
CONSIDERATION IN THE MERGER. EACH SHAREHOLDER MUST
MAKE HIS OR HER OWN DECISION WITH RESPECT TO ANY
SUCH ELECTION. AS A RESULT OF THE ALLOCATION
PROCEDURES DESCRIBED HEREIN, IF MORE THAN 50% OF THE
SHARES OF HOME BENEFICIAL COMMON STOCK ELECT CASH
CONSIDERATION OR MORE THAN 75% OF THE SHARES OF HOME
BENEFICIAL COMMON STOCK ELECT STOCK CONSIDERATION, A
HOME BENEFICIAL SHAREHOLDER MAY RECEIVE CASH
CONSIDERATION AND/OR STOCK CONSIDERATION IN AMOUNTS
THAT DIFFER FROM THE AMOUNTS SUCH SHAREHOLDER HAS
ELECTED WITH RESPECT TO ITS SHARES OF HOME
BENEFICIAL COMMON STOCK. SEE "THE PROPOSED MERGER--
ALLOCATION RULES--ILLUSTRATION OF POTENTIAL EFFECTS
OF ALLOCATION PROCEDURES." SHAREHOLDERS WHO DO NOT
RETURN A VALIDLY COMPLETED ELECTION FORM PRIOR TO
THE ELECTION DEADLINE AND SHAREHOLDERS WHO MAKE NO
ELECTION WILL RECEIVE (I) CASH CONSIDERATION, TO THE
EXTENT ELECTIONS FOR CASH CONSIDERATION (EACH, A
"CASH ELECTION") DO NOT EXCEED 50% OF THE
OUTSTANDING SHARES OF HOME BENEFICIAL COMMON STOCK,
(II) CASH CONSIDERATION, TO THE EXTENT ELECTIONS FOR
STOCK CONSIDERATION (EACH, A "STOCK ELECTION")
EXCEED 75% OF THE OUTSTANDING SHARES OF HOME
BENEFICIAL COMMON STOCK OR (III) STOCK
CONSIDERATION, TO THE EXTENT CASH ELECTIONS EXCEED
50% OF THE OUTSTANDING SHARES OF HOME BENEFICIAL
COMMON STOCK.
Fractional Shares....... Fractional shares of American General Common Stock
will not be issued in the Merger. Holders of Home
Beneficial Common Stock will be paid cash in lieu of
such fractional shares. See "THE PROPOSED MERGER--
Fractional Shares."
Recommendation of the
Home Beneficial Board
and Home Beneficial's
Reasons for the
Merger................. THE HOME BENEFICIAL BOARD BELIEVES THAT THE MERGER IS
FAIR TO AND IN THE BEST INTERESTS OF HOME BENEFICIAL
AND ITS SHAREHOLDERS AND RECOMMENDS THAT HOME
BENEFICIAL SHAREHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. At a meeting held
on December 22, 1996, the Home Beneficial Board
unanimously approved the Merger and resolved to
recommend that Home Beneficial shareholders vote for
approval and adoption of the Merger Agreement. The
Home Beneficial Board considered many factors in
reaching its conclusion to approve the Merger
Agreement and to recommendthat Home Beneficial
shareholders vote for approval and adoption of
the Merger Agreement. See "THE PROPOSED MERGER--
Recommendation of the Home Beneficial Board and Home
Beneficial's Reasons for the Merger."
11
<PAGE>
Approval by the
American General Board
and American General's
Reasons for the
Merger................. The American General Board has unanimously approved
the Merger Agreement and the issuance of the Stock
Consideration in connection with the Merger. The
Merger does not require the approval of the American
General shareholders. The American General Board
believes that the acquisition of Home Beneficial
will be an excellent geographic and strategic fit
with American General's existing life insurance
business. When the plan to consolidate Home
Beneficial's operations into those of American
General Life and Accident Insurance Company
("AGLA"), an American General subsidiary, is fully
implemented, American General expects a reduction in
annual operating expenses of approximately $20
million. There can be no assurance that any such
cost savings will be realized. See "RISK FACTORS--
Information Concerning Forward-Looking Statements"
and "THE PROPOSED MERGER--American General's Reasons
for the Merger."
Opinion of Home
Beneficial's Financial
Advisor................ Goldman Sachs & Co. ("Goldman Sachs") has delivered
its written opinion to the Home Beneficial Board to
the effect that, as of the date hereof, the Merger
Consideration to be received by the holders of
shares of Home Beneficial Common Stock ("Shares")
pursuant to the Merger Agreement is fair to holders
of Shares receiving such Merger Consideration.
The full text of the written opinion of Goldman
Sachs, which sets forth assumptions made, matters
considered and limitations on the review undertaken
in connection with the opinion, is attached hereto
as Annex B and is incorporated herein by reference.
Holders of Shares are urged to, and should, read
such opinion in its entirety. See "THE PROPOSED
MERGER--Opinion of Home Beneficial's Financial
Advisor."
Interests of Certain
Persons in the
Merger................. In considering the recommendation of the Home
Beneficial Board with respect to the Merger
Agreement, shareholders should be aware that certain
members of Home Beneficial's management and the Home
Beneficial Board have certain interests in the
Merger that are in addition to the interests of
shareholders of Home Beneficial generally. See
"SECURITY OWNERSHIP--Security Ownership of Certain
Stockholders, Directors and Management of Home
Beneficial." The Home Beneficial Board was aware of
these interests and considered them, among other
matters, in approving the Merger Agreement. See "THE
PROPOSED MERGER--Interests of Certain Persons in the
Merger."
Conditions to the
Merger................. The respective obligations of Home Beneficial, AGC
Life and American General to consummate the Merger
are subject to a number of conditions, including,
among others (i) the expiration or early termination
of the waiting period (and any extension thereof)
under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended
12
<PAGE>
(the "HSR Act") and no action having been instituted
by the Department of Justice (the "DOJ") or the
Federal Trade Commission (the "FTC"); (ii) the
absence of any statute, rule, regulation, executive
order, decree, ruling or preliminary or permanent
injunction prohibiting the consummation of the
Merger; (iii) the obtaining of certain non-
governmental third party consents and approvals;
(iv) the filing or obtaining of all permits,
authorizations, consents or approvals required by
any governmental entity, including as required by
the insurance laws and regulations of the
Commonwealth of Virginia and the State of Missouri;
(v) the approval of the Merger by Home Beneficial
shareholders; (vi) the Registration Statement having
become effective and not being the subject of any
stop order proceedings; (vii) the approval for
listing on the NYSE of the American General Common
Stock issuable in the Merger; (viii) the performance
in all material respects by the parties to the
Merger Agreement of their obligations under such
agreement and the parties' respective
representations and warranties being true and
correct in all material respects; and (ix) the
receipt by each of Home Beneficial and American
General of opinions from their respective counsel to
the effect that the Merger will be treated for
federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). Home
Beneficial and American General may determine to
modify or waive any condition to the consummation of
the Merger, provided that no modification or waiver
by Home Beneficial which requires shareholder
approval under applicable law, the Home Beneficial
Restated Articles of Incorporation (the "Home
Beneficial Articles") or the Home Beneficial bylaws
(the "Home Beneficial Bylaws") will occur unless
such approval is obtained. In the event a
modification or waiver by Home Beneficial is
contemplated which requires shareholder approval
under applicable law, a supplement to this Proxy
Statement/Prospectus will be distributed to
shareholders and proxies will be resolicited. See
"THE SPECIAL MEETING--Solicitation of Proxies."
Neither American General nor Home Beneficial
presently contemplates waiving or modifying any of
the foregoing conditions. See "THE PROPOSED MERGER--
The Merger Agreement--Conditions to the Merger."
Other Acquisition
Proposals.............. The Merger Agreement provides that, subject to
certain exceptions, prior to the consummation or
termination of the Merger Agreement, Home Beneficial
and its subsidiaries and representatives and agents
will not (i) solicit, initiate or encourage the
submission of an Acquisition Proposal (defined
below) or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any
information with respect to, or agree to or endorse,
or take any other action to facilitate any
Acquisition Proposal or any inquiries or the making
of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal, in
each case subject to certain exceptions necessary to
comply with the Home Beneficial Board's fiduciary
obligations to the Home Beneficial shareholders. An
"Acquisition Proposal" means any tender or exchange
offer involving the capital
13
<PAGE>
stock of Home Beneficial or its subsidiaries, any
proposal or offer for a merger, consolidation, or
other business combination involving Home Beneficial
or any of its subsidiaries, any proposal or offer to
acquire in any manner a substantial equity interest
in, or a substantial portion of the business or
assets of, Home Beneficial or any of its
subsidiaries, any proposal or offer with respect to
any recapitalization or restructuring of Home
Beneficial or any of its subsidiaries, or any
proposal or offer with respect to any other
transaction similar to any of the foregoing with
respect to Home Beneficial or any of its
subsidiaries, other than the Merger. See "THE
PROPOSED MERGER--The Merger Agreement--Other
Acquisition Proposals."
Termination............. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time,
(i) by mutual consent of Home Beneficial and
American General; (ii) by either the American
General Board or the Home Beneficial Board, if (a)
the Merger Agreement and the Merger shall fail to be
approved by the Home Beneficial shareholders at the
Special Meeting, (b) the Merger shall not have been
consummated on or before June 30, 1997, provided
that under certain circumstances such date may be
extended to no later than September 30, 1997, (c) a
court of competent jurisdiction or agency or
commission shall have issued an order, decree or
ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement
and such order, decree, ruling or other action shall
have become final and non-appealable, provided that
certain conditions are satisfied, or (d) by the Home
Beneficial Board exercising its rights under the
Merger Agreement to take action with respect to an
Acquisition Proposal as necessary to comply with its
fiduciary duties to Home Beneficial shareholders;
(iii) by the Home Beneficial Board if, (a) prior to
the Special Meeting, American General issues capital
stock or other securities (other than in the
ordinary course) requiring shareholder approval and
Home Beneficial advises American General within 10
Trading Days of receipt of notice of such event of
its decision to terminate the Merger Agreement, or
(b) the Trading Average of American General Common
Stock falls below $35.00; and (iv) by the American
General Board if there has been a breach by Home
Beneficial of any representation or warranty that
would be reasonably likely to have a material
adverse effect on Home Beneficial or there has been
a material breach by Home Beneficial of a covenant
or agreement that is not curable or, if curable, not
cured within 30 days after written notice of such
breach. See "THE PROPOSED MERGER--The Merger
Agreement--Termination."
Termination Fees........ In the event the Home Beneficial Board (i) withdraws
or modifies, or proposes to withdraw or modify, in a
manner adverse to American General or AGC Life, its
approval or recommendation of the Merger Agreement
or the Merger, (ii) approves or recommends, or
proposes to approve or recommend, any Acquisition
Proposal, (iii) enters into any agreement with
respect to any Acquisition Proposal or (iv)
terminates
14
<PAGE>
the Merger Agreement when an Acquisition Proposal is
outstanding, Home Beneficial has agreed to pay to
American General a termination fee of $20 million.
Regulatory Filings and
Approvals.............. The consummation of the Merger is subject to certain
regulatory approvals, including approval by the
Virginia State Corporation Commission and the
Missouri Department of Insurance (for which
notification of approval was received on February
28, 1997 for Virginia and February 25, 1997 for
Missouri) and the expiration or early termination of
the relevant waiting period under the HSR Act (for
which notice of early termination was received on
January 27, 1997). In connection with the Merger, on
February 28, 1997, HBLIC received approval from the
Bureau of Insurance of the Virginia State
Corporation Commission (the "Virginia Bureau of
Insurance") to pay a dividend to Home Beneficial of
up to $300 million, which dividend has been declared
by the board of directors of HBLIC and will be paid
on the date immediately prior to the Closing Date,
assuming the satisfaction or waiver of all the
conditions to the Merger that are capable of being
satisfied prior to the Closing Date. See "THE
PROPOSED MERGER--Regulatory Filings and Approvals."
Accounting Treatment.... The Merger will be treated as a purchase by American
General for accounting and financial reporting
purposes. See "THE PROPOSED MERGER--Accounting
Treatment."
Certain Federal Income
Tax Consequences of
the Merger............. Consummation of the Merger is conditioned upon the
receipt of opinions from Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel to American
General, and from Debevoise & Plimpton, special
counsel to Home Beneficial, substantially to the
effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a)
of the Code so that, for federal income tax
purposes, the Merger will not result in the
recognition of gain or loss by American General, AGC
Life, Home Beneficial or, except to the extent they
receive any cash in the Merger, the shareholders of
Home Beneficial (including holders of voting
trust certificates evidencing beneficial ownership
of Home Beneficial Voting Common Stock). Such
opinions will be based upon facts, representations
by management of the companies and assumptions set
forth in such opinions. No rulings have been or will
be requested from the Internal Revenue Service with
respect to any tax matters relating to the Merger.
Shareholders are urged to consult their tax advisors
as to the tax consequences of the Merger to them
under federal, state, local or any other applicable
law. See "THE PROPOSED MERGER--Certain Federal
Income Tax Consequences of the Merger."
Dissenters' Rights...... Holders of Home Beneficial Non-Voting Common Stock do
not have dissenters' rights in connection with the
Merger. However, holders of Home Beneficial Voting
Common Stock (and holders of voting trust
certificates evidencing beneficial ownership of such
shares) who comply with the requirements of Article
15 of Section 13.1 of the VSCA may
15
<PAGE>
dissent from the Merger and obtain payment for the
fair value of their Home Beneficial Voting Common
Stock. Excerpts from the VSCA relating to
dissenters' rights are attached to this Proxy
Statement/Prospectus as Annex C. See "THE PROPOSED
MERGER--Rights of Dissenting Shareholders."
Comparison of
Shareholder Rights..... The rights of Home Beneficial shareholders are
currently governed by the VSCA, the Home Beneficial
Articles and the Home Beneficial Bylaws. Upon
consummation of the Merger, Home Beneficial
shareholders who receive American General Common
Stock in the Merger will become shareholders of
American General, and their rights will be governed
by the Texas Business Corporation Act ("TBCA"), the
American General Articles of Incorporation (the
"American General Articles") and American General's
bylaws (the "American General Bylaws"). For a
summary of the material differences between the
rights of Home Beneficial shareholders and the
rights of American General shareholders, see
"COMPARISON OF SHAREHOLDER RIGHTS."
Certain Considerations.. In addition to the other information contained in
this Proxy Statement/ Prospectus, the shareholders
of Home Beneficial should consider the factors set
forth under "RISK FACTORS" and under "THE PROPOSED
MERGER--Certain Election Considerations" in deciding
whether to approve the Merger and in making their
election as to which form of Merger Consideration
they elect to receive in the Merger.
16
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF AMERICAN GENERAL
The following table presents summary historical financial data of American
General and its consolidated subsidiaries for the periods indicated. The
historical financial data as of and for the five years ended December 31, 1996
was derived from American General's audited consolidated financial statements.
The data should be read in conjunction with the consolidated financial
statements, related notes and other financial information of American General
included or incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Total revenues(a)....... $6,887 $ 6,495 $ 4,841 $ 4,829 $ 4,602
Income before income tax
expense................ 964(b) 850(c) 802(d) 602(e) 775
Net income.............. 577(b) 545(c) 513(d) 204(f) 533
PER SHARE DATA
Net income.............. $2.75(b) $ 2.64(c) $ 2.45(d) $ .94(f) $ 2.45
Common dividend......... 1.30 1.24 1.16 1.10 1.04
Book value (at end of
period)(g)............. 27.38 28.42 17.05 23.96 21.33
High market price....... 41.75 39.13 30.50 36.50 29.38
Low market price........ 32.88 27.50 24.88 26.25 20.13
Closing market price.... 40.88 34.88 28.25 28.63 28.50
Average shares outstand-
ing.................... 213.6 208.9 209.4 216.6 217.7
COVERAGE RATIOS
Earnings to fixed
charges................ 2.46 2.18 2.40 2.13 2.37
Earnings to combined
fixed charges and
preferred dividends.... 2.23 2.09 2.40 2.13 2.37
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Assets(g)............... $66,254 $ 61,153 $ 46,295 $ 43,982 $ 39,742
Corporate debt.......... 1,533 1,723 1,836 1,686 1,987
Redeemable equity....... 1,227 729 47 -- --
Shareholders'
equity(g).............. 5,621 5,801 3,457 5,137 4,616
</TABLE>
- --------
(a) Includes realized investment gains (losses) as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
$ 67 $ 12 $ (172) $ 8 $ 18
</TABLE>
(b) Includes $145 million ($93 million aftertax) related to loss on assets held
for sale.
(c) Includes $216 million ($140 million aftertax) adjustment to allowance for
finance receivable losses.
(d) Includes $172 million ($114 million aftertax) of realized investment
losses primarily from capital gains offset program.
(e) Includes $300 million write-down of goodwill.
(f) Includes effect of $300 million write-down of goodwill and $46 million
aftertax charge for cumulative effect of accounting changes.
(g) Includes effect of Statement of Financial Accounting Standards ("SFAS")
115, "Accounting for Certain Investments in Debt and Equity Securities".
To facilitate analysis of period-to-period balances, the effect of SFAS
115, which was adopted at December 31, 1993, on reported balances was as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995 1994 1993
------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
Increase (decrease) in assets...................... $ 843 $ 1,655 $ (986) $ 1,040
Increase (decrease) in shareholders' equity........ 542 1,069 (950) 676
Increase (decrease) in book value per share........ 2.60 5.18 (4.65) 3.14
</TABLE>
17
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF HOME BENEFICIAL
The following table presents summary historical financial data of Home
Beneficial and its consolidated subsidiaries for the periods indicated. The
historical financial data as of and for the five fiscal years ended December
31, 1996 was derived from Home Beneficial's audited consolidated financial
statements. The data should be read in conjunction with the consolidated
financial statements, related notes and other financial information of Home
Beneficial included or incorporated by reference in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Total revenues(a)....... $ 213.9 $ 202.1 $ 200.9 $ 213.2 $ 211.5
Income before income tax
expense................ 64.2 58.1 55.6 63.9 68.7
Net income.............. 42.4 37.9 36.2 42.6 17.0(b)
PER SHARE DATA
Net income.............. $ 2.46 $ 2.16 $ 2.04 $ 2.35 $ .92(b)
Common dividend......... .87 .83 .795 .775 .76
Book value (at end of
period)(c)............. 32.17 31.08 26.58 26.38 24.85
High market price....... 38.50 25.50 23.00 26.50 29.00
Low market price........ 23.50 19.00 19.50 21.50 21.00
Closing market price.... 37.875 24.00 20.00 23.00 25.75
Average shares
outstanding............ 17.2 17.5 17.8 18.1 18.6
<CAPTION>
DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Assets(c)............... $1,423.5 $1,403.4 $1,288.8 $1,280.2 $1,248.4
Liabilities............. 874.9 861.3 822.0 806.9 788.0
Stockholders'
equity(c).............. 548.6 542.1 466.8 473.3 460.4
- --------
(a) Includes realized investment gains as follows:
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
$ 6.9 -- -- $ 10.8 $ 2.9
</TABLE>
(b) Includes $29.4 million ($1.58 per share) after-tax charge for cumulative
effect of change in accounting principle as a result of the adoption of
SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions".
(c) Includes the effect of the adoption of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities" as of January 1, 1994. The
effect of adopting SFAS 115 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Increase (decrease) in
assets.................. $ 28.4 $ 51.7 $ (26.3)
Increase (decrease) in
stockholders' equity.... 18.5 33.6 (17.0)
Increase (decrease) in
book value per share.... 1.08 1.93 (.97)
</TABLE>
18
<PAGE>
CERTAIN INFORMATION REGARDING AMERICAN GENERAL
GENERAL
American General, with assets of $66 billion and shareholders' equity of
$5.6 billion as of December 31, 1996, is the parent company of one of the
nation's largest diversified financial services organizations. American
General provides financial services directly to consumers, emphasizing
personal service and frequent customer contact. American General's operating
subsidiaries are leading providers of retirement services, consumer loans and
life insurance. The principal executive offices of American General are
located at 2929 Allen Parkway, Houston, Texas 77019-2155, and its telephone
number is (713) 522-1111.
The American General Common Stock is listed and traded on the NYSE, Pacific
Stock Exchange, London Stock Exchange, Basel Stock Exchange, Geneva Stock
Exchange and Zurich Stock Exchange under the symbol "AGC." First Chicago Trust
Company of New York is the transfer agent, registrar and dividend disbursing
agent for the American General Common Stock. Its address is P.O. Box 2500,
Jersey City, New Jersey 07303-2500, and its telephone number is (800) 519-
3111.
RECENT DEVELOPMENTS
On February 13, 1997, American General announced a definitive agreement
under which USLIFE Corporation ("USLIFE") will merge into American General in
a transaction valued at $1.8 billion. The combined companies will have assets
of $74 billion and market capitalization in excess of $10 billion. American
General expects to issue a minimum of 39.3 million and a maximum of 46.5
million shares of American General Common Stock to USLIFE shareholders in the
merger. Under the agreement, USLIFE shareholders will exchange each share of
USLIFE common stock for American General Common Stock valued at $49. The
exchange ratio will be based on an average trading price of American General
Common Stock prior to closing, subject to a minimum of approximately 1.09
shares and a maximum of approximately 1.29 shares of American General Common
Stock.
USLIFE provides financial services, primarily life insurance and annuities,
to over one million customers nationwide. Ultimate annual expense savings from
the USLIFE merger are expected to be approximately $50 million. There can be
no assurance that the USLIFE merger will be completed, or if completed,
whether any such expense savings will be realized. The transaction, which is
subject to approval by American General and USLIFE shareholders and to
requisite regulatory approvals, is expected to close by June 30, 1997. The
USLIFE merger will be accounted for using the pooling of interests method.
Following the disclosure of the USLIFE merger, Duff & Phelps Credit Rating
Co. ("Duff & Phelps"), Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings Services ("S&P") and other rating agencies announced that the
ratings of certain securities of American General and certain of its
subsidiaries, and the claims-paying ability ratings of American General's
principal life insurance subsidiaries, would be reviewed for possible
downgrade or other action. Duff & Phelps subsequently reduced its rating of
American General's preferred securities, such as its capital securities, from
"A+" to "A". S&P has indicated that it expects to reduce its rating of certain
securities of American General and certain of its subsidiaries by one notch,
upon completion of the USLIFE merger. As of the date of this Proxy
Statement/Prospectus, Moody's has not downgraded American General's ratings
but they remain under review by Moody's. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating organization.
In March 1997, American General Institutional Capital B, a subsidiary trust
of American General sold in an unregistered offering $500 million of 8 1/8%
Capital Securities, Series B, which securities are subject to mandatory
redemption in 2046.
19
<PAGE>
RECENT RESULTS
American General reported consolidated net income for the three years ended
December 31, 1996 as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN MILLIONS,
EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Net income.................................................... $ 577 $ 545 $ 513
Net income per share.......................................... 2.75 2.64 2.45
</TABLE>
The following significant items affected year-to-year comparability of net
income:
. Results include the operations of Independent Insurance Group, Inc.
("Independent Life"), acquired February 29, 1996, and The Franklin Life
Insurance Company ("Franklin Life"), acquired January 31, 1995, from the
date of their respective acquisitions.
. Net income for 1996 reflected an aftertax charge of $93 million ($.44 per
share) resulting from American General's decision to offer for sale $875
million of non-strategic, underperforming finance receivable portfolios.
. Net income for 1995 included a fourth quarter aftertax charge of $140
million ($.67 per share) for an increase in the allowance for finance
receivable losses.
. In 1994, net income reflected net realized investment losses of $114
million ($.55 per share), primarily from American General's capital gains
offset program.
American General reports the results of its business operations in three
segments: Retirement Services, Consumer Finance, and Life Insurance. To
facilitate meaningful period-to-period comparisons, earnings of each business
segment include earnings from its business operations and earnings on that
amount of equity considered necessary to support its business, and exclude net
realized investment gains (losses) and other non-recurring items. Segment
earnings were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Retirement Services................................... $225 $204 $187
Consumer Finance...................................... 128 85 245
Life Insurance........................................ 397 348 257
------- ------- -------
Segment earnings.................................... 750 637 689
Loss on assets held for sale........................ (93) -- --
------- ------- -------
Total............................................. $657 $637 $689
======= ======= =======
RETIREMENT SERVICES
The Retirement Services segment offers retirement products and planning
services to employees of educational, health care, public sector, and other
not-for-profit organizations. Asset growth through sales and deposits, as well
as management of the investment spread and operating expenses, contribute to
the segment's profitability. Segment results were as follows:
<CAPTION>
1996 1995 1994
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Segment earnings...................................... $ 225 $ 204 $ 187
Assets
Investments......................................... 22,146 21,933 18,260
Separate Accounts................................... 7,134 4,541 2,507
Sales................................................. 1,324 1,112 891
Deposits
Fixed............................................... 1,587 1,720 1,657
Variable............................................ 1,310 835 573
</TABLE>
20
<PAGE>
Earnings. Segment earnings increased 10% in 1996 and 9% in 1995, reflecting
continued strong growth in assets. Asset growth, excluding the fair value
adjustment on securities, was 13% in 1996 and 17% in 1995 as a result of
strong sales and deposits in each of the segment's primary markets.
Sales and Deposits. Sales increased 19% in 1996 and 25% in 1995 primarily
due to the 1994 introduction of the Portfolio Director product series, which
provides numerous variable investment options. Variable deposits increased 57%
in 1996 and 46% during 1995, as a result of policyholders' demand for equity
investments due to the strong performance of the stock market. During 1996,
the segment responded to this demand by introducing Portfolio Director(R)2,
which offers 20 investment options including 12 publicly traded mutual funds.
The segment's Separate Account assets, which relate to variable account
options, increased $2.6 billion in 1996 and $2.0 billion in 1995.
Investment Spread. Investment results and crediting rates on fixed accounts
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Net investment income.................................. $1,652 $1,597 $1,492
Investment yield....................................... 8.03% 8.24% 8.37%
Average crediting rate................................. 6.23 6.41 6.57
Investment spread...................................... 1.80 1.83 1.80
</TABLE>
Net investment income, the primary component of segment revenues, increased
in 1996 and 1995 as a result of growth in invested assets. Investment income
increased despite declines of 21 and 13 basis points in investment yields on
fixed accounts in 1996 and 1995, respectively. In response to these declining
yields, the segment adjusted the rates credited to policyholders. Through such
management of crediting rates, the segment has maintained a stable investment
spread for the past three years.
Surrenders. The rate of policyholder surrenders of fixed accounts was 5.3%
of average reserves in 1996, compared to 4.3% in 1995 and 4.9% in 1994. The
1996 increase was due to competition from mutual funds and other financial
institutions, and the trend toward lower fixed interest crediting rates.
Operating Expenses. The ratio of operating expenses to average assets
improved to .52% in 1996, compared to .61% in 1995 and .57% in 1994. Operating
expenses for 1995 were adversely affected by a pretax charge of $19 million
(.08% of average assets) for estimated state guaranty fund assessments
resulting from past industry insolvencies.
Outlook For 1997. Through the development of new products and enhanced
technology, the Retirement Services Segment is well positioned to meet the
retirement services needs of the expanding middle-aged market. Segment
earnings are expected to increase primarily through expanded sales, asset
growth, and management of the investment spread.
21
<PAGE>
CONSUMER FINANCE
The Consumer Finance segment provides consumer and home equity loans and
other credit-related products. Segment results are influenced by the amount
and mix of finance receivables, credit quality, borrowing cost, and operating
expenses. In 1996, this segment focused on its action program to improve
credit quality. Segment results were as follow:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Segment earnings........................................ $ 128* $ 85 $ 245
Finance receivables..................................... 7,625 8,410 7,920
Yield on finance receivables............................ 17.9% 18.0% 17.6%
Borrowing cost.......................................... 6.9 7.0 6.6
Spread.................................................. 11.0 11.0 11.0
</TABLE>
- --------
* Excludes $93 million loss on assets held for sale.
Earnings. The decline in credit quality beginning in 1995 and management's
related actions have caused segment earnings to fluctuate over the past two
years. In the fourth quarter of 1995, American General increased the allowance
for losses on finance receivables by $216 million ($140 million after tax).
Efforts to improve credit quality were also reflected in 1996 earnings through
higher operating expenses and lower finance charge revenues.
Action Program. As a result of the segment's strategy in prior years of
emphasizing higher-yielding receivables, which are characterized by higher
credit risk, delinquencies and charge-offs increased to higher than
anticipated levels beginning in the third quarter of 1995. Management
responded by initiating an action program to improve credit quality, beginning
with a comprehensive review of the consumer finance operations in the fourth
quarter of 1995. This review, which consisted of extensive internal analysis,
together with credit loss development projections supplied by outside credit
consultants, indicated a need for an increase in the allowance for losses. As
a result, the segment increased the allowance for losses on finance
receivables by $216 million ($140 million after tax) in the fourth quarter of
1995.
Other components of the action program included raising underwriting
standards, increasing collection efforts, and rebalancing the finance
receivable portfolio to de-emphasize certain higher-risk portfolios and
increase the proportion of real estate-secured receivables. During 1996, the
segment purchased five portfolios of real estate-secured receivables totaling
$754 million, which increased the proportion of these receivables to 49% at
December 31, 1996, compared to 35% and 34% at year-end 1995 and 1994,
respectively.
Assets Held For Sale. To increase its focus on core branch operations,
American General decided in the fourth quarter of 1996 to offer for sale two
non-strategic, underperforming finance receivable portfolios totaling $875
million. These portfolios consisted of $520 million of bank credit card
receivables and $355 million of private label loans issued in prior years to
finance purchases of home satellite dishes. At December 31, 1996, these
receivables and an associated allowance of $70 million were reclassified to
assets held for sale.
American General has hired an outside advisor to market the portfolios.
Based on negotiations with prospective purchasers subsequent to year end,
American General determined that an aftertax write-down of $93 million was
necessary to reduce the carrying amount of the assets held for sale to net
realizable value, after considering related expenses.
Spread. Yield on finance receivables declined 17 basis points in 1996,
compared to an increase of 44 basis points during 1995. The 1996 decline
reflects the increased proportion of real estate-secured loans and higher
levels of non-accrual delinquent loans. Although the yield declined in 1996,
the spread between yield and borrowing cost has remained constant at 11% for
the past three years.
22
<PAGE>
Credit Quality Data. The allowance for finance receivable losses,
delinquencies, and charge-offs were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(IN MILLIONS,
EXCEPT RATIO
DATA)
<S> <C> <C> <C>
Allowance for finance receivable losses.................... $ 395 $ 492 $ 226
% of finance receivables................................. 5.18% 5.85% 2.86%
Delinquencies.............................................. $ 317 $ 386 $ 252
% of finance receivables................................. 3.83% 4.13% 2.89%
Charge-offs................................................ $ 444 $ 308 $ 172
% of average finance receivables......................... 5.47% 3.77% 2.45%
</TABLE>
The 1996 decreases in the allowance and delinquency ratios were primarily
due to the increased proportion of real estate-secured receivables and the
reclassification of certain receivables to assets held for sale. Excluding the
portfolios held for sale, the delinquency ratios were 3.88% and 2.81% at year-
end 1995 and 1994, respectively.
The increases in charge-offs in 1996 and 1995 were primarily attributable to
non-real estate-secured loans and the portfolios currently held for sale.
Excluding the portfolios held for sale, the charge-off ratios were 4.72%,
3.26% and 2.19% in 1996, 1995 and 1994, respectively.
Operating Expenses. Operating expenses increased 10% in 1996 and 26% in
1995. As a percentage of average finance receivables, operating expenses were
6.1%, 5.4%, and 5.0% in 1996, 1995, and 1994, respectively. The increase in
operating expenses reflected lower 1996 deferrals of loan origination costs,
increased collection efforts associated with higher levels of delinquent
receivables, and increased costs related to branch office growth that occurred
in 1995 and 1994.
Outlook For 1997. Management believes that the planned sale of the non-
strategic, underperforming portfolios combined with the ongoing credit quality
improvement program will result in improved earnings. However, adverse changes
in credit fundamentals within the consumer finance industry, including the
national trend of increasing numbers of personal bankruptcies, could
negatively impact expected future results in the Consumer Finance segment.
LIFE INSURANCE
The Life Insurance segment provides traditional and interest-sensitive life
insurance and annuities to three defined markets, based on household income
and product needs. American General Life Insurance Company ("AGL") serves the
estate planning needs of middle- and upper-income households. Franklin Life
provides individual life insurance to middle-income households. AGLA
concentrates on meeting the insurance needs of families with modest incomes.
Recent acquisitions of companies that strategically fit the segment's existing
markets and distribution systems have contributed to growth and profitability.
Segment profitability is a function of premiums, investment spread, mortality,
and operating expenses. Segment results were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Segment earnings....................................... $ 397 $ 348 $ 257
Assets................................................. 25,078 23,592 14,156
Premiums and other considerations...................... 1,687 1,486 999
Net investment income.................................. 1,533 1,401 902
Insurance and annuity benefits......................... 1,805 1,722 990
</TABLE>
Earnings. Earnings increased primarily due to the acquisitions of
Independent Life on February 29, 1996 and Franklin Life on January 31, 1995.
These acquisitions contributed $146 million and $98 million to segment
earnings in 1996 and 1995, respectively. The acquisitions were the primary
reason for the increases in each of the line items in the table above.
23
<PAGE>
Premiums and Deposits. Premiums, sales, and deposits were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ----
(IN MILLIONS)
<S> <C> <C> <C>
Life insurance
Premiums................................................... $1,291 $1,127 $679
Sales...................................................... 310 347 258
Deposits................................................... 682 649 547
Annuities
Sales...................................................... 366 592 601
Deposits................................................... 434 661 598
</TABLE>
Life insurance premiums increased by 15% in 1996 and 66% in 1995 due to new
sales and the acquisitions of Independent Life and Franklin Life. Life
insurance sales were lower in 1996 due to competitive factors and disruptions
resulting from changes in field administration systems. The 1995 increase in
life insurance sales primarily related to the acquisition of Franklin Life.
Deposits for interest-sensitive life insurance increased 5% in 1996, compared
to an increase of 19% in 1995, which included high amounts of optional
deposits in excess of target premium on such contracts.
Annuity sales were lower in 1996 due to market conditions that would not
support the segment's profitability objectives. Deposits for annuities
decreased 34% in 1996 compared to an increase of 10% in 1995. The 1996
decrease reflected increased competition from other equity-based investments.
During 1996, the segment launched initiatives to increase sales, such as
strategic alliances with brokerage firms and mutual fund companies and the
development of new insurance and annuity products.
Investment Spread. Net investment income increased in 1996 and 1995 as a
result of the Independent Life and Franklin Life acquisitions. The average
investment yield, interest crediting rate, and investment spread for the
primary operating companies were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
AGL
Investment yield............................................ 7.79% 7.99% 8.05%
Average crediting rate...................................... 5.90 5.98 5.91
Investment spread........................................... 1.89 2.01 2.14
AGLA
Investment yield............................................ 8.36% 8.78% 8.97%
Average crediting rate...................................... 6.62 6.82 6.78
Investment spread........................................... 1.74 1.96 2.19
Franklin Life
Investment yield............................................ 8.53% 8.57%
Average crediting rate...................................... 6.46 6.65
Investment spread........................................... 2.07 1.92
</TABLE>
Investment spread has declined but is still within product pricing
assumptions. Some large blocks of traditional in force business have crediting
rates that cannot be adjusted when investment yields fluctuate. At December
31, 1996, approximately 61% of the segment's insurance and annuity liabilities
were subject to interest crediting rate adjustments.
Mortality. Death claims, included in insurance and annuity benefits,
increased 10% in 1996 and 24% in 1995 due to the acquisitions of Independent
Life and Franklin Life. Death claims per $1,000 of in force were $4.20, $3.98,
and $4.66 in 1996, 1995, and 1994, respectively. Overall, mortality experience
was within pricing assumptions.
24
<PAGE>
Operating Expenses. The ratio of operating expenses to direct premiums and
deposits was 16.6%, 13.3%, and 13.8% in 1996, 1995, and 1994, respectively.
The increase in 1996 resulted from lower annuity deposits and Independent
Life's higher overall expense ratio, which does not completely reflect
anticipated savings from consolidation of operations. Lower sales resulted in
a reduction in the deferral of acquisition costs in 1996 compared to 1995.
Outlook For 1997. American General plans to complete the acquisitions of
USLIFE and Home Beneficial and the integration of Independent Life's
operations in 1997. Additionally, product and distribution system initiatives
started during 1996 and the planned introduction of new variable and indexed
products in 1997 are expected to improve sales. Together, these activities are
expected to result in increased segment earnings.
Litigation. American General is party to various lawsuits and proceedings
arising in the ordinary course of business. Many of these lawsuits and
proceedings arise in jurisdictions, such as Alabama, that permit damage awards
disproportionate to the actual economic damages incurred. Based upon
information presently available, American General believes that the total
amounts that will ultimately be paid, if any, arising from these lawsuits and
proceedings will have no material adverse effect on American General's
consolidated results of operations and financial position. However, it should
be noted that the frequency of large damage awards, including large punitive
damage awards, that bear little or no relation to actual economic damages
incurred by plaintiffs in jurisdictions like Alabama continues to increase and
creates the potential for an unpredictable judgment in any given suit.
Two of American General's subsidiaries, Franklin Life and AGL, are
defendants in lawsuits filed as purported class actions asserting claims
related to sales practices of certain life insurance products. Because these
cases are in the early stages of litigation, it is premature to address their
materiality. The claims are being defended vigorously by the subsidiaries.
25
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF AMERICAN GENERAL
The following table presents selected historical financial data of American
General and its consolidated subsidiaries for the periods indicated. The
historical financial data as of and for the five years ended December 31, 1996
was derived from American General's audited consolidated financial statements.
The data should be read in conjunction with the consolidated financial
statements, related notes and other financial information of American General
included or incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Premiums and other
considerations......... $ 1,968 $1,753 $1,210 $1,252 $1,213
Net investment income... 3,271 3,095 2,493 2,437 2,327
Finance charges......... 1,450 1,492 1,248 1,083 994
Realized investment
gains (losses)......... 67 12 (172)(a) 8 18
Equity in earnings of
investee............... 40 43 -- -- --
Other................... 91 100 62 49 50
-------- -------- -------- -------- --------
Total revenues....... 6,887 6,495 4,841 4,829 4,602
-------- -------- -------- -------- --------
Insurance and annuity
benefits............... 3,156 3,047 2,224 2,311 2,198
Operating costs and
expenses............... 1,589 1,350 1,075 970 986
Provision for finance
receivable losses...... 417 574(b) 214 163 135
Write-down of goodwill.. -- -- -- 300(c) --
Loss on assets held for
sale................... 145(d) -- -- -- --
Interest expense
Corporate.............. 123 156 110 108 116
Consumer Finance....... 493 518 416 375 392
-------- -------- -------- -------- --------
Total benefits and
expenses............ 5,923 5,645 4,039 4,227 3,827
-------- -------- -------- -------- --------
Income before income tax
expense................ 964 850 802 602 775
Income tax expense...... 347 286 289 352 242
-------- -------- -------- -------- --------
Income before net
dividends on preferred
securities of
subsidiaries........... 617 564 513 250 533
Net dividends on
preferred securities of
subsidiaries .......... 40 19 -- -- --
-------- -------- -------- -------- --------
Income before cumulative
effect of accounting
changes................ 577 545 513 250 533
Cumulative effect of
accounting changes..... -- -- -- (46) --
-------- -------- -------- -------- --------
Net income............. $ 577(e) $ 545(f) $ 513 $ 204(g) $ 533
======== ======== ======== ======== ========
PER SHARE DATA
Net income.............. $ 2.75(e) $ 2.64(f) $ 2.45 $ .94(g) $ 2.45
Common dividend......... 1.30 1.24 1.16 1.10 1.04
Book value (at end of
period)(h)............. 27.38 28.42 17.05 23.96 21.33
Average shares
outstanding............ 213.6 208.9 209.4 216.6 217.7
COVERAGE RATIOS
Earnings to fixed
charges................ 2.46 2.18 2.40 2.13 2.37
Earnings to combined
fixed charges and
preferred dividends.... 2.23 2.09 2.40 2.13 2.37
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Assets(h).................... $66,254 $61,153 $46,295 $43,982 $39,742
Invested assets(h)........... 44,270 42,904 30,697 31,876 27,814
Finance receivables, net..... 7,230 7,918 7,694 6,390 6,038
Debt (including short-term)
Corporate................... 1,533 1,723 1,836 1,686 1,987
Consumer Finance............ 7,630 7,470 7,090 5,843 5,484
Total liabilities (excluding
debt)....................... 50,243 45,430 33,865 31,316 27,655
Redeemable equity............ 1,227 729 47 -- --
Shareholders' equity(h)...... 5,621 5,801 3,457 5,137 4,616
- --------
(a) Results primarily from capital gains offset program. See "Management's
Discussion and Analysis" within American General's Annual Report on Form
10-K for the year ended December 31, 1994, incorporated herein by
reference.
(b) See "Management's Discussion and Analysis" within American General's
Annual Report on Form 10-K for the year ended December 31, 1995,
incorporated herein by reference.
(c) See "Management's Discussion and Analysis" and Note 1.7 of Item 8, both
within American General's Annual Report on Form 10-K for the year ended
December 31, 1994, incorporated herein by reference.
(d) See "CERTAIN INFORMATION REGARDING AMERICAN GENERAL--Consumer Finance"
herein and Note 4.4 to Financial Statements within American General's
Current Report on Form 8-K dated February 21, 1997, incorporated herein by
reference.
(e) Includes effect of $93 million aftertax loss on assets held for sale (see
Note (d) above).
(f) Includes effect of $140 million aftertax adjustment to the allowance for
finance receivable losses (see Note (b) above).
(g) Includes effect of $300 million write-down of goodwill (see Note (c)
above) and $46 million aftertax charge for cumulative effect of accounting
changes.
(h) Includes the effect of SFAS 115. To facilitate analysis of period-to-
period balances, the effect of SFAS 115, which was adopted at December 31,
1993, on reported balances was as follows:
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995 1994 1993
------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
Increase (decrease) in as-
sets........................ $ 843 $ 1,655 $ (986) $ 1,040
Increase (decrease) in in-
vested assets............... 1,296 2,623 (1,387) 1,594
Increase (decrease) in
shareholders' equity........ 542 1,069 (950) 676
Increase (decrease) in book
value per share............. 2.60 5.18 (4.65) 3.14
</TABLE>
See "Management's Discussion and Analysis" within American General's Current
Report on Form 8-K dated February 21, 1997, incorporated herein by
reference.
27
<PAGE>
CERTAIN INFORMATION REGARDING HOME BENEFICIAL
GENERAL
Home Beneficial, with assets of approximately $1.4 billion and shareholders'
equity of approximately $548.6 million as of December 31, 1996, is the parent
holding company for HBLIC. HBLIC, which is the principal subsidiary of Home
Beneficial, is engaged in the life, accident and health insurance business.
HBLIC sells group life and substantially all forms of ordinary insurance
including universal life, whole life, term and annuities, together with
accidental death and disability riders. HBLIC's business is concentrated in
six mid-Atlantic states and the District of Columbia. Home Beneficial was
incorporated as a general business corporation under the laws of the
Commonwealth of Virginia in 1970 in order to serve as the parent holding
company for HBLIC which was organized under the laws of the Commonwealth of
Virginia in 1899. The principal executive offices of Home Beneficial are
located at 3901 West Broad Street, Richmond, Virginia 23230, and its telephone
number is (804) 358-8431.
Home Beneficial Non-Voting Common Stock is listed and traded on Nasdaq under
the symbol "HBENB." There is no established trading market for Home Beneficial
Voting Common Stock. First Union National Bank of North Carolina is the
transfer agent for Home Beneficial. Its address is 230 South Tryon Street,
Charlotte, North Carolina 28288-1154, and its telephone number is (704) 374-
6531.
PRODUCTS AND SERVICES
The insurance coverages offered by Home Beneficial through HBLIC are
generally typical of those offered by others in the industry. Life and
accident and health insurance products are marketed by HBLIC through its own
sales force of approximately 1,150 full time personnel. For the year ended
December 31, 1996, life insurance premiums comprised approximately 97% of
total premiums. The primary marketing area for HBLIC's insurance operations is
the region comprised of six mid-Atlantic states (Delaware, Maryland, North
Carolina, Tennessee, Virginia and West Virginia) and the District of Columbia,
with approximately 66% of premium income being derived from Virginia and
Tennessee.
RECENT RESULTS
Home Beneficial's individual life insurance sales for 1996 increased 6% over
1995 results, which were up 18%. Premiums increased 3% compared to decreases
of approximately 2% and 1% for 1995 and 1994, respectively. The growth in
premiums for 1996 resulted principally from increased individual premiums.
Premium growth for 1995 was affected by a decline in premiums recognized from
participation in a large group reinsurance contract. Premium growth for 1994
was affected by reduced individual life insurance sales.
Home Beneficial's net investment income, excluding realized investment gains
and losses increased 1.5% compared to an increase of 3.6% for 1995 and a
decrease of 1.4% for 1994. The improvement for both 1996 and 1995 resulted
from growth in invested assets. Net investment income for 1994 was affected by
the downward trend experienced in portfolio interest rates during 1993. In
addition, Home Beneficial used $34 million of internally generated funds
between April 1991 and July 1994 to repurchase 1.5 million shares of Home
Beneficial Common Stock. During 1996, Home Beneficial used $9.3 million of
internally generated funds to repurchase 0.4 million shares of Home Beneficial
Common Stock. Realized investment gains amounted to $6.9 million for 1996.
Benefits and claims increased 2% for both 1996 and 1995 compared to a decrease
of 4% for 1994. Mortality costs contributed to changes in each of the years.
Amortization of deferred policy acquisition costs for 1996 increased as a
result of increased individual policy terminations. General expenses increased
9% for 1996 compared to a 9% decrease for 1995. The decline for 1995 was
attributable to increased policy acquisition cost deferral related to
increased individual sales and improvement in employee health plan cost
provisions. The increase for 1996 resulted primarily from increases in
employee health plan cost provisions.
28
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF HOME BENEFICIAL
The following table presents selected historical financial data of Home
Beneficial and its consolidated subsidiaries for the periods indicated. The
financial data for the five fiscal years ended December 31, 1996 was derived
from the audited consolidated financial statements of Home Beneficial for such
periods. The data should be read in conjunction with the consolidated
financial statements, related notes and other financial information of Home
Beneficial incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Premiums................ $ 117.6 $ 114.0 $ 116.1 $ 116.4 $ 117.9
Net investment income,
excluding realized
investment gains....... 89.4 88.1 84.8 86.0 90.7
Realized investment
gains.................. 6.9 -- -- 10.8 2.9
-------- -------- -------- -------- --------
Total revenues......... 213.9 202.1 200.9 213.2 211.5
Costs and expenses...... 149.7 144.0 145.3 149.3 142.8
-------- -------- -------- -------- --------
Income before income tax
expense................ 64.2 58.1 55.6 63.9 68.7
Income tax expense...... 21.8 20.2 19.4 21.3 22.3
-------- -------- -------- -------- --------
Income before cumulative
effect of change in
accounting principle... 42.4 37.9 36.2 42.6 46.4
Cumulative effect of
change in accounting
principle.............. -- -- -- -- (29.4)
-------- -------- -------- -------- --------
Net income............. $ 42.4 $ 37.9 $ 36.2 $ 42.6 $ 17.0
======== ======== ======== ======== ========
PER SHARE DATA
Net income.............. $ 2.46 $ 2.16 $ 2.04 $ 2.35 $ .92(a)
Common dividend......... .87 .83 .795 .775 .76
Book value (at end of
period)(b)............. 32.17 31.08 26.58 26.38 24.85
<CAPTION>
DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Assets(b)............... $1,423.5 $1,403.4 $1,288.8 $1,280.2 $1,248.4
Investments(b).......... 1,285.3 1,266.8 1,146.7 1,143.9 1,116.4
Liabilities............. 874.9 861.3 822.0 806.9 788.0
Stockholders'
equity(b).............. 548.6 542.1 466.8 473.3 460.4
- --------
(a) Includes $29.4 million ($1.58 per share) aftertax charge for cumulative
effect of change in accounting principle as a result of the adoption of
SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions".
(b) Includes the effect of the adoption of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities" as of January 1, 1994. The
effect of adopting SFAS 115 is as follows:
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995 1994
-------- -------- --------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Increase (decrease) in
assets................. $ 28.4 $ 51.7 $ (26.3)
Increase (decrease) in
stockholders' equity... 18.5 33.6 (17.0)
Increase (decrease) in
book value per share... 1.08 1.93 (.97)
</TABLE>
29
<PAGE>
SELECTED PRO FORMA PER SHARE DATA
The following table presents the consolidated net income, book value and
common dividend per share of American General and Home Beneficial on a
historical basis, on a pro forma basis for American General and on an
equivalent pro forma basis for Home Beneficial. The historical data for
American General and Home Beneficial was derived from their respective audited
financial statements. The American General Pro Forma A data for the year ended
December 31, 1996 is based on American General's historical results, adjusted
to reflect the impact of the acquisition of Independent Life on February 29,
1996, as if the transaction had occurred on January 1, 1996, giving effect to
the acquisition under the purchase method of accounting for business
combinations. The American General Pro Forma B data was derived by combining
the American General Pro Forma A data with Home Beneficial's historical
financial information, giving effect to the Merger under the purchase method
of accounting, as if it had occurred on January 1, 1996. Equivalent pro forma
information for Home Beneficial, with respect to holders of Home Beneficial
Common Stock who receive American General Common Stock, is presented on an
equivalent share basis, which reflects American General's Pro Forma B amounts
multiplied by an assumed exchange ratio of .9204 per share which is based on
an assumed Trading Average of $42.375, the closing price of American General
Common Stock on March 14, 1997.
The information set forth below should be read in conjunction with the
respective audited consolidated financial statements and related notes of
American General and Home Beneficial incorporated herein by reference.
Additional pro forma financial information, including a balance sheet and
income statement, are not presented herein since Home Beneficial does not fall
within the definition of a "significant business" as defined in Rule 1-02 of
Regulation S-X.
<TABLE>
<CAPTION>
AMERICAN GENERAL HOME BENEFICIAL
---------------------------------- ---------------------
PRO FORMA A PRO FORMA B EQUIVALENT
HISTORICAL (A), (C) (B), (C) HISTORICAL PRO FORMA
---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1996:
PER SHARE DATA
Net income............. $ 2.75 $ 2.76 $ 2.84 $ 2.46 $ 2.61
Book value (at end of
period)............... 27.38 27.38 27.93 32.17 25.71
Common dividend........ 1.30 1.30 1.30 .87 1.20
</TABLE>
- --------
(a) The unaudited consolidated Pro Forma A results for the year ended December
31, 1996 are based on American General's historical results, adjusted to
reflect the impact of the acquisition of Independent Life on February 29,
1996, as if the transaction had occurred on January 1, 1996, using the
purchase method of accounting. Pro forma book value per share is
calculated as if the transaction had occurred on the balance sheet date.
Pro forma common dividend per share assumes dividends are consistent with
American General's historical dividend level.
(b) The unaudited consolidated Pro Forma B results for the year ended December
31, 1996 are based on American General's Pro Forma A results (see Note (a)
above), adjusted to reflect the impact of the Merger as if it had occurred
on January 1, 1996. Pro forma book value per share is calculated as if the
Merger had occurred on the balance sheet date. Pro forma common dividend
per share assumes dividends are consistent with American General's
historical dividend level. For purposes of calculating American General's
Pro Forma B data, the acquisition price for Home Beneficial of
approximately $665 million is assumed to be financed 50% by issuance of
American General Common Stock and 50% in cash. Alternative mixes of stock
and cash consideration are possible under the terms of the Merger
Agreement; however, the use of alternative mixes would not materially
impact the pro forma results.
Pro Forma B net income per share differs from Pro Forma A net income per
share by the following adjustments:
<TABLE>
<S> <C>
Pro Forma A net income per share..................................... $ 2.76
Home Beneficial's historical net income.............................. .19
Adjustments
Reduction in investment income resulting from HBLIC dividend....... (.10)
Purchase accounting reserve changes................................ .09
Increase in common shares outstanding.............................. (.09)
Other.............................................................. (.01)
------
Pro Forma B net income per share..................................... $ 2.84
======
</TABLE>
Pro Forma B book value per share differs from Pro Forma A book value per
share by the following adjustments:
<TABLE>
<S> <C>
Pro Forma A book value per share..................................... $27.38
Home Beneficial's historical equity.................................. 2.54
Adjustments
Reduction in investments resulting from HBLIC dividend............. (1.42)
Net purchase accounting valuation adjustments...................... .61
Increase in short-term debt........................................ (.16)
Increase in common shares outstanding.............................. (.98)
Other.............................................................. (.04)
------
Pro Forma B book value per share..................................... $27.93
======
</TABLE>
(c) The unaudited pro forma information is not necessarily indicative of
American General's consolidated financial data had the acquisitions been
consummated at the assumed dates (see Notes (a) and (b) above), nor is it
necessarily indicative of American General's consolidated financial data
for any future period.
30
<PAGE>
MARKET PRICE DATA AND DIVIDENDS
American General Common Stock is listed and traded on the NYSE, the Pacific
Stock Exchange, the London Stock Exchange, the Basel Stock Exchange, the
Geneva Stock Exchange and the Zurich Stock Exchange under the symbol "AGC."
Home Beneficial Non-Voting Common Stock is listed and traded on Nasdaq under
the symbol "HBENB." Home Beneficial Voting Common Stock is closely held, and
there is no public market in which such shares are traded. The table below
sets forth, for the quarters indicated, (i) the quarterly per share cash
dividends paid (a) to holders of American General Common Stock and (b) to
holders of Home Beneficial Common Stock, (ii) the high and low sales prices of
American General Common Stock as reported by the NYSE Composite Tape and (iii)
the high and low sales prices of Home Beneficial Non-Voting Common Stock, as
reported by Nasdaq.
<TABLE>
<CAPTION>
DIVIDEND
DECLARED PRICE OF HOME DIVIDEND
PRICE OF AMERICAN PER BENEFICIAL DECLARED
GENERAL COMMON AMERICAN NON-VOTING PER HOME
STOCK GENERAL COMMON STOCK BENEFICIAL
----------------- COMMON ------------- COMMON
HIGH LOW SHARE HIGH LOW SHARE
----------------- -------- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1992
First Quarter............ $ 22.38 $ 20.13 $ .26 $27.75 $21.00 $ .19
Second Quarter........... 24.63 20.50 .26 25.00 22.50 .19
Third Quarter............ 25.19 23.69 .26 29.00 22.50 .19
Fourth Quarter........... 29.38 23.63 .26 26.25 21.50 .19
Year ended December 31,
1993
First Quarter............ $ 32.88 $ 27.31 $ .275 $26.50 $24.00 $ .19
Second Quarter........... 33.25 27.75 .275 25.00 23.50 .195
Third Quarter............ 36.50 30.13 .275 26.25 23.00 .195
Fourth Quarter........... 34.75 26.25 .275 24.00 21.50 .195
Year ended December 31,
1994
First Quarter............ $ 29.63 $ 25.50 $ .29 $23.00 $20.00 $ .195
Second Quarter........... 29.38 24.88 .29 21.50 20.00 .20
Third Quarter............ 30.50 26.88 .29 22.00 20.25 .20
Fourth Quarter........... 28.88 25.63 .29 21.50 19.50 .20
Year ended December 31,
1995
First Quarter............ $ 33.25 $ 27.50 $ .31 $20.75 $19.00 $ .20
Second Quarter........... 35.50 31.13 .31 21.75 19.00 .21
Third Quarter............ 38.88 33.63 .31 24.00 20.25 .21
Fourth Quarter........... 39.13 31.00 .31 25.50 22.75 .21
Year ended December 31,
1996
First Quarter............ $ 37.88 $ 33.25 $ .325 $26.25 $23.50 $ .21
Second Quarter........... 37.63 32.88 .325 26.50 24.75 .22
Third Quarter............ 38.75 34.00 .325 27.75 24.50 .22
Fourth Quarter........... 41.75 35.75 .325 38.50 24.75 .22
Year ended December 31,
1997
First Quarter (through
Mar. 14, 1997).......... $42.88 $42.31 $ .35 $39.00 $37.75 $ .22
</TABLE>
The closing prices of Home Beneficial Non-Voting Common Stock and American
General Common Stock on December 20, 1996, the last full trading day prior to
the public announcement of the Merger were $29.25 per share, as reported by
Nasdaq, and $40.25 per share, as reported by the NYSE Composite Tape,
respectively. The closing prices of Home Beneficial Non-Voting Common Stock
and American General Common Stock on March 14, 1997, the most recent
practicable date prior to the printing of this Proxy Statement/Prospectus,
were $38.25 per share, as reported by Nasdaq, and $42.375 per share, as
reported by the NYSE Composite Tape, respectively. SHAREHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS.
31
<PAGE>
American General has paid cash dividends on American General Common Stock in
each year since 1929. The regular dividend has been increased in each of the
last 22 years. On February 6, 1997, American General declared a quarterly cash
dividend on American General Common Stock of $.35 per share for the first
quarter of 1997 (an annual rate of $1.40 per share), payable on March 1, 1997
to holders of record as of February 17, 1997. Future payment of dividends on
the American General Common Stock will depend on earnings, financial
condition, capital requirements and other relevant factors. Because American
General is a holding company, its capacity to pay dividends is limited by the
ability of its subsidiaries to pay dividends. Since many of American General's
subsidiaries are insurance companies subject to regulatory control by various
state insurance departments, the ability of such subsidiaries to pay dividends
to American General without prior regulatory approval is limited by applicable
laws and regulations. Furthermore, certain non-insurance subsidiaries are
restricted in their ability to make dividend payments by long-term debt
agreements. At December 31, 1996, the amount of dividends available to
American General from subsidiaries during 1997 not limited by such
restrictions was $703 million.
Home Beneficial and its predecessors have paid cash dividends on Home
Beneficial Common Stock in each year since 1906. The regular dividend has been
increased in each of the last 33 years. Home Beneficial currently pays cash
dividends quarterly at a rate of $.22 per share. On January 21, 1997, Home
Beneficial declared its dividend for the first quarter of 1997 payable on
March 10, 1997 to holders of record as of February 20, 1997. Future payment of
dividends on the Home Beneficial Common Stock, in the event that the Merger is
not consummated, will depend on earnings, financial condition, capital
requirements and other relevant factors. Because Home Beneficial is a holding
company, its capacity to pay dividends is limited by the ability of its
subsidiaries to pay dividends. Since Home Beneficial's principal subsidiary is
an insurance company subject to regulatory control by various state insurance
departments, the ability of such subsidiary to pay dividends to Home
Beneficial without prior regulatory approval is limited by applicable laws and
regulations. In connection with the Merger, HBLIC has applied to the Virginia
Bureau of Insurance and has received approval to pay a dividend of up to $300
million to Home Beneficial, which dividend has been declared by the board of
directors of HBLIC and will be paid on the date immediately prior to the
Closing Date, assuming the satisfaction or waiver of all the conditions to the
Merger that are capable of being satisfied prior to the Closing Date. See "THE
PROPOSED MERGER--Regulatory Filings and Approvals."
On February 14, 1997, there were 27,584 holders of record of American
General Common Stock. On February 14, 1997, there were approximately 60 and
575 holders of record of Home Beneficial Voting Common Stock and Home
Beneficial Non-Voting Common Stock, respectively.
32
<PAGE>
RISK FACTORS
In addition to the other information contained in this Proxy
Statement/Prospectus, the shareholders of Home Beneficial should consider the
following factors in deciding whether to approve the Merger and in making
their election as to which form of Merger Consideration they elect to receive
in the Merger.
DETERMINATION OF EXCHANGE RATIO
The Exchange Ratio will be determined based on an average of the high and
low sales prices of American General Common Stock as reported in The Wall
Street Journal during the ten consecutive Trading Days ending on and including
the fifth Trading Day prior to the Effective Time. Therefore, no assurance can
be given that at the Effective Time the product of the Exchange Ratio and the
market value of a share of American General Common Stock will not be higher or
lower than $39.00.
In addition, because under the terms of the Merger Agreement the Average
Purchaser Price used to calculate the Exchange Ratio cannot be less than
$35.00 per share, the Exchange Ratio is in effect subject to a cap of 1.1143
shares of American General Common Stock for each share of Home Beneficial
Common Stock received in the Merger. If the Trading Average of American
General Common Stock during the ten Trading Days ending on and including the
fifth Trading Day prior to the Effective Time is less than $35.00, the Home
Beneficial Board has the right, but not the obligation, to terminate the
Merger Agreement. In such event, if the Merger Agreement is not terminated and
the Merger is consummated, the Stock Consideration could be worth less than
$39.00 per share of Home Beneficial Common Stock. For a discussion of certain
of the factors that may be taken into account by the Home Beneficial Board in
connection with determining whether it would exercise its right to terminate
the Merger Agreement, see "THE PROPOSED MERGER--The Merger Agreement--
Termination."
As a result of the allocation procedures set forth in the Merger Agreement
as described herein, if Cash Elections are made with regard to more than 50%
of the shares of Home Beneficial Common Stock or Stock Elections are made with
respect to more than 75% of the shares of Home Beneficial Common Stock, Home
Beneficial shareholders may receive Cash Consideration and/or Stock
Consideration in amounts that differ from the amounts such shareholders elect
to receive. See "THE PROPOSED MERGER--Allocation Rules."
TAX CONSEQUENCES INVOLVED IN MAKING ELECTIONS
There may be materially different tax consequences involved in electing to
receive Cash Consideration and/or Stock Consideration. Moreover, Home
Beneficial shareholders may receive Cash Consideration and/or Stock
Consideration in amounts that differ from the amounts such shareholders elect.
See "THE PROPOSED MERGER--Allocation Rules." The tax consequences of the
receipt of Merger Consideration to a holder of Home Beneficial Common Stock
will be determined by the amount of Cash Consideration and/or Stock
Consideration actually received by the holder. If a holder receives Cash
Consideration and/or Stock Consideration in amounts that differ from the
amounts elected, the holder may have different tax consequences than would
arise if the holder received the Cash Consideration and/or Stock Consideration
actually elected. See "THE PROPOSED MERGER--Certain Federal Income Tax
Consequences of the Merger."
FLUCTUATIONS IN AMERICAN GENERAL'S CONSUMER FINANCE SEGMENT EARNINGS
Earnings in American General's Consumer Finance segment, which provides
consumer and home equity loans and other credit-related products, fluctuated
in 1995 and 1996 due to a decline in credit quality and management's related
actions. In 1995, the segment increased the allowance for finance receivable
losses in response to an unanticipated increase in delinquencies and charge-
offs. In 1996, in conjunction with an action program to improve credit
quality, the segment decided to offer for sale two non-strategic,
underperforming finance receivable portfolios totaling $875 million and
recorded them at net realizable value. American General management believes
that the planned sale of those portfolios, combined with the ongoing credit
quality improvement program, will result in improved earnings. However,
adverse changes in credit fundamentals within the consumer finance industry,
including the national trend of increasing numbers of personal bankruptcies,
could negatively impact expected future results in the Consumer Finance
segment. See "CERTAIN INFORMATION REGARDING AMERICAN GENERAL--Consumer
Finance."
33
<PAGE>
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this Proxy Statement/Prospectus and
in documents incorporated herein by reference may be considered forward-
looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act, including, without limitation, (i) the
statements in "CERTAIN INFORMATION REGARDING AMERICAN GENERAL--Recent
Developments" regarding the prospective acquisition of USLIFE, including but
not limited to American General's belief that the USLIFE merger, if completed,
will result in annual expense savings of approximately $50 million, (ii) the
statements made in "CERTAIN INFORMATION REGARDING AMERICAN GENERAL--Life
Insurance" relating to American General's belief that amounts payable in
respect of lawsuits and proceedings will likely have no material adverse
effect on American General, (iii) the statements made under "CERTAIN
INFORMATION REGARDING AMERICAN GENERAL--Retirement Services," "--Consumer
Finance," and "--Life Insurance" relating to the outlook for 1997 in each of
those segments, (iv) the statements in "SELECTED PRO FORMA PER SHARE DATA,"
(v) the statements in "THE PROPOSED MERGER--Recommendation of the Home
Beneficial Board and Home Beneficial's Reasons for the Merger," "--Opinion of
Home Beneficial's Financial Advisor," "--American General's Reasons for the
Merger" and "--Plans for Home Beneficial After the Merger" concerning
(a) prospective considerations the Home Beneficial Board took into account in
arriving at its recommendation in favor of the Merger, (b) American General
management's belief with respect to the geographic and strategic fit of Home
Beneficial with American General's existing life insurance business and
(c) American General's plans for consolidating Home Beneficial's operations
into those of AGLA and American General management's expectation concerning
the time to complete such consolidation, and (vi) variations in the foregoing
statements whenever they appear in this Proxy Statement/Prospectus and the
documents incorporated herein by reference. Forward-looking statements are
made based upon either American General or Home Beneficial management's
current expectations and beliefs concerning future developments and their
potential effects upon American General or Home Beneficial, as the case may
be. There can be no assurance that future developments affecting either
American General or Home Beneficial will be those anticipated by their
respective managements. Actual results may differ materially from those
included in the forward-looking statements. These forward-looking statements
involve risks and uncertainties including, but not limited to, the following:
changes in general economic conditions, including the performance of financial
markets, interest rates, and the level of personal bankruptcies; customer
responsiveness to both new products and distribution channels; competitive,
regulatory, or tax changes that affect the cost of or demand for American
General's products; adverse litigation results; failure to achieve American
General's anticipated levels of expense savings from cost-saving initiatives;
and difficulties in combining the operations of American General with the
operations of each of Home Beneficial and USLIFE, respectively, and the
potential loss of key personnel in connection therewith. American General's
Consumer Finance segment's future results also could be adversely affected if
finance receivable volume is lower than anticipated or if, despite American
General's initiatives to improve credit quality, finance receivable
delinquencies and net charge-offs increase or remain at current levels for a
longer period than anticipated by management. Failure to dispose of assets
held for sale for at least net realizable value could also adversely affect
this segment's future results.
While Home Beneficial and American General each reassess material trends and
uncertainties affecting each company's financial condition and results of
operations, in connection with its preparation of management's discussion and
analysis of financial condition and results of operations contained in each
company's quarterly and annual reports, neither Home Beneficial nor American
General intends to review or revise any particular forward-looking statement
referenced in this Proxy Statement/Prospectus or incorporated herein by
reference in light of future events.
The information referred to above should be considered by Home Beneficial
shareholders when reviewing any forward-looking statements contained in this
Proxy Statement/Prospectus, in any documents incorporated herein by reference,
in any of Home Beneficial's or American General's public filings or press
releases or in any oral statements made by either Home Beneficial or American
General or any of their respective officers or other persons acting on their
behalf. By means of this cautionary note, each of Home Beneficial and American
General intends to avail itself of the safe harbor from liability with respect
to forward-looking statements that is provided by Section 27A and Section 21E
referred to above.
34
<PAGE>
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of Home
Beneficial Common Stock in connection with the solicitation of proxies by the
Home Beneficial Board for use at the Special Meeting to be held at the
principal executive offices of Home Beneficial, 3901 West Broad Street,
Richmond, Virginia 23230, at 10:00 a.m. on April , 1997, and any adjournment
or postponement thereof.
At the Special Meeting, the holders of Home Beneficial Voting Common Stock
and the holders of Home Beneficial Non-Voting Common Stock eligible to vote,
will be asked to consider and vote upon a proposal to approve and adopt the
Merger Agreement. Holders of Home Beneficial Voting Common Stock will also be
asked to consider and vote upon such other business as may properly come
before the Special Meeting.
RECORD DATE
The Home Beneficial Board has fixed the close of business on February 14,
1997 as the Record Date for the determination of holders of Home Beneficial
Common Stock entitled to vote at the Special Meeting. Under Virginia law, all
shareholders are entitled to notice of the Special Meeting. Only holders of
Home Beneficial Common Stock as of the Record Date will be entitled to vote at
the Special Meeting. On the Record Date, there were 8,060,660 shares
outstanding of Home Beneficial Voting Common Stock and 8,992,910 shares
outstanding of Home Beneficial Non-Voting Common Stock or 17,053,570 shares of
Home Beneficial Common Stock in the aggregate.
QUORUM
The presence, in person or by proxy, at the Special Meeting of the holders
of a majority of the aggregate number of shares of Home Beneficial Voting and
Non-Voting Common Stock, outstanding and entitled to vote as a single voting
group at the Special Meeting, will be necessary to constitute a quorum.
VOTES REQUIRED; VOTING RIGHTS
The affirmative vote of the holders of more than two-thirds of the aggregate
number of shares of Home Beneficial Voting Common Stock and Home Beneficial
Non-Voting Common Stock entitled to vote and voting together as a single
voting group and the affirmative vote of the holders of more than two-thirds
of the shares of Home Beneficial Voting Common Stock voting as a separate
voting group are required to approve the Merger Agreement. Each share of Home
Beneficial Voting Common Stock is entitled to one vote with respect to all
matters presented at the Special Meeting. Under Virginia law, each share of
Home Beneficial Non-Voting Common Stock also is entitled to one vote with
respect to the approval and adoption of the Merger Agreement at the Special
Meeting.
If fewer shares of Home Beneficial Common Stock are voted in favor of the
Merger than the number required for approval, it is expected that the Special
Meeting will be postponed or adjourned for the purpose of allowing additional
time for soliciting and obtaining additional proxies or votes. If a motion to
adjourn the meeting is presented for the purpose of allowing additional time
to solicit proxies, shareholders providing proxies that are not voted against
the Merger will be deemed to have conferred discretionary authority to vote
for such adjournment, and shares voted against the Merger shall be voted
against a motion to adjourn such meeting. See "--Solicitation of Proxies."
Under the rules of the National Association of Securities Dealers, brokers
who hold shares in "street name" have the authority to vote on certain matters
when they do not receive instructions from beneficial owners. However, this
authority does not extend to voting on the Merger Agreement. Accordingly,
brokers who do not receive instructions will not be entitled to vote on the
Merger Agreement. In tabulating the vote on the Merger, abstentions and broker
non-votes will have the same effect as votes against the Merger.
35
<PAGE>
As of the Record Date, the directors and executive officers of Home
Beneficial (9 persons) owned beneficially an aggregate of 1,606,707 shares of
the Home Beneficial Voting Common Stock (constituting approximately 19.9% of
the outstanding shares of Home Beneficial Voting Common Stock) and an
aggregate 171,946 shares of Home Beneficial Non-Voting Stock (constituting
approximately 1.9% of the outstanding shares of Home Beneficial Non-Voting
Common Stock). See "SECURITY OWNERSHIP--Security Ownership of Certain
Stockholders, Directors and Management of Home Beneficial." To the knowledge
of American General, no executive officer or director of American General owns
any shares of Home Beneficial Common Stock.
As of December 31, 1996, Dixie Company, nominee for Jefferson National Bank,
owned beneficially 2,373,552 shares of Home Beneficial Voting Common Stock
(constituting approximately 29.5% of the outstanding shares) and 434,332
shares of the Home Beneficial Non-Voting Common Stock (constituting
approximately 4.8% of the outstanding shares). As of the same date, the Estate
of Mary Morton Parsons owned beneficially 1,174,427 shares of Home Beneficial
Voting Common Stock (constituting approximately 14.6% of the outstanding
shares). See "SECURITY OWNERSHIP--Security Ownership of Certain Stockholders,
Directors and Management of Home Beneficial."
DISSENTERS' RIGHTS
Holders of Home Beneficial Non-Voting Common Stock do not have dissenters'
rights in connection with the Merger because (i) Home Beneficial Non-Voting
Common Stock was traded on Nasdaq as of the Record Date and (ii) the holders
of such shares are required by the terms of the Merger Agreement to accept
cash or listed shares of American General Common Stock. However, holders of
Home Beneficial Voting Common Stock who comply with the applicable
requirements of the VSCA may dissent from the Merger and obtain payment for
the fair value of their Home Beneficial Voting Common Stock. See "THE PROPOSED
MERGER--Rights of Dissenting Shareholders" and the excerpted sections of the
VSCA attached hereto as Annex C. Holders of voting trust certificates issued
under the Voting Trust Agreement described in "COMPARISON OF SHAREHOLDER
RIGHTS--Voting Trust Agreement" have the same dissenters' rights as holders of
Home Beneficial Voting Common Stock.
SOLICITATION OF PROXIES
If a shareholder attends the Special Meeting, he or she may vote by ballot.
However, many of Home Beneficial's shareholders may be unable to attend the
Special Meeting. Therefore, the Home Beneficial Board is soliciting proxies so
that each holder of Home Beneficial Voting Common Stock and Home Beneficial
Non-Voting Common Stock on the Record Date has the opportunity to vote on the
proposals to be considered at the Special Meeting on which each is entitled to
vote.
When a proxy is returned properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy. If a
shareholder does not return a signed proxy or vote in person at the Special
Meeting, his or her shares will not be voted. Shareholders are urged to mark
the boxes on the proxy to indicate how their shares are to be voted. If a
holder of Home Beneficial Voting Common Stock or Home Beneficial Non-Voting
Common Stock returns a signed proxy, but does not indicate how his or her
shares are to be voted, the shares represented by the proxy will be voted FOR
approval and adoption of the Merger Agreement. A holder of shares of both Home
Beneficial Voting Common Stock and Home Beneficial Non-Voting Common Stock
will find enclosed a separate form of proxy for each class of stock and should
sign and return both proxies.
The Home Beneficial Board does not know of any matters other than those
described in the notice of the Special Meeting that are to come before the
Special Meeting. If any other matters are properly brought before the Special
Meeting, including, among other things, a motion to adjourn or postpone the
Special Meeting to another time and/or place for the purpose of, among other
things, permitting dissemination of information regarding material
developments relating to the Merger or soliciting additional proxies in favor
of the proposal to adopt and approve the Merger Agreement, one or more of the
persons named on the proxy card will vote the
36
<PAGE>
shares represented by such proxy upon such matters as determined in their best
judgment and consistent with the voting rights of such shares as provided by
the Home Beneficial Bylaws and the VSCA; provided, however, that no proxy that
is voted against the proposal to approve and adopt the Merger Agreement will
be voted in favor of any adjournment or postponement for the purpose of
soliciting additional proxies. At any subsequent reconvening of the Special
Meeting, all proxies will be voted in the same manner as such proxies would
have been voted at the original convening of the Special Meeting, except for
proxies that have been effectively revoked or withdrawn prior to such
reconvened meeting. See "--Votes Required; Voting Rights."
Any Home Beneficial shareholder who executes and returns a proxy may revoke
such proxy at any time before it is voted by (i) notifying in writing the
Corporate Secretary of Home Beneficial at 3901 West Broad Street, Richmond,
Virginia 23230, (ii) granting a subsequent proxy, or (iii) appearing in person
and voting at the Special Meeting. Additional proxy cards are available from
the Information Agent. Attendance at the Special Meeting will not in and of
itself constitute revocation of a proxy.
In addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Home Beneficial in person or by
telephone, telegram or other means of communications. Such directors, officers
and employees will not be additionally compensated but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. Home
Beneficial has retained Corporate Investor Communications, Inc., a proxy
solicitation firm, to act as Information Agent in connection with the election
by Home Beneficial shareholders of the type of consideration to be received in
the Merger and to assist with soliciting and tabulating proxies for the
Special Meeting at an estimated expense of approximately $5,000, plus
reasonable out-of-pocket expenses. Arrangements will be made with custodians,
nominees and fiduciaries for the forwarding of proxy solicitation materials to
beneficial owners of shares held of record by such custodians, nominees and
fiduciaries, and Home Beneficial will reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith. Home
Beneficial will bear all costs and expenses of this solicitation other than
expenses incurred in connection with printing and mailing of this Proxy
Statement/Prospectus, which will be shared equally by Home Beneficial and
American General.
SHAREHOLDERS SHOULD NOT SEND IN ANY SHARE CERTIFICATES WITH THEIR PROXY
CARDS. PROXY CARDS SHOULD BE SENT TO FIRST UNION NATIONAL BANK OF NORTH
CAROLINA. SHARE CERTIFICATES SHOULD BE SENT WITH THE FORM OF ELECTION/LETTER
OF TRANSMITTAL TO FIRST CHICAGO TRUST COMPANY OF NEW YORK, AS EXCHANGE AGENT.
37
<PAGE>
THE PROPOSED MERGER
GENERAL
The following is a brief summary of certain aspects of the Merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, a copy of which is included in this Proxy
Statement/Prospectus as Annex A and is incorporated herein by reference. A
description of the relative rights, privileges and preferences of Home
Beneficial Common Stock on the one hand, and American General Common Stock, on
the other, including certain material differences between the rights of
holders of such stock, is set forth under "COMPARISON OF SHAREHOLDER RIGHTS."
CLOSING; EFFECTIVE TIME
The Closing will take place on, or as promptly as practicable following, the
date of the approval of the Merger Agreement by the Home Beneficial
shareholders at the Special Meeting and the satisfaction or waiver of the
other conditions to each party's obligation to consummate the Merger. The
Merger will become effective upon the filing of Articles of Merger with the
Virginia State Corporation Commission in accordance with the VSCA and Articles
of Merger with the Secretary of State of Missouri in accordance with the
MGBCL, or at such later time as may be designated in such filings as the
Effective Time. Such filings will be made as soon as practicable after the
Closing.
CONVERSION OF SHARES
Each share of Home Beneficial Common Stock outstanding prior to the
Effective Time (other than dissenting shares) will be converted into,
exchanged for and represent the right to receive any of the following: (i) a
fraction (the Exchange Ratio) of a share of American General Common Stock
(together with the attached American General Preferred Share Purchase Rights),
calculated by dividing (x) $39.00 by (y) the average of the high and low sales
prices of American General Common Stock as reported in The Wall Street Journal
during the ten consecutive NYSE Trading Days ending on (and including) the
fifth Trading Day prior to the Effective Time of the Merger (the Trading
Average); and/or (ii) cash in the amount of $39.00, without any interest
thereon. If the Trading Average of American General Common Stock falls below
$35.00 per share and the Merger is consummated, the Exchange Ratio becomes
fixed and a maximum of 1.1143 shares of American General Common Stock would be
exchangeable for each share of Home Beneficial Common Stock. Under the Merger
Agreement, the Home Beneficial Board has the right, but not the obligation, to
terminate the Merger Agreement if the Trading Average is below $35.00 per
share. The Merger Agreement does not provide for the Exchange Ratio to become
fixed at any Trading Average greater than $35.00 and, therefore, there is no
minimum number (or fraction) of shares of American General Common Stock that
would be exchangeable for each share of Home Beneficial Common Stock. Home
Beneficial shareholders will be entitled to elect to receive any proportion of
Stock Consideration or Cash Consideration in exchange for their shares,
provided that all elections will be subject to the procedures described below
with respect to the allocation of available Cash Consideration and Stock
Consideration. See "--Certain Election Considerations." For a discussion of
certain of the factors that may be taken into account by the Home Beneficial
Board in connection with determining whether it would exercise its right to
terminate the Merger Agreement, see "THE PROPOSED MERGER--The Merger
Agreement--Termination."
The table below illustrates what the Exchange Ratio would be at Trading
Averages of $35, $40, $45 and $50 per share of American General Common Stock,
the potential number of shares of American General Common Stock exchangeable
at such Exchange Ratios assuming that Stock Elections are made with respect to
50% and 75%, respectively, of the outstanding shares of Home Beneficial Common
Stock and the percentage of American General Common Stock outstanding after
the Merger represented by such shares. As illustrated in the table, as the
Trading Average of American General Common Stock increases, the number of
shares (or fraction of a share) of American General Common Stock that would be
exchangeable for each share of Home Beneficial Common Stock decreases. BECAUSE
THE EXCHANGE RATIO WILL NOT BE DETERMINED UNTIL THE END OF THE FIFTH
38
<PAGE>
TRADING DAY PRIOR TO THE EFFECTIVE TIME, THE ACTUAL NUMBER OF SHARES (OR
FRACTION OF A SHARE) OF AMERICAN GENERAL COMMON STOCK EXCHANGEABLE IN THE
MERGER FOR EACH SHARE OF HOME BENEFICIAL COMMON STOCK MAY DIFFER FROM THE
EXAMPLES PROVIDED IN THE TABLE. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR AMERICAN GENERAL COMMON STOCK.
ILLUSTRATION OF POTENTIAL EXCHANGE RATIOS AND EFFECT ON SHARES
OF AMERICAN GENERAL COMMON STOCK EXCHANGEABLE IN THE MERGER
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF SHARES OF PERCENTAGE OF
AMERICAN GENERAL OUTSTANDING SHARES OF AMERICAN GENERAL OUTSTANDING SHARES OF
COMMON STOCK AMERICAN GENERAL COMMON STOCK AMERICAN GENERAL
EXCHANGE EXCHANGEABLE ASSUMING COMMON STOCK EXCHANGEABLE ASSUMING COMMON STOCK
TRADING AVERAGE RATIO 50% STOCK ELECTIONS(1) POST-MERGER(2)(3) 75% STOCK ELECTIONS(1) POST-MERGER(3)(4)
- --------------- -------- ---------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C> <C>
$35.00 (or below)....... 1.1143 9,501,397 4.47% 14,252,094 6.56%
$40.00.................. 0.9750 8,313,615 3.93% 12,470,423 5.79%
$45.00.................. 0.8667 7,390,165 3.51% 11,085,246 5.18%
$50.00.................. 0.7800 6,650,892 3.17% 9,976,338 4.68%
</TABLE>
- --------
(1) Based on 17,053,570 shares of Home Beneficial Common Stock outstanding as
of December 31, 1996.
(2) Assuming 50% Stock Elections.
(3) Based on 203,090,677 shares of American General Common Stock outstanding as
of December 31, 1996 plus additional shares from the respective rows of
columns 3 and 5. Does not give effect to a minimum of approximately 39.3
million and a maximum of approximately 46.5 million shares of American
General Common Stock that may be issued in connection with the USLIFE
merger. See "CERTAIN INFORMATION REGARDING AMERICAN GENERAL--Recent
Developments."
(4) Assuming 75% Stock Elections.
FRACTIONAL SHARES
No fractional shares of American General Common Stock will be issued in the
Merger, and such fractional shares will not entitle the owners thereof to any
rights of a holder of American General Common Stock. Instead, each record
holder of Home Beneficial Common Stock who would otherwise have been entitled
to receive a fraction of a share of American General Common Stock upon
surrender of certificates representing Home Beneficial Common Stock for
exchange will, upon surrender of Home Beneficial Common Stock certificates, be
entitled to receive a cash payment (without interest) equal to the product of
such fraction multiplied by the greater of $35.00 and the Trading Average.
Beneficial holders of Home Beneficial Common Stock who do not own their shares
of record should consult with the record holder of such shares with regard to
the receipt of the consideration to be received upon the exchange of their Home
Beneficial Common Stock certificates in the Merger.
SHAREHOLDER ELECTIONS
Each record holder of shares of Home Beneficial Common Stock issued and
outstanding immediately prior to the Election Deadline will be entitled to
submit a request specifying the percentage of his or her shares of Home
Beneficial Common Stock which such record holder desires to have converted into
(i) Stock Consideration and/or (ii) Cash Consideration. Shares of Home
Beneficial Common Stock as to which either (i) no preference for Stock
Consideration and/or Cash Consideration shall have been expressed, (ii) no
Election Form shall have been submitted, or (iii) an Election Form shall have
been submitted which American General and Home Beneficial jointly deem
improperly completed or executed (each instance involving the foregoing (i),
(ii) or (iii), a "Non-Election"), shall be deemed "Non-Electing Shares." Non-
Electing Shares are subject to the allocation procedures described under "--
Allocation Rules--Allocation for Non-Electing Shares" and as further described
in Article III of the Merger Agreement. Non-Electing Shares shall, to the
extent Cash Elections exceed 50% of the outstanding shares of Home Beneficial
Common Stock, be deemed to be shares in respect of which a Stock Election has
been made or, to the extent Stock Elections exceed 75% of the outstanding
shares of Home Beneficial Common Stock, be deemed to be shares in respect of
which a Cash Election has been made. See "--Allocation Rules."
39
<PAGE>
CERTAIN ELECTION CONSIDERATIONS
In making an election for Stock Consideration and/or Cash Consideration,
Home Beneficial shareholders are urged to consider the following factors: (i)
because the Exchange Ratio will be determined based on an average market price
of the American General Common Stock during the ten Trading Days ending on and
including the fifth Trading Day prior to the Effective Time, no assurance can
be given that the product of the Exchange Ratio and the market value of a
share of American General Common Stock will not be higher or lower than $39.00
at the Effective Time of the Merger; (ii) in the event that the Trading
Average of American General Common Stock falls below $35.00 per share and the
Closing occurs, the Stock Consideration will be worth less than $39.00 per
share of Home Beneficial Common Stock; and (iii) there may be materially
different tax consequences involved in receiving Stock Consideration and/or
Cash Consideration, as described below under "--Certain Federal Income Tax
Consequences of the Merger." See "--Opinion of Home Beneficial's Financial
Advisor" for a discussion of the valuation of the American General Common
Stock. For a discussion of certain of the factors that may be taken into
account by the Home Beneficial Board in connection with determining whether it
would exercise its right to terminate the Merger Agreement, see "THE PROPOSED
MERGER--The Merger Agreement--Termination."
NONE OF AMERICAN GENERAL, HOME BENEFICIAL, THE AMERICAN GENERAL BOARD OR THE
HOME BENEFICIAL BOARD MAKES ANY RECOMMENDATION AS TO WHETHER HOME BENEFICIAL
SHAREHOLDERS SHOULD ELECT TO RECEIVE STOCK CONSIDERATION AND/OR CASH
CONSIDERATION IN THE MERGER. EACH SHAREHOLDER MUST MAKE HIS OR HER OWN
DECISION WITH RESPECT TO ANY SUCH ELECTION. AS A RESULT OF THE ALLOCATION
PROCEDURES DESCRIBED HEREIN, IF MORE THAN 50% OF THE SHARES OF HOME BENEFICIAL
COMMON STOCK ELECT CASH CONSIDERATION OR MORE THAN 75% OF THE SHARES OF HOME
BENEFICIAL COMMON STOCK ELECT STOCK CONSIDERATION, A HOME BENEFICIAL
SHAREHOLDER MAY RECEIVE CASH CONSIDERATION AND/OR STOCK CONSIDERATION IN
AMOUNTS THAT DIFFER FROM THE AMOUNTS SUCH SHAREHOLDER HAS ELECTED WITH RESPECT
TO ITS SHARES OF HOME BENEFICIAL COMMON STOCK. IF A SHAREHOLDER MAKES NO
ELECTION, SUCH SHAREHOLDER WILL RECEIVE (I) CASH CONSIDERATION, TO THE EXTENT
CASH ELECTIONS DO NOT EXCEED 50% OF THE OUTSTANDING SHARES OF HOME BENEFICIAL
COMMON STOCK, (II) CASH CONSIDERATION, TO THE EXTENT STOCK ELECTIONS EXCEED
75% OF THE OUTSTANDING SHARES OF HOME BENEFICIAL COMMON STOCK OR (III) STOCK
CONSIDERATION, TO THE EXTENT CASH ELECTIONS EXCEED 50% OF SUCH SHARES, SUBJECT
TO THE ALLOCATION RULES SET FORTH IN THE MERGER AGREEMENT AND AS MORE FULLY
DESCRIBED BELOW. SEE "--ALLOCATION RULES."
PROCEDURES FOR SHAREHOLDER ELECTIONS
Home Beneficial shareholders will be required to make their elections by
completing and mailing the Election Form accompanying this Proxy
Statement/Prospectus to the Exchange Agent. To be effective, an Election Form
must be (i) properly completed, signed and submitted to the Exchange Agent at
its designated office, by the Election Deadline and (ii) accompanied by the
certificates representing the shares of Home Beneficial Common Stock as to
which the election is being made (or by an appropriate guarantee of delivery
of such certificates, as set forth in the Election Form, by a member of any
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the United
States, provided such certificates are in fact delivered to the Exchange Agent
by the time required in such guarantee of delivery). Home Beneficial will use
all reasonable efforts to make an Election Form available to all persons who
become holders of record of Home Beneficial Common Stock between the date of
mailing of this Proxy Statement/Prospectus and the Election Deadline.
Additional Election Forms may be obtained from the Exchange Agent by calling
(201) 222-4707 or the Information Agent by calling (800) 932-8478. Any
extension of the Election Deadline will be announced in a news release
delivered to the Dow Jones News Service.
Home Beneficial shareholders who wish to obtain information regarding the
Exchange Ratio prior to sending in Election Forms should call the Exchange
Agent at (201) 324-0137 or Corporate Investor Communications, Inc., the
Information Agent for the Merger, at (800) 932-8478. THE ELECTION FORM AND
RELATED INSTRUCTIONS CONTAIN IMPORTANT INFORMATION CONCERNING THE TIMING AND
PROCEDURES FOR MAKING AN ELECTION. HOME BENEFICIAL SHAREHOLDERS ARE URGED TO
READ SUCH MATERIAL AND INSTRUCTIONS CAREFULLY.
40
<PAGE>
The Exchange Agent shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to
disregard immaterial defects in the Election Forms, and any good faith
decisions of the Exchange Agent shall be conclusive and binding. The Exchange
Agent shall be under no obligation to notify any person of any defect in an
Election Form.
A holder of shares of Home Beneficial Common Stock who does not submit an
effective Election Form prior to the Election Deadline will be deemed to have
made a Non-Election. Shares of Home Beneficial Common Stock with respect to
which a Non-Election has been made will be converted into the right to
receive, to the extent Cash Elections exceed 50% of the outstanding shares of
Home Beneficial Common Stock, Stock Consideration or, to the extent Stock
Elections exceed 75% of the outstanding shares of Home Beneficial Common
Stock, Cash Consideration, without regard to the preference of the holder of
such shares. If American General and Home Beneficial jointly determine that
any purported Stock Election or Cash Election has not been made effectively,
such purported Stock Election or Cash Election will be deemed to be of no
force and effect, and the shareholder making such purported Stock Election or
Cash Election will, for purposes hereof, be deemed to have made a Non-Election
and such shareholder's shares will be converted as described above into Stock
Consideration or, as the case may be, Cash Consideration.
An election may be revoked or changed by written notice (including by
facsimile) received by the Exchange Agent at any time up to and immediately
prior to the Election Deadline accompanied by a properly completed and signed,
revised Election Form or by withdrawal of a shareholder's certificate(s) for
shares of Home Beneficial Common Stock, or of the guarantee of delivery of
such certificate(s), previously deposited with the Exchange Agent. Any
certificate(s) representing shares of Home Beneficial Common Stock which have
been submitted to the Exchange Agent in connection with an election will be
promptly returned without charge to the holder thereof in the event such
election is so revoked and such holder requests in writing the return of such
certificate(s). Upon any such revocation, unless a duly completed Election
Form is thereafter submitted in accordance with the above, such shares will be
deemed to be Non-Electing Shares. Revocations by facsimile should be sent to
the Exchange Agent at (201) 222-4720 or (201) 222-4721.
In the event that the Merger Agreement is terminated pursuant to the
provisions thereof and any shares of Home Beneficial Common Stock have been
transmitted to the Exchange Agent pursuant to the provisions thereof, such
shares shall be returned as promptly as practicable without charge to the
person submitting the same. See "--The Merger Agreement--Termination."
ALLOCATION RULES
The following is a summary of the allocation rules with respect to the cash
and American General Common Stock available for election as Merger
Consideration, as set forth in the Merger Agreement. The following summary
does not purport to be complete and is qualified in its entirety by reference
to the Merger Agreement, a copy of which is attached as Annex A to this Proxy
Statement/Prospectus and is incorporated herein by reference.
Allocation of American General Common Stock Available for Election
The Merger Agreement provides that no more than 75% of the aggregate number
of shares of Home Beneficial Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger may be converted into Stock
Consideration. If Stock Elections are received for a number of shares of Home
Beneficial Common Stock that is in the aggregate less than 75% of the
outstanding shares of Home Beneficial Common Stock, each share of Home
Beneficial Common Stock covered by a Stock Election will be converted into the
right to receive a fraction of a share of American General Common Stock equal
to the Exchange Ratio. In the event that the aggregate number of shares of
Home Beneficial Common Stock in respect of which Stock Elections are made
exceeds 75% of the aggregate number of shares of Home Beneficial Common Stock
issued and outstanding immediately prior to the Effective Time of the Merger,
the Stock Election Shares shall be converted into the right to receive Stock
Consideration and/or other Cash Consideration in the following manner:
(i) Each Non-Electing Share and each share of Home Beneficial Common
Stock for which a Cash Election has been received will be converted into
the right to receive the Cash Consideration in the Merger;
41
<PAGE>
(ii) the Exchange Agent will distribute a fraction of a share of American
General Common Stock equal to the Exchange Ratio with respect to a number
of such shares of Home Beneficial Common Stock equal to 75% of the
outstanding shares of Home Beneficial Common Stock;
(iii) Shares of Home Beneficial Common Stock covered by a Stock Election
and not fully converted into the right to receive American General Common
Stock as set forth in paragraph (ii) above will be converted in the Merger
into the right to receive the Cash Consideration multiplied by the number
of such shares of Home Beneficial Common Stock; and
(iv) The distributions of Cash Consideration and of American General
Common Stock contemplated by the preceding paragraphs (ii) and (iii) will
be made on a pro rata basis among all shares of Home Beneficial Common
Stock as to which Stock Elections have been made.
Allocation of Cash Available for Election
The Merger Agreement provides that the number of shares of Home Beneficial
Common Stock to be converted into the right to receive the Cash Consideration
pursuant to the Merger shall not be less than 25% and not more than 50% of the
aggregate number of shares of Home Beneficial Common Stock issued and
outstanding immediately prior to the Effective Time. If Cash Elections are
received for a number of shares of Home Beneficial Common Stock that is 50% or
less in aggregate amount of the outstanding shares of Home Beneficial Common
Stock, each Cash Election Share will be converted into the right to receive
the Cash Consideration. In the event that Cash Election Shares exceed 50% of
the shares of Home Beneficial Common Stock issued and outstanding immediately
prior to the Effective Time, the Cash Election Shares will be converted into
the right to receive Cash Consideration or Stock Consideration in the
following manner:
(i) Each Non-Electing Share and Stock Election Share will be converted
into the right to receive a fraction of a share of American General Common
Stock equal to the Exchange Ratio;
(ii) The Exchange Agent will distribute Cash Consideration with respect
to a number of such Cash Election Shares equal to 50% of the outstanding
shares of Home Beneficial Common Stock;
(iii) Each share of Home Beneficial Common Stock covered by a Cash
Election and not fully converted into the right to receive the Cash
Consideration as set forth in paragraph (ii) above will be converted in the
Merger into the right to receive a number of shares of American General
Common Stock equal to the Exchange Ratio; and
(iv) The distributions of Cash Consideration and of American General
Common Stock contemplated by paragraphs (ii) and (iii) above will be made
on a pro rata basis among all shares of Home Beneficial Common Stock as to
which Cash Elections have been made.
Allocation for Non-Electing Shares
If Non-Electing Shares are not converted under the proration procedures
described above, the Exchange Agent shall distribute with respect to such Non-
Electing Shares:
(i) Cash Consideration with respect to a number of such Non-Electing
Shares, that will result in the sum of (A) the number of such shares of
Home Beneficial Common Stock converted into cash and (B) the number of
shares of Home Beneficial Common Stock for which Cash Elections have been
received being as close as practicable to 50% of the outstanding shares of
Home Beneficial Common Stock;
(ii) Non-Electing Shares not converted into the right to receive the Cash
Consideration as set forth in the preceding clause (i) shall be converted
in the Merger into the right to receive a number of shares of American
General Common Stock equal to the Exchange Ratio multiplied by the number
of such shares of Home Beneficial Common Stock; and
(iii) The distribution of Cash Consideration and of American General
Common Stock contemplated by the preceding clauses (i) and (ii) shall be
made on a pro rata basis among all Non-Electing Shares.
42
<PAGE>
Certain Allocation Adjustments
If required by special counsel to Home Beneficial or special counsel to
American General in order for such counsel to provide the tax opinions
contemplated by the Merger Agreement, the "50%" limitation on the number of
shares of Home Beneficial Common Stock that may be converted to Cash
Consideration shall be adjusted to a number reasonably required by such
counsel, provided that after giving effect to such adjustment the number of
shares of Home Beneficial Common Stock to be converted into American General
Common Stock pursuant to the Merger shall not exceed 75% of all outstanding
shares of Home Beneficial Common Stock. As a result of this provision, the
number of shares of Home Beneficial Common Stock that may be converted to Cash
Consideration may be reduced below 50% (but not below 25%), but would not be
increased above 50% in any circumstance. If any adjustment is necessary, the
Home Beneficial Board, in the exercise of its fiduciary duties, will determine
whether the adjustment results in a change in the information that has been
provided to shareholders that would require Home Beneficial to resolicit its
shareholders.
Illustration of Potential Effects of Allocation Procedures
The tables below illustrate the potential effects of the allocation
procedures described above on a holder of 100 shares of Home Beneficial Common
Stock who elects (i) in the case of table 1, to receive Stock Consideration
with respect to all 100 shares and (ii) in the case of table 2, to receive
Cash Consideration with respect to all 100 shares. Both tables assume an
Exchange Ratio of 0.9204 based on the closing price of American General Common
Stock of $42.375 on March 14, 1997, the most recent practicable date prior to
the printing of this Proxy Statement/Prospectus. THE TABLES ARE SET FORTH FOR
PURPOSES OF ILLUSTRATION ONLY AND ARE BASED ON THE ASSUMPTIONS DESCRIBED IN
THIS PARAGRAPH AND IN THE TABLES. THE ACTUAL AMOUNTS OF STOCK CONSIDERATION
AND/OR CASH CONSIDERATION TO BE RECEIVED BY A HOME BENEFICIAL SHAREHOLDER MAY
DIFFER BASED ON THE ACTUAL EXCHANGE RATIO AND THE ACTUAL ELECTIONS MADE BY ALL
HOME BENEFICIAL SHAREHOLDERS IN THE AGGREGATE.
TABLE 1
ILLUSTRATION OF POTENTIAL EFFECTS OF ALLOCATION PROCEDURES
ON HOLDER OF 100 SHARES OF HOME BENEFICIAL COMMON STOCK
WHO MAKES A STOCK ELECTION WITH RESPECT TO ALL 100 SHARES
<TABLE>
<CAPTION>
NUMBER OF HOME NUMBER OF HOME NUMBER OF
PERCENTAGE OF ALL HOME BENEFICIAL SHARES BENEFICIAL SHARES AMERICAN GENERAL AMOUNT OF CASH
BENEFICIAL SHARES MAKING ALLOCATED TO STOCK ALLOCATED TO CASH SHARES RECEIVED AS CONSIDERATION
STOCK ELECTIONS(1) EXCHANGE RATIO(2) CONSIDERATION(3) CONSIDERATION(4) STOCK CONSIDERATION RECEIVED(5)
- ------------------------ ----------------- ------------------ ----------------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
75% 0.9204 100.00 0.00 92 $ 0.00
80% 0.9204 93.75 6.25 86 243.75
90% 0.9204 83.33 16.67 76 650.13
100% 0.9204 75.00 25.00 69 975.00
</TABLE>
- --------
(1) For any percentage below 75%, all of such holder's shares would be
converted into Stock Consideration.
(2) Based on the closing price of $42.375 of American General Common Stock on
March 14, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus.
(3) Calculated by dividing the Stock Election threshold (75%) by the
percentages in column 1 and multiplying by 100 shares.
(4) Calculated by subtracting the number of shares in column 3 from 100.
(5) Cash payments in respect of fractional shares are not taken into account
in the table.
43
<PAGE>
TABLE 2
ILLUSTRATION OF POTENTIAL EFFECTS OF ALLOCATION PROCEDURES
ON HOLDER OF 100 SHARES OF HOME BENEFICIAL COMMON STOCK
WHO MAKES A CASH ELECTION WITH RESPECT TO ALL 100 SHARES
<TABLE>
<CAPTION>
NUMBER OF HOME NUMBER OF HOME NUMBER OF
PERCENTAGE OF ALL HOME BENEFICIAL SHARES BENEFICIAL SHARES AMOUNT OF CASH AMERICAN GENERAL
BENEFICIAL SHARES MAKING ALLOCATED TO CASH ALLOCATED TO STOCK CONSIDERATION SHARES RECEIVED AS
CASH ELECTIONS(1) EXCHANGE RATIO(2) CONSIDERATION(3) CONSIDERATION(4) RECEIVED(5) STOCK CONSIDERATION
- ------------------------ ----------------- ----------------- ------------------ -------------- -------------------
<S> <C> <C> <C> <C> <C>
50% 0.9204 100.00 0.00 $3,900.00 0
75% 0.9204 66.67 33.33 2,600.13 30
85% 0.9204 58.82 41.18 2,293.98 37
100% 0.9204 50.00 50.00 1,950.00 46
</TABLE>
- --------
(1) For any percentage below 50%, all of such holder's shares of Home
Beneficial Common Stock would be converted into Cash Consideration. Under
certain circumstances, the 50% threshold may be adjusted downward. At the
largest possible downward adjustment, the threshold could conceivably be
reduced to 25% (See "--Certain Allocation Adjustments"). In that event, if
Cash Elections were made by holders of 100% of the Home Beneficial Common
Stock, a holder of 100 shares would have 25 shares allocated to Cash
Consideration and 75 shares allocated to Stock Consideration.
(2) Based on the closing price of $42.375 of American General Common Stock on
March 14, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus.
(3) Calculated by dividing the Cash Election threshold (50%) by the percentage
in column 1 and multiplying by 100.
(4) Calculated by subtracting the number of shares in column 3 from 100.
(5) Cash payments in respect of fractional shares are not taken into account
in the table.
EXCHANGE OF CERTIFICATES
Upon surrender of each certificate representing shares of Home Beneficial
Common Stock, the Exchange Agent will pay to the holder of such certificate,
as soon as practicable after the Effective Time, the applicable Merger
Consideration (and cash in lieu of fractional shares) and such certificate
will thereafter be cancelled. Until so surrendered and exchanged, each such
certificate that prior to the Effective Time represented shares of Home
Beneficial Common Stock (other than certificates representing dissenting
shares) will represent solely the right to receive the Merger Consideration
(and cash in lieu of fractional shares). No interest will be paid or accrue on
the Merger Consideration.
After the Effective Time, there will be no transfers on the stock transfer
books of AGC Life of any shares of Home Beneficial Common Stock. If, after the
Effective Time, certificates formerly representing shares of Home Beneficial
Common Stock are presented to the Exchange Agent or AGC Life, as the case may
be, they will be cancelled and (subject to applicable abandoned property,
escheat and similar laws and, in the case of dissenting shares, subject to
applicable law) exchanged for Merger Consideration (and cash in lieu of
fractional shares), as provided above.
No dividends or other distributions declared or made after the Effective
Time with respect to shares of American General Common Stock will be paid to
the holder of any unsurrendered certificate with respect to the shares of
American General Common Stock such holder is entitled to receive, and no cash
payment in lieu of fractional shares will be paid, until the holder of such
certificate surrenders such certificate in accordance with the provisions of
the Merger Agreement.
At the Effective Time, all shares of Home Beneficial Common Stock that are
owned by Home Beneficial as treasury stock and any shares of Home Beneficial
Common Stock owned by American General, AGC Life or any other direct or
indirect wholly owned subsidiary of American General (other than such shares,
if any, of Home Beneficial Common Stock as may be held in a separate account
or mutual fund of a subsidiary of American General) will be cancelled and
retired and will cease to exist, and no payment or other consideration will be
made in respect thereof.
44
<PAGE>
BACKGROUND OF THE MERGER
In view of continuing changes in the life insurance industry, in the first
quarter of 1994, Home Beneficial retained Goldman Sachs as financial advisor
with respect to Home Beneficial's position within its industry, to consider
and advise Home Beneficial regarding strategic alternatives that might be
available to it to enhance shareholder value. Goldman Sachs consulted with
Home Beneficial until early 1995, but during that time there were no meetings
or discussions with any third parties regarding a purchase or sale of Home
Beneficial, or any other combination transaction with a third-party. During
the spring of 1995, Home Beneficial was approached by a third-party, and over
the spring and summer of 1995, management, with the assistance of Goldman
Sachs, engaged in a series of discussions with that party relating to a
possible acquisition of Home Beneficial. In September 1995, management of Home
Beneficial concluded that the potential price level this party would be
willing to offer in an acquisition transaction was not sufficiently attractive
to merit further discussions, and therefore such discussions were terminated.
After that date, no further discussions were held with that party until it was
contacted by Goldman Sachs in early December 1996 in connection with the sales
process initiated by Home Beneficial described below.
Although on these and other prior occasions management had given
consideration to Home Beneficial's position in the life insurance industry and
strategic alternatives that might be available to it, such alternatives have
not until recently been deemed by management to be sufficiently attractive to
warrant exploration beyond relatively preliminary stages. A number of factors
contributed to management's determination in the last quarter of 1996 to
commence a re-examination of Home Beneficial's position and the alternatives
available to it to enhance shareholder value. In particular, in recent years,
Home Beneficial and other sellers of life insurance through the home service
distribution system have been confronted with a variety of demographic,
economic and industry changes which have combined to inhibit growth in revenue
and net income. In view of these and other factors, in the fall of 1996 senior
management of Home Beneficial began a reconsideration of various strategic
alternatives that might be available to Home Beneficial, including a possible
sale transaction. In addition to a possible sale of Home Beneficial to a
larger company, strategic alternatives that had been considered in recent
years by Home Beneficial included the possibility of (i) a significant stock
repurchase program, (ii) a merger with another life insurance company
comparable in size to Home Beneficial or smaller, (iii) the purchase of
additional blocks of home service insurance business within the geographic
territory in which Home Beneficial operates, and (iv) the purchase of another
company, perhaps outside the insurance industry, which would utilize Home
Beneficial's strong cash flows. However, management's reservations about
seeking an acquisition outside its area of expertise, the lack of suitable
acquisition candidates in Home Beneficial's operating territory, and the
inability of certain of these strategies to produce long-term growth for Home
Beneficial caused Home Beneficial management to conclude that none were
attractive alternatives. In the absence of an attractive alternative strategy,
and faced with prospects of insufficient growth in net earnings and dividends
to meet management's goals, as well as evidence of continuing consolidation in
the life insurance business (in August 1996, another large Virginia based
insurer agreed to be acquired), management determined in September 1996, to
reexamine Home Beneficial's long-term prospects and available strategies.
In September 1996, Mr. R.W. Wiltshire, Jr., the president and chief
executive officer of Home Beneficial, held discussions with Goldman Sachs
regarding that firm's availability to assist and advise Home Beneficial with
respect to exploring strategic alternatives (including, in addition to a
merger with a larger company, continuing the business in its present
configuration without significant changes, seeking to acquire other businesses
that would complement its present business, combining a portion of its
business with another insurer in a joint venture or other partnership
arrangement, or commencing a significant stock repurchase program). At Home
Beneficial's regular monthly board meeting on October 24, 1996, Mr. Wiltshire
received board authorization to retain an investment banker to assist and
advise the Company in considering such strategic alternatives, including a
possible sale. Mr. Wiltshire's continued discussions with Goldman Sachs led to
a decision in late October to authorize Goldman Sachs, subject to the
execution of an appropriate engagement letter, to explore the possibility of
an acquisition of Home Beneficial with a limited number of parties Home
Beneficial might, with the assistance of Goldman Sachs, identify as companies
that would likely have a strong interest in Home Beneficial and, in
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particular, in its home service insurance business. Throughout November 1996,
Home Beneficial, with the assistance of Goldman Sachs, gathered information
necessary to prepare a confidential information memorandum regarding Home
Beneficial. On December 3, 1996, Mr. Wiltshire executed an engagement letter
dated as of October 29, 1996 with Goldman Sachs.
In early December 1996, Goldman Sachs identified approximately seven
companies in the insurance industry, including American General, for whom
Goldman Sachs believed Home Beneficial might represent an attractive
acquisition candidate based on the potential synergies of a strategic
combination. Each of the companies identified by Goldman Sachs is a financial
services company engaged in the sale of life insurance through the home
service distribution system, which is the primary focus of Home Beneficial's
life insurance business. As a result, Home Beneficial believed that such
companies might be able to realize synergies and cost efficiencies through the
elimination of redundant back-office functions and the consolidation of field
sales forces and other insurance operations. Based on consultations with
Goldman Sachs, Home Beneficial considered that companies not engaged in the
sale of life insurance through the home service distribution system would be
less likely to have a serious interest in acquiring Home Beneficial. At the
direction of Mr. Wiltshire, Goldman Sachs contacted each of the parties to
assess its interest in a potential transaction involving Home Beneficial.
Prospective acquirors were advised that the Home Beneficial Board had made no
determination as to whether to proceed with such a transaction involving Home
Beneficial. Six of the parties expressed an interest in a possible transaction
involving Home Beneficial. In connection with Home Beneficial's agreement to
provide confidential information concerning Home Beneficial, each of the six
companies, including American General, executed a confidentiality agreement
pursuant to which each agreed to keep confidential information concerning Home
Beneficial. Home Beneficial requested indications of interest on or before
December 19, 1996. During the week of December 2, 1996, Mr. Wiltshire advised
Home Beneficial's regular legal counsel of the status of the sale efforts, and
Home Beneficial's counsel retained special counsel to assist Home Beneficial
in any transaction that might develop.
During the week of December 9, 1996 and prior to the receipt by Home
Beneficial of expressions of interest from any other parties, American General
informed Home Beneficial of its interest in making a proposal to acquire Home
Beneficial that would, in American General's judgment, be sufficiently
attractive to induce Home Beneficial to permit American General to begin its
due diligence investigation of Home Beneficial and to commence negotiation of
a merger agreement prior to December 19, 1996. On December 11, 1996, American
General delivered a letter to Home Beneficial stating that Robert M. Devlin,
president and chief executive officer of American General, was prepared to
recommend to the American General Board an offer to acquire Home Beneficial at
a price of $39.00 per share of Home Beneficial Common Stock, subject to
completion of due diligence and negotiation of a definitive merger agreement.
After submission of American General's proposal, Goldman Sachs, on behalf of
Home Beneficial, undertook discussions with American General to clarify its
bid and to understand its terms, including the form of consideration,
structure and closing contingencies. In response to the American General
proposal, Home Beneficial advised American General that Home Beneficial would
continue its solicitation of other expressions of interest in accordance with
its original timetable and, in parallel with that process, consider permitting
American General to begin its due diligence and to commence negotiation of a
merger agreement prior to December 19, 1996.
On December 12, 1996, American General delivered a draft of the Merger
Agreement to Home Beneficial and its counsel. On December 14, 1996, Mr.
Wiltshire met with Mr. Devlin to discuss American General's proposal. Based on
those discussions and his knowledge of the industry and judgment concerning
the likelihood of a higher offer being presented by another party and
following consultations with Goldman Sachs and informal discussions with
several members of the Home Beneficial Board, Mr. Wiltshire authorized
American General to commence its due diligence in Richmond on December 15,
1996. Mr. Wiltshire also authorized Home Beneficial's counsel to begin
negotiation of a definitive merger agreement. On December 16, 1996, counsel to
Home Beneficial met with counsel for American General in New York to negotiate
terms of the proposed Merger Agreement. During the week of December 16, 1996,
Goldman Sachs, on behalf of Home Beneficial, advised the other parties that it
had contacted that Home Beneficial had received an attractive acquisition
proposal which
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could result in an acceleration of the sale process and that if such parties
were interested in a transaction with Home Beneficial they should act promptly
to advise Home Beneficial of their best offers.
On December 17, 1996, at its regularly scheduled meeting, the Home
Beneficial Board received presentations from Goldman Sachs and Home
Beneficial's legal advisors. During the course of this meeting, Goldman Sachs
representatives reviewed developments since the Home Beneficial Board had
authorized the exploration of strategic alternatives, including the sale
process it had commenced, the identity and financial and business
characteristics of each of the parties contacted, the initial responses it
received, including the response of American General, and its preliminary
evaluation of the American General proposal. The Home Beneficial Board was
advised that American General was prepared to offer a transaction in which
Home Beneficial shareholders would receive some combination of cash or stock
at the election of such shareholders. The Home Beneficial Board was aware that
there were several large Home Beneficial shareholders for whom a nontaxable
transaction was economically attractive and who were unlikely to support an
all cash transaction. Following presentations by management concerning the
development of the American General proposal and Mr. Wiltshire's analysis of
its potential benefits, and presentations by Goldman Sachs and counsel, the
Home Beneficial Board directed that negotiations be continued in an effort to
determine if a definitive merger agreement could be concluded reflecting
American General's $39.00 per share proposal, while at the same time
instructing Goldman Sachs to continue the bid solicitation process with other
parties that had been initiated earlier in December.
During the week of December 16, 1996, American General, assisted by its
legal counsel and by its financial advisor, Merrill Lynch, Pierce, Fenner &
Smith, Inc. ("Merrill Lynch"), conducted and concluded its due diligence
investigation of Home Beneficial. On December 20, 1996, Mr. Wiltshire,
accompanied by representatives of Goldman Sachs, traveled to Houston to meet
with Mr. Devlin and other representatives of American General, both for the
purpose of conducting on-site due diligence review of the business and
financial affairs of American General, and to understand better how American
General proposed to integrate the business of Home Beneficial with that of
American General.
From December 18 through December 21, 1996, counsel for Home Beneficial and
counsel for American General continued to hold meetings by telephone and in
person in which various terms of the Merger Agreement were negotiated.
On December 19, 1996, at a special meeting, the American General Board
approved the Merger transaction in principle and authorized its officers to
negotiate and enter into a definitive agreement. At that meeting, Merrill
Lynch rendered an opinion that the proposed transaction was fair to American
General from a financial point of view.
On December 22, 1996, the Home Beneficial Board met in a special meeting to
review, with the advice and assistance of Home Beneficial's financial and
legal advisors, the proposed Merger Agreement with American General and the
transactions contemplated thereby, including the Merger. All directors of the
Home Beneficial Board were present. At the special meeting, Goldman Sachs and
Home Beneficial's legal advisors made presentations to the Home Beneficial
Board concerning the transaction. Home Beneficial's legal advisors addressed
the board's fiduciary duties to the shareholders of Home Beneficial in the
context of the proposed transaction. Home Beneficial's legal advisors also
summarized the material terms and conditions of the Merger Agreement. Goldman
Sachs reviewed the proposed transaction with American General, including the
financial terms of the proposed merger. Goldman Sachs representatives reviewed
the sale process, the American General proposal and its evaluation of the
American General proposal. Goldman Sachs also presented information with
respect to each of the other preliminary indications of interest it had
received. Goldman Sachs reviewed its discussions with each of the parties it
had contacted and reported that, with the exception of one preliminary
indication of interest received on December 19, 1996 from another party (the
"Second Party"), which had expressed an interest in Home Beneficial at a
purchase price potentially in excess of $39.00 per share of Home Beneficial
Common Stock, each of the other preliminary indications of interest received
had proposed consideration that was below American General's offer. Goldman
Sachs reviewed with the Home Beneficial Board its discussions with
representatives of the Second Party on December 19 and December 20, 1996
during
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which Goldman Sachs was informed that the Second Party had preliminarily
valued Home Beneficial at a range of values, the mid-point of which was below
$39.00 per share of Home Beneficial Common Stock and that the Second Party
would not be prepared to commence its due diligence investigation until early
January 1997. The Home Beneficial Board discussed the relative risks and
benefits in pursuing the preliminary indication of interest of the Second
Party, including the uncertainties as to whether a transaction could be
consummated with the Second Party at the high end of the range of values it
had indicated and the potential adverse impact that a decision to pursue
discussions with the Second Party could have on the definitive offer Home
Beneficial had received from American General. Due to its preliminary nature,
Goldman Sachs did not conduct an evaluation analysis regarding the Second
Party's indication of interest, nor was Goldman Sachs requested to do so by
Home Beneficial.
During the December 22, 1996 Home Beneficial Board meeting, Goldman Sachs
rendered to the Home Beneficial Board its opinion to the effect that, as of
such date, the Merger Consideration to be received by the Home Beneficial
shareholders pursuant to the Merger was fair to such shareholders. Following
extended discussion and review of the transaction, the Home Beneficial Board
unanimously approved the Merger Agreement with American General. For a
discussion of reasons for the Home Beneficial Board's decision and factors
considered by the Home Beneficial Board, see "--Recommendation of the Home
Beneficial Board and Home Beneficial's Reasons for the Merger" and "--Opinion
of Home Beneficial's Financial Advisor."
On December 22, 1996, the Merger Agreement was executed and delivered by all
the parties thereto. On December 23, 1996, American General and Home
Beneficial issued a joint press release announcing the Merger Agreement.
RECOMMENDATION OF THE HOME BENEFICIAL BOARD AND HOME BENEFICIAL'S REASONS FOR
THE MERGER
The Home Beneficial Board has determined that the Merger is fair to and in
the best interests of Home Beneficial and its shareholders. At a meeting held
on December 22, 1996, the Home Beneficial Board unanimously approved the
Merger Agreement and resolved to recommend that the shareholders of Home
Beneficial vote for approval and adoption of the Merger Agreement.
In reaching its conclusion to approve the Merger Agreement and to recommend
that shareholders vote for approval and adoption of the Merger Agreement, the
Home Beneficial Board considered many factors including, but not limited to,
the following:
(i) The Home Beneficial Board's consideration of, among other things,
information with respect to the financial condition, results of operations
and business of Home Beneficial, on both a historical and a prospective
basis, and the influence of current industry, economic and market
conditions;
(ii) The Home Beneficial Board's consideration of strategic alternatives
(including, in addition to a merger with a larger company, continuing the
business in its present configuration without significant changes, seeking
to acquire other businesses that would complement its present business,
combining a portion of its business with another insurer in a joint venture
or other partnership arrangement, or commencing a significant stock
repurchase program), none of which appeared to be as favorable to the
holders of the shares of Home Beneficial Common Stock as the Merger;
(iii) The fact that procedures to elicit proposals to acquire Home
Beneficial had been implemented and that discussions had been conducted
with likely interested parties in the context of a competitive sale process
intended to maximize shareholder value through the solicitation of bids to
acquire the company from those parties believed to be most likely to have a
significant interest in acquiring the insurance business of Home
Beneficial;
(iv) The uncertainty, if the American General offer were rejected, of
negotiating an alternative transaction on as favorable a basis with another
party within a reasonable timeframe;
(v) The recognition by Home Beneficial's management of the difficulties
and risks inherent in attempting to enhance shareholder value over the
long-term through internal processes due to increasing
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competitive pressures, a lack of sufficient premium and net income growth
in recent years, and high costs relative to other larger companies using
the home service distribution method;
(vi) American General's business, assets, management, competitive
position and prospects, which the Home Beneficial Board believes, on a
combined basis with those of Home Beneficial, would represent a good
strategic fit between the two companies in view of their respective product
lines and markets;
(vii) The financial condition, results of operations, cash flows and
dividends of each of Home Beneficial and American General, on an historical
basis, before giving effect to the Merger;
(viii) Historical market prices and trading information with respect to
each of Home Beneficial Non-Voting Common Stock and American General Common
Stock;
(ix) The treatment of the Merger as a "tax-free reorganization" for
federal income tax purposes (see "--Certain Federal Income Tax Consequences
of the Merger") and the fact that certain large shareholders of Home
Beneficial were unlikely to vote in favor of a transaction that did not
qualify as a nontaxable reorganization under the Code;
(x) The potential efficiencies and synergies to be realized by the
combined operations of Home Beneficial and American General, which are
expected to result from the consolidation of district offices, the
consolidation of Home Beneficial's home office into AGLA's Nashville
office, the consolidation of field sales forces, and other economies that
are expected to produce a favorable impact on the long-term value of
American General as well as enhance the competitive position of the
combined entity and the ability of all Home Beneficial shareholders to
maintain an ownership stake in the combined entity by electing to receive
American General Common Stock and potentially realize the benefits of the
Merger;
(xi) The regulatory approvals required to consummate the Merger and the
prospects for receiving all such approvals;
(xii) The oral opinion received by the Home Beneficial Board from Goldman
Sachs on December 22, 1996, later confirmed in writing, to the effect that,
as of such date, the Merger Consideration to be received by the Home
Beneficial shareholders is fair and the analysis of Goldman Sachs described
under "--Opinion of Home Beneficial's Financial Advisor";
(xiii) The compatibility of the business and operating strategies of both
companies; and
(xiv) The terms and conditions of the Merger Agreement, including, among
other things, the fact that the Merger Agreement permits Home Beneficial's
Board, in the exercise of its fiduciary duties, to engage in negotiations
with or to furnish information to third parties in response to unsolicited
takeover proposals and to terminate the Merger Agreement in order to enter
into a definitive agreement relating to an alternative takeover proposal,
upon payment of a $20 million termination fee.
The Home Beneficial Board also considered certain potential risks relating
to the Merger, including (i) the risk that the Merger would not be
consummated, with resulting distraction in the interim to Home Beneficial's
normal business operations, and the adverse effect that might have on Home
Beneficial's ability to retain and attract key employees while the Merger was
pending; (ii) the substantial changes expected to be incurred by Home
Beneficial in connection with the Merger, including the consolidation of its
home office operations away from Richmond, Virginia, where it has been
headquartered since 1899; and (iii) the risk that the price of American
General Common Stock might drop below the $35.00 price level that fixes the
Exchange Ratio at a maximum of 1.1143 shares of American General Common Stock
for each share of Home Beneficial Common Stock. The Home Beneficial Board also
considered the fact that Home Beneficial has a long history as a Richmond,
Virginia based business, managed and controlled primarily by descendants of
the founding families. The Home Beneficial Board believed, however, that these
risks and disadvantages were outweighed by the potential benefits to be
realized from the Merger.
Based on this analysis, the Home Beneficial Board unanimously determined
that the Merger is fair to, and in the best interests of, Home Beneficial's
stockholders. The foregoing discussion of the information and factors
considered by the Home Beneficial Board is not intended to be exhaustive, and
such were considered collectively
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by the Home Beneficial Board in connection with its review of the Merger
Agreement and the proposed transactions. In view of the variety of factors
considered in connection with its evaluation of the Merger, the Home
Beneficial Board did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the Home
Beneficial Board may have given different weights to different factors. For a
discussion of the interests of certain members of Home Beneficial's management
and directors in the Merger, which interests were taken into account by the
Home Beneficial Board in approving the Merger, see "--Interests of Certain
Persons in the Merger."
The full text of the written opinion of Goldman Sachs, which sets forth the
assumptions made, matters considered and limitations on the review undertaken
in connection with the opinion, is attached hereto as Annex B, and is
incorporated herein by reference. SHAREHOLDERS ARE URGED TO AND SHOULD READ
SUCH OPINION IN ITS ENTIRETY. See also "--Opinion of Home Beneficial's
Financial Advisor."
THE HOME BENEFICIAL BOARD RECOMMENDS THAT HOME BENEFICIAL SHAREHOLDERS VOTE
"FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF HOME BENEFICIAL'S FINANCIAL ADVISOR
On December 22, 1996, Goldman Sachs delivered its oral opinion, subsequently
confirmed in writing, to the Home Beneficial Board that as of the date of such
opinion, the Merger Consideration to be received by the holders of Shares
pursuant to the Merger Agreement was fair to holders of Shares receiving such
Merger Consideration. Goldman Sachs subsequently delivered its written opinion
to the Home Beneficial Board that as of the date hereof, the Merger
Consideration to be received by the holders of Shares pursuant to the Merger
Agreement is fair to holders of Shares receiving such Merger Consideration.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED THE DATE HEREOF,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS ANNEX
B AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF SHARES ARE URGED TO, AND
SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the Registration Statement, including this Proxy Statement/Prospectus; the
Merger Agreement; Annual Reports to Stockholders and Annual Reports on Form
10-K of Home Beneficial for the five years ended December 31, 1996 and of
American General for the five years ended December 31, 1995; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of Home Beneficial
and of American General; a Current Report on Form 8-K of American General
dated February 21, 1997; annual statutory statements for the two years ended
December 31, 1995, for HBLIC and for certain of American General's insurance
subsidiaries; certain other communications from Home Beneficial and American
General to their respective stockholders; an actuarial appraisal as of
June 30, 1996 of HBLIC (the "Appraisal") prepared by a nationally recognized
actuarial firm (the "Actuarial Firm"), and certain internal financial analyses
for Home Beneficial prepared by its management. Goldman Sachs also held
discussions with members of the senior management of Home Beneficial and of
American General regarding the past and current business operations, financial
condition and future prospects of their respective companies. In addition,
Goldman Sachs reviewed the reported price and trading activity for the Shares
and for shares of American General Common Stock, compared certain financial
and stock market information for Home Beneficial and for American General with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. American General did not make available to Goldman
Sachs its projections of expected future performance; consequently, its review
of such information for purposes of rendering its opinion was limited to
discussions with management of American General of analysts' estimates for
1997. In addition, Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of Home Beneficial or American General
or any of their respective
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subsidiaries and, except for the Appraisal referred to above, was not
furnished with any such evaluation or appraisal. Goldman Sachs was aware that
Home Beneficial had received, prior to entering into the Merger Agreement, an
indication of interest from another party expressing a willingness, subject to
due diligence and other contingencies, to pay a purchase price potentially in
excess of the Merger Consideration. Goldman Sachs understood that in
evaluating such indication of interest the Home Beneficial Board took into
consideration the relative risks and benefits in pursuing the preliminary
indication of interest of such other party, including the uncertainties as to
whether a transaction could be consummated with such other party at the high
end of the range of values it had indicated and the potential adverse impact
that a decision to pursue discussions with such other party could have on the
definitive offer Home Beneficial had received from American General. Due to
its preliminary nature, Goldman Sachs did not conduct an evaluation analysis
regarding such indication of interest, nor was Goldman Sachs requested to do
so by Home Beneficial.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its written opinion to the Home
Beneficial Board dated as of December 22, 1996. Goldman Sachs utilized
substantially the same type of analyses in connection with providing the
written opinion attached hereto as Annex B.
(i) Discounted Dividend Analysis. Goldman Sachs performed a discounted
dividend analysis, assuming a dividend pay-out ratio of 40.0%, under the
following two scenarios: (a) using a projection of 4.0% earnings growth for
Home Beneficial (the "4.0% Scenario") and (b) using a projection of 8.0%
earnings growth for Home Beneficial (the "8.0% Scenario"), in each case
based upon Institutional Brokers' Estimate System ("IBES") median earnings
estimates as of December 20, 1996, for 1997. Goldman Sachs calculated a net
present value of projected dividends for the years 1997 through 2001 using
discount rates ranging from 10.0% to 14.0%. Goldman Sachs also calculated
Home Beneficial's terminal values as of December 31, 2001 based on the
latest twelve months ("LTM") EPS multiples ranging from 12.0x to 18.0x.
These terminal values were then discounted to present value using discount
rates ranging from 10.0% to 14.0%. The analysis provided implied per share
values ranging from $20.86 to $35.00 in the 4.0% Scenario and from $23.94
to $40.36 in the 8.0% Scenario.
(ii) Pro Forma Merger Analysis. Goldman Sachs computed a pro forma Merger
analysis based on certain assumptions regarding post-Merger capital
structure, cost savings and other matters. This analysis indicated that
synergies of at least $7.9 million would be required in order for the
Merger to be non-dilutive to American General at a price per Share of
$39.00. Goldman Sachs did not engage in a determination of the actual
dollar amount or composition of synergies anticipated as a result of the
Merger, nor was Goldman Sachs requested to do so by Home Beneficial. This
analysis further indicated that, based on the current dividend of $88.00
per 100 Shares paid on the Shares and the foregoing assumptions, those
stockholders of Home Beneficial making a Stock Election would receive a
total of $125.96 per 100 Shares in dividends on a pro forma basis,
representing a 43.1% increase.
(iii) Selected Public Companies Analysis. Goldman Sachs reviewed and
compared certain financial information, ratios and public market multiples
relating to Home Beneficial and to American General to corresponding
financial information, ratios and public market multiples for 11 publicly
traded companies in the life insurance industry: Providian, Jefferson-
Pilot, Torchmark, Unitrin, American National, Liberty Corp, Equitable,
ReliaStar, Protective Life, Provident and USLIFE (the "Selected
Companies"). The Selected Companies were chosen because they are publicly
traded companies with operations that for purposes of analysis may be
considered similar to the operations of Home Beneficial and of American
General. The multiples of Home Beneficial were calculated using a share
price of $29.25 per share, the closing price of the Home Beneficial Non-
Voting Common Stock on Nasdaq on December 20, 1996, the last full trading
day before the Merger was announced. The multiples of American General were
calculated using a share price of $40.25 per share, the closing price of
the shares on the NYSE on December 20, 1996, the last full trading day
before the Merger was announced. The multiples and ratios for Home
Beneficial, American General and the Selected Companies were based on the
most recent publicly available information. The earnings per share growth
estimate for a projected 5-year period for Home Beneficial was based on
information provided by the Actuarial Firm with the approval of Home
Beneficial.
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Goldman Sachs considered, among other multiples and ratios, estimated
price-to-earnings ratios for 1996 (the "1996 P/E Ratio") and for 1997 (the
"1997 P/E Ratio") based on median IBES earnings estimates as of December
20, 1996, earnings per share growth for a historical 5-year period (the
"Historical 5-Year EPS Growth Rate") and for a projected 5-year period (the
"Projected 5-Year EPS Growth Rate"), the price-to-adjusted book ratio (the
"Price-to-Adjusted Book Ratio") for common equity before adjustment for net
unrealized investment gains pursuant to FAS 115, the dividend payout (the
"Dividend Payout"), the dividend yield (the "Dividend Yield") and the
estimated return on equity for 1996 (the "1996E ROE") based on 1996
earnings per share median IBES estimate as a percentage of book value per
share. Goldman Sachs' analyses indicated that (a) the 1996 P/E Ratio for
the Selected Companies ranged from 10.1x to 16.9x, with an average of
13.1x, compared with 1996 P/E Ratios of 13.1x for Home Beneficial and of
12.6x for American General; (b) the 1997 P/E Ratio for the Selected
Companies ranged from 9.3x to 15.2x, with an average of 11.7x, compared
with 1997 P/E Ratios of 12.3x for Home Beneficial and of 11.0x for American
General; (c) the Historical 5-Year EPS Growth Rate for the Selected
Companies ranged from 2.0% to 140.0%, with an average of 21.0%, compared
with Historical 5-Year EPS Growth Rates of -4.0% for Home Beneficial and of
6.0% for American General; (d) the Projected 5-Year EPS Growth Rate for the
Selected Companies ranged from 8.0% to 15.0%, with an average of 11.0%,
compared with Projected 5-Year EPS Growth Rates of 5.0% for Home Beneficial
and of 10.0% for American General; (e) the Price-to-Adjusted Book Ratio for
the Selected Companies ranged from 0.9x to 3.1x, with an average of 1.7x,
compared with Price-to-Adjusted Book Ratios of 1.0x for Home Beneficial and
of 1.9x for American General; (f) the Dividend Payout for the Selected
Companies ranged from 10.0% to 66.0%, with an average of 30.0%, compared
with Dividend Payouts of 39.0% for Home Beneficial and of 41.0% for
American General; (g) the Dividend Yield for the Selected Companies ranged
from 0.8% to 4.0%, with an average of 2.3%, compared with Dividend Yields
of 3.0% for Home Beneficial and of 3.2% for American General; and (h) the
1996E ROE for the Selected Companies ranged from 7.3% to 19.4%, with an
average of 12.0%, compared with 1996E ROEs of 7.2% for Home Beneficial and
of 14.4% for American General.
(iv) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to selected transactions in the home service industry
since 1986, (the "Selected Home Service Transactions") and in the life
insurance industry since 1990 (the "Selected Life Insurance Transactions").
Such analyses indicated that for the Selected Home Service Transactions,
aggregate consideration as a multiple (a) of surplus plus AVR (and in the
case of pre-1992 transactions, of surplus plus MSVR) ranged from 1.81x to
4.66x, compared with 1.87x for the Merger; (b) of tangible GAAP book value
ranged from 1.08x to 2.85x, compared with 1.33x for the Merger; and (c) of
LTM net income ranged from 13.6x to 25.9x, compared with 17.8x for the
Merger, in each case assuming Merger Consideration per Share of $39.00.
Such analyses also indicated that for the Selected Life Insurance
Transactions, aggregate consideration as a multiple (a) of tangible GAAP
book value ranged from 0.84x to 4.63x, compared with 1.33x for the Merger;
and (b) of LTM net income ranged from 10.4x to 30.5x, compared with 17.8x
for the Merger, in each case assuming Merger Consideration per Share of
$39.00.
(v) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Shares. In addition, Goldman
Sachs calculated that the price per Share of $39.00 to be paid pursuant to
the Merger Agreement represented a premium of 33.3% over a price per Share
of $29.25, the closing price of the Shares on Nasdaq on December 20, 1996,
the last full trading day before the Merger was announced.
(vi) Dividend Adjustment Analysis. Goldman Sachs performed a dividend
adjustment analysis in which they calculated the dividend adjustment per
Share and the transaction value per Share using intercompany dividend
amounts ranging from $0.00 to $300 million. This analysis determined that
(a) the dividend adjustment per Share would be $0.55 and the transaction
value per Share would be $38.45 based upon an assumed intercompany dividend
payment of $0.00, and (b) the dividend adjustment per Share would be $0.0
and the transaction value per Share would be $39.00 based upon an assumed
intercompany dividend payment of $250 million.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without
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considering the analyses as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs did not attribute any particular weight to any
analysis or factor considered by it; rather Goldman Sachs made its
determination as to fairness on the basis of its experience and professional
judgment, after considering the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable
to Home Beneficial or American General or the contemplated transaction. The
analyses were prepared solely for purposes of Goldman Sachs' providing its
opinion to the Home Beneficial Board as to the fairness of the Merger
Consideration to the holders of Shares receiving such Merger Consideration and
do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts
of future results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of the parties or its
respective advisors, none of Home Beneficial, American General, Goldman Sachs
or any other person assumes responsibility if future results are materially
different from those forecast.
As described above, Goldman Sachs' opinion to the Home Beneficial Board was
one of many factors taken into consideration by Home Beneficial in making its
determination to approve the Merger Agreement. Goldman Sachs' opinion was
provided to the Home Beneficial Board for the information and assistance of
the Home Beneficial Board in connection with its consideration of the Merger,
and such opinion does not constitute a recommendation as to how any holder of
Shares should vote with respect thereto. The foregoing summary does not
purport to be a complete description of the analyses performed by Goldman
Sachs and is qualified by reference to the written opinion of Goldman Sachs
set forth in Annex B hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Home Beneficial having acted as its financial advisor in
connection with, and having participated in certain of the negotiations
leading to, the Merger Agreement. Goldman Sachs has also provided certain
investment banking services to American General from time to time, including
having acted as lead underwriter in connection with several public and private
offerings of securities in recent years, including a private placement of
7.57% Capital Securities issued by an affiliate of American General on
November 29, 1996 and a public offering of 6.00% Convertible Monthly Income
Preferred Securities issued by an affiliate of American General on May 24,
1995, and may provide investment banking services to American General in the
future. Home Beneficial selected Goldman Sachs as its financial advisor
because it is a nationally recognized investment banking firm that has
substantial experience in transactions similar to the Merger.
Goldman Sachs is a full-service securities firm and in the normal course of
its trading activities may from time to time effect transactions and hold
positions in the securities or options on securities of Home Beneficial and/or
American General and certain of its subsidiaries for its own account and for
the account of its customers. As of the date of the opinion, Goldman Sachs had
accumulated a long position of 3,989 shares of American General Common Stock.
Pursuant to a letter agreement dated as of October 29, 1996 and executed on
December 3, 1996 (the "Engagement Letter"), Home Beneficial engaged Goldman
Sachs to act as its financial advisor in connection with the Merger. Pursuant
to the terms of the Engagement Letter, Home Beneficial has agreed to pay
Goldman Sachs upon consummation of the Merger a transaction fee of
approximately $5 million based on per share Merger Consideration of $39.00,
subject to adjustment if the total number of shares of Home Beneficial's
common stock outstanding on a fully diluted basis should change prior to
consummation of the Merger. The determination of such transaction fee was
based upon the aggregate consideration to be paid in connection with the
Merger. Home Beneficial has also agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorneys' fees, and to indemnify
Goldman Sachs against certain liabilities, including certain liabilities under
the federal securities laws.
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AMERICAN GENERAL'S REASONS FOR THE MERGER
The American General Board, having received an opinion from Merrill Lynch
that the Merger was fair to American General from a financial point of view,
unanimously approved the Merger Agreement and the issuance of the Stock
Consideration in connection with the Merger. The Merger does not require the
approval of the American General shareholders. In reaching its conclusion to
approve the Merger Agreement, the American General Board determined that the
Merger is consistent with and in furtherance of the long-term business
strategy of American General. The American General Board believes that the
acquisition of Home Beneficial will be an excellent geographic and strategic
fit with American General's existing life insurance business. When the plan to
consolidate Home Beneficial's operations into those of American General's life
insurance subsidiary, AGLA, is fully implemented, American General expects a
reduction in annual operating expenses of approximately $20 million. There can
be no assurance that such cost savings, if any, will be achieved. See "--Plans
for Home Beneficial After the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General
Certain directors and executive officers of Home Beneficial have interests
in the Merger that are in addition to the interests of Home Beneficial and its
shareholders generally. See "SECURITY OWNERSHIP--Security Ownership of Certain
Stockholders, Directors and Management of Home Beneficial." The Home
Beneficial Board was aware of these interests and considered them, among other
matters, in approving the Merger Agreement.
Indemnification of Home Beneficial Directors and Officers
The Merger Agreement provides that all rights to indemnification existing in
favor of the present or former directors, officers, employees, fiduciaries and
agents of Home Beneficial or any of Home Beneficial's subsidiaries
(collectively, the "Indemnified Parties") as provided in the Home Beneficial
Articles or the Home Beneficial ByLaws or similar organizational documents of
any of Home Beneficial's subsidiaries or pursuant to the terms of any
indemnification agreement entered into between Home Beneficial and any of the
Indemnified Parties with respect to matters occurring prior to the Effective
Time shall survive the Merger and will continue in full force and effect, to
the fullest extent and for the maximum term permitted by law. Additionally,
American General has agreed to continue for not less than six years from the
Effective Time the current policies of the directors' and officers' liability
insurance maintained by Home Beneficial, or the equivalent therefor, with
respect to matters occurring prior to the Effective Time, provided that in no
event will American General or AGC Life be required to expend to maintain or
procure insurance coverage any amount per annum in excess of 200% of the
aggregate premiums paid for such coverage on an annualized basis in 1995.
Supplemental Executive Retirement Plan
In October 1996, Home Beneficial's Board approved a Supplemental Executive
Retirement Plan (the "Plan") which became effective November 1, 1996. The
Plan, as re-approved and amended in December 1996, is an unfunded plan
maintained primarily for the purpose of providing deferred compensation to
certain senior management employees. The Plan provides supplemental retirement
income to participants in excess of their employer-provided benefits under
certain other plans and arrangements up to the maximum benefit specified in
the Plan. The Plan also provides supplemental survivor's income to a
participant's spouse, a death benefit to a participant's beneficiaries and
certain limited medical benefits.
A participant's accrued benefit under the Plan is an annual amount payable
monthly, equal to a stated percentage (from 55% to 70% depending on the
participant) of the participant's highest weekly compensation as determined
pursuant to the Plan reduced by: (a) ten percent for each year of future
service (beginning November 1, 1996) less than ten; (b) benefits paid by Home
Beneficial under its retirement plan, (c) except in the event of disability,
five percent for each year payment begins before age 65; and (d) in the event
of disability, any benefits paid under Home Beneficial's welfare benefit plan
providing long-term disability benefits.
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The retirement benefit is payable beginning at age 65, and is payable
monthly in the form of a 100% joint and spouse survivor annuity for R.W.
Wiltshire, Jr., George T. Richardson and W.B. Wiltshire, if married at their
benefit starting dates, and a life annuity for all other participants. The
other participants, who include Hugh D. Garnett, may elect to receive payment
in the form of an actuarially reduced 100% joint and spouse survivor annuity.
A participant will become fully vested in his accrued retirement benefit
upon the earliest to occur of the following events, while he is an active
employee: (a) death; (b) termination of employment due to disability; or (c)
completion of five years of service. A participant will forfeit any benefits
in the event of termination from employment prior to satisfying the vesting
requirements.
Notwithstanding the foregoing, additional benefits are payable on account of
a change of control (as defined). Upon a change in control participants in the
Plan are deemed to have 10 years of future service and become 100% vested in
their accrued benefit, and their accrued benefit is payable immediately
without reduction for payment before age 65. In addition, the Plan provides
participants with certain retiree life insurance benefits after termination of
employment comparable to the retiree benefits they would have received if they
were considered retirees under Home Beneficial's welfare benefit plan
providing retiree life insurance benefits. Those participants who are eligible
to receive an unreduced 100% joint and spouse survivor annuity are also
provided medical insurance benefits until age 65 for themselves and their
dependents comparable to the benefits under Home Beneficial's welfare benefit
plan providing medical expense benefits. While it is believed that payments
and benefits are not subject to the excise tax imposed by Section 4999 of the
Code, the Plan provides that participants will be reimbursed for any excise
tax on such payments and benefits and for any income, employment and excise
taxes payable on the reimbursement.
Severance Plan
In October 1996, Home Beneficial's Board approved an employee severance pay
policy. The policy covers all home office employees other than those
classified as hourly paid or who are not normally compensated for time off due
to illness, vacation and holidays. Additionally, certain executive employees
are excluded from the policy. In addition, the Home Beneficial Board may
exclude any employee from participation under the policy within 30 days after
the employee's date of hire.
Under the policy, a covered termination is a cessation of employment with
Home Beneficial or its then affiliates within 18 months after a change in
control (as defined) on account of either: (a) termination of employment by
the covered employee for good reason (defined to mean the occurrence after a
change in control of a reduction in base salary or a transfer of job location
more than 25 miles from Home Beneficial's home office); or (b) termination
initiated by Home Beneficial for any reason other than death, disability or
cause (as defined).
In the event of a "covered termination," an employee will be entitled to a
severance pay benefit determined as follows: (a) for officers, one week of pay
for each of the first five years of service plus three weeks of pay for each
year of service over five (subject to a maximum of 104 weeks pay); and (b) for
other employees, one week of pay for each of the first five years of service
plus two weeks of pay for each year of service over five (subject to a maximum
of 104 weeks of pay). The severance pay benefit will not be reduced or
eliminated if an employee starts another job before the end of the severance
pay period. In the event of death after termination of employment, payment
will be continued for the balance of the severance pay period (i.e., the
period for which the total number of weeks of pay is paid, based on payment at
regular paydays).
PLANS FOR HOME BENEFICIAL AFTER THE MERGER
American General plans to consolidate Home Beneficial's operations into
those of AGLA which is expected to continue to be based in Nashville,
Tennessee. AGLA is an indirect, wholly owned subsidiary of American General
that utilizes employee agents to sell and service life and health insurance.
The consolidation is expected to take up to 12 to 15 months and, when
completed, should result in a $20 million reduction in annual operating
expenses.
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement not summarized elsewhere in this Proxy Statement/Prospectus. A copy
of the Merger Agreement is attached as Annex A to this Proxy
Statement/Prospectus and is incorporated herein by reference. The following
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement.
The Merger
The Merger Agreement provides that, as soon as practicable following the
approval of the Merger Agreement by Home Beneficial's shareholders, and the
satisfaction or waiver of the other conditions to each party's obligation to
consummate the Merger, Home Beneficial will be merged with and into AGC Life
in accordance with the VSCA and the MGBCL, the separate corporate existence of
Home Beneficial will cease, and AGC Life will continue as the surviving
corporation ("Surviving Corporation") in the Merger.
Directors and Officers
Pursuant to the Merger Agreement, the directors and officers of AGC Life
immediately prior to the Effective Time will be the directors and officers,
respectively, of the Surviving Corporation following the Merger.
Charter and Bylaws
Pursuant to the Merger Agreement, the Articles of Incorporation and Bylaws
of AGC Life as in effect immediately prior to the Effective Time will be the
Articles of Incorporation and Bylaws, respectively, of the Surviving
Corporation following the Merger.
Representations and Warranties
The Merger Agreement contains various customary representations and
warranties of each of Home Beneficial and American General as to (i)
organization, (ii) capitalization, (iii) ownership of subsidiaries,
(iv) authority relative to the Merger Agreement, (v) consents and approvals,
(vi) compliance with applicable federal securities law requirements and
absence of material misstatements in documents and reports filed with the
Commission, (vii) statutory financial statements, (viii) the absence of
certain changes, (ix) the absence of undisclosed material litigation, (x) the
absence of undisclosed liabilities, (xi) the absence of material violations,
breaches or defaults under any charter documents, agreements, order, statute,
rule or regulation, or governmental authorization, (xii) taxes, (xiii) title
to property, (xiv) the conduct of insurance business by each of American
General and Home Beneficial and their respective insurance subsidiaries in
compliance with applicable laws, (xv) regulatory filings, (xvi) investments,
(xvii) reserves , (xviii) the accuracy of the information provided for
inclusion in this Proxy Statement/Prospectus and the Registration Statement,
(xix) brokers being entitled to fees in connection with the Merger, (xx)
environmental matters, and (xxi) absence of material misstatements or
omissions in the Merger Agreement, reports or documents filed with the
Commission, and statutory financial statements.
American General has also made representations and warranties as to (i) the
ownership by American General and its subsidiaries of Home Beneficial Common
Stock and (ii) its reliance upon its independent investigation of Home
Beneficial and the warranties contained in the Merger Agreement and the
absence of liability to American General on the part of the directors,
officers and other representatives of Home Beneficial and its subsidiaries
based on information provided or made available, or statements made to
American General prior to the execution of the Merger Agreement.
Home Beneficial has also made representations and warranties as to (i) the
absence of repurchases of Home Beneficial Common Stock by Home Beneficial
since September 30, 1996, (ii) employee benefit plans and compliance with the
Employee Retirement Income Security Act of 1974, as amended, (iii) labor
relations and other employee matters, (iv) related party transactions, (v) the
identification of affiliates and the delivery of a
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letter agreement from affiliates in connection with Rule 145 under the
Securities Act, (vi) the receipt of an opinion of Goldman Sachs to the effect
that the consideration to be received by the Home Beneficial shareholders in
the Merger is fair to such shareholders, (vii) obligations of Home Beneficial
and its subsidiaries under futures or option contracts, swaps, hedges or
similar instruments ("Derivatives"), (viii) material contracts to which Home
Beneficial or its subsidiaries is a party or by which any of them is bound,
and (ix) the Investment Company Act and Investment Advisors Act.
The respective representations and warranties of each of Home Beneficial and
American General will terminate at the Effective Time, other than the
representation and warranty of American General that it has conducted its own
independent review of Home Beneficial, has relied solely upon its own
investigation and analysis and the warranties contained in the Merger
Agreement and agrees, to the fullest extent permitted by law, that none of
Home Beneficial, its subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives shall have any
liability or responsibility whatsoever to American General based upon any
information provided or made available, or statements made, to American
General prior to the execution of the Merger Agreement.
Conduct of Business Pending the Merger
Pursuant to the Merger Agreement, Home Beneficial and American General have
agreed that, during the period from the date of the Merger Agreement until the
Effective Time, except as contemplated by the Merger Agreement or as mutually
consented to, each of Home Beneficial, AGC Life and American General and each
of their respective subsidiaries will conduct its business in the ordinary
course consistent with past practice and shall use all reasonable efforts to
preserve intact their respective business organizations and relationships with
third parties. In addition, each of Home Beneficial and American General have
agreed not to: (i) amend its articles of incorporation or bylaws (unless, in
case of American General, it would not have any adverse impact on the
transactions contemplated by the Merger Agreement), (ii) declare or pay any
dividends or other distribution (except for regular quarterly dividends),
(iii) split, combine or reclassify any shares of its capital stock (unless, in
the case of American General, it agrees to appropriate adjustment to the
Exchange Ratio), (iv) repurchase, redeem, purchase or otherwise acquire any
shares of capital stock of Home Beneficial or permit their respective
subsidiaries to do so, (v) take any action that would reasonably be expected
to cause the Merger to fail to qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code, or permit their respective subsidiaries
to do so, (vi) allow any of their respective insurance subsidiaries to conduct
transactions in specified investments except in compliance with relevant
investment policies and all applicable insurance laws and regulations, or
(vii) except to the extent necessary to comply with the requirements of
applicable laws and regulations, take, or agree or commit to take, any action
that would make any of its representations and warranties inaccurate in any
material respect at any time prior to the Effective Time or omit, or agree or
commit to omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect
(provided that each of Home Beneficial and American General is permitted to
take or omit to take such action which (without any uncertainty) can be cured,
and in fact is cured, at or prior to the Effective Time) or take, or agree or
commit to take, any action that would result in, or is reasonably likely to
result in, any conditions to the Merger not being satisfied.
Pursuant to the Merger Agreement, Home Beneficial has also agreed that,
during the period from the date of the Merger Agreement until the Effective
Time, Home Beneficial will not, and will not permit any subsidiary to: (i)
subject to the Home Beneficial Board's fiduciary duties to its shareholders,
merge or consolidate with any other person or, except in the ordinary course
of business, acquire a material amount of assets of any other person, (ii)
sell, lease, license or otherwise surrender, relinquish or dispose of any
material facility owned or leased by it or any of its subsidiaries or any
assets or property which are material to it and its subsidiaries, taken as a
whole, except pursuant to existing disclosed contracts or commitments or in
the ordinary course of business consistent with past practice (which past
practices shall not be deemed to include actions taken in connection with the
Merger), (iii) settle any material audit, make or change any material tax
election or file amended tax returns, (iv) issue any capital stock or other
securities or enter into any amendment of any material term of any
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outstanding security, or incur any material indebtedness except in the
ordinary course of business pursuant to existing credit facilities or
arrangements, or amend or otherwise increase, accelerate the payment of
vesting of amounts payable or to become payable under or fail to make any
required contribution to, any Home Beneficial employee benefit plan or
materially increase any non-salary benefits payable to any employee or former
employee, except in the ordinary course of business consistent with past
practice or as otherwise permitted by the Merger Agreement, (v) grant any
increase in the compensation or benefits of directors, officers, employees,
consultants or agents (except in the ordinary course of business consistent
with past practice), (vi) enter into or amend any employment agreement or
other employment arrangement, except in the ordinary course of business
consistent with past practice (which past practices shall not be deemed to
include actions taken in connection with the Merger), (vii) make any change in
any accounting method or accounting practice followed by it or any of its
subsidiaries, except in specified circumstances, and (viii) enter into any
agreement to purchase, or to lease for a term in excess of one year, any real
property, provided that Home Beneficial, or any of its subsidiaries, (a) may
as a tenant, or a landlord, renew any existing lease for a term not exceeding
eighteen months, and (b) renew any lease pursuant to an option granted prior
to the date of the Merger Agreement.
Pursuant to the Merger Agreement, American General has agreed that, from the
date of the Merger Agreement until the Effective Time, it will not and will
not permit any subsidiary to: (i) merge or consolidate with any other person
or, except in the ordinary course of business, acquire a material amount of
assets of any other person, if such merger, consolidation or acquisition could
reasonably be expected to have a material impact on the ability of American
General to consummate the transactions contemplated by the Merger Agreement,
and (ii) issue any shares of capital stock or other securities (except for
issuances of shares in the ordinary course pursuant to any American General
stock options and restricted stock awards granted under a stock plan of
American General) in connection with any transaction requiring shareholder
approval unless American General first notifies Home Beneficial in writing of
such transaction and provides Home Beneficial with information with respect
thereto.
On February 12, 1997, American General provided written notice to Home
Beneficial that it had entered into a definitive agreement with USLIFE
pursuant to which American General would require the approval of its
stockholders for the transaction. After taking account of such notice and such
other matters as it considered appropriate, Home Beneficial determined not to
exercise its right to terminate the Merger Agreement.
In addition, from the date of the Merger Agreement until the Effective Time,
Home Beneficial has agreed that each of Home Beneficial and each Home
Beneficial subsidiary will (i) except to the extent contemplated by clause
(ii) below or except to the extent consistent with past practice, invest
available cash only in corporate bonds (other than bonds issued by public
utilities) rated no higher than A1 nor lower than Baa3 by Moody's Investor
Services, Inc. or no higher than A+ nor lower than BBB-- by Standard & Poors
Corporation, with maturities of not fewer than five nor more than ten years,
(ii) not invest more than 30% of available cash in the making of mortgage
loans or purchasing mortgage backed securities, provided, however, that
nothing in the Merger Agreement will require any Home Beneficial subsidiary to
make any investment other than in compliance with the investment policies of
such subsidiary and all applicable insurance laws and regulations, or prohibit
Home Beneficial from making investments, mortgage loans or purchasing mortgage
backed securities pursuant to existing disclosed contracts or commitments, and
(iii) neither purchase nor issue any Derivatives and use all reasonable
efforts to sell, closeout or otherwise liquidate, in an orderly fashion, any
such Derivatives which Home Beneficial or any of its subsidiaries owns.
Filings and Other Actions
Pursuant to the Merger Agreement, the parties have agreed that each of Home
Beneficial, American General and AGC Life will (i) promptly prepare and file
all requisite applications and notifications with the Virginia Bureau of
Insurance, the Missouri Department of Insurance, and the insurance departments
of any other applicable states and make all filings and submissions under the
HSR Act, (ii) use reasonable best efforts to timely make all necessary filings
and timely seek all necessary consents, approvals, permits or authorizations
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from the date of the Merger Agreement until the Effective Time, and (iii) use
reasonable best efforts to take all other actions, make all filings,
registrations and submissions, and do all things necessary or appropriate to
consummate the transactions contemplated by the Merger Agreement as soon as
practicable. See "--Regulatory Filings and Approvals."
Other Acquisition Proposals; Certain Fees
The Merger Agreement provides that, from the date of the Merger Agreement
until the termination thereof, Home Beneficial will not, nor will it permit
any of its subsidiaries to, nor will it authorize or permit any officer,
director of, employee of, or any investment banker, attorney, accountant or
other advisor or representative of, Home Beneficial or any of its subsidiaries
to, directly or indirectly, (i) solicit, initiate or encourage the submission
of an Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or agree to or endorse, or take any other action to facilitate any
Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal, in each case subject to certain exceptions necessary to comply with
the Home Beneficial Board's fiduciary obligations to the Home Beneficial
shareholders.
Home Beneficial has agreed to advise American General as promptly as
practicable of the receipt by it (or any of the other entities or persons
referred to above) of an Acquisition Proposal or any inquiry which could lead
to any Acquisition Proposal, the material terms and conditions of such
Acquisition Proposal or inquiry, and the identity of the person making any
such Acquisition Proposal or inquiry. Home Beneficial will keep American
General fully informed of the status and details of any such Acquisition
Proposal or inquiry. Notwithstanding the foregoing, however, the Home
Beneficial Board is not prohibited from furnishing information to, or entering
into discussions or negotiations with, any person or entity that makes an
unsolicited bona fide Acquisition Proposal if, and only to the extent that,
(A) the Home Beneficial Board, after consultation with and based upon the
advice of independent legal counsel, determines in good faith that such action
is necessary for the Home Beneficial Board to comply with its fiduciary duties
to Home Beneficial's shareholders under applicable law and (B) prior to taking
such action, Home Beneficial (x) provides reasonable notice to American
General to the effect that it is taking such action and (y) receives from such
person or entity an executed confidentiality agreement in reasonably customary
form. In addition, Home Beneficial has agreed to cease and terminate any
existing activities, discussions or negotiations with any parties with respect
to any possible Acquisition Proposal and to notify each party with which it,
or any officer, director, investment advisor, financial advisor, attorney or
other representative has had discussions during the 30 days prior to the date
of Merger Agreement that the Home Beneficial Board no longer seeks the making
of any Acquisition Proposal.
The Home Beneficial Board has agreed that it will not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Home
Beneficial or AGC Life, the approval or recommendation by such board of the
Merger Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal or (iii) enter into any
agreement with respect to any Acquisition Proposal, unless Home Beneficial
receives an Acquisition Proposal and the Home Beneficial Board determines in
good faith, following consultation with outside counsel, that in order to
comply with its fiduciary duties to the Home Beneficial stockholders under
applicable law it is necessary for the Home Beneficial Board to withdraw or
modify its approval or recommendation of the Merger Agreement or the Merger,
approve or recommend such Acquisition Proposal, enter into an agreement with
respect to such Acquisition Proposal or terminate the Merger Agreement. In the
event Home Beneficial Board takes any of the foregoing actions in (i), (ii) or
(iii) or terminates the Merger Agreement when an Acquisition Proposal is
outstanding, Home Beneficial shall, concurrently with the taking of any such
action, pay to American General $20 million in same day funds. Nothing in this
paragraph will prohibit Home Beneficial from taking and disclosing to the Home
Beneficial stockholders a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act or from making any disclosure to Home Beneficial's
stockholders that, in the good faith reasonable judgment of the Home
Beneficial Board based on the advice of outside counsel, is required under
applicable law; provided that, except as otherwise permitted in this
paragraph, Home Beneficial does not withdraw or modify, or propose to withdraw
or modify, its position with respect to
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the Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal. Notwithstanding anything contained in the Merger
Agreement to the contrary, any action by the Home Beneficial Board permitted
by this paragraph will not constitute a breach of the Merger Agreement by Home
Beneficial.
Expenses
The Merger Agreement provides that, except in the event of the break-up fee
described above, whether or not the Merger is consummated, all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses, except
that those expenses incurred in connection with printing and mailing of this
Proxy Statement/Prospectus, as well as the filing fees relating to the
Registration Statement and the HSR Act, will be shared equally by American
General and Home Beneficial.
Indemnification and Insurance
The Merger Agreement provides that all rights to indemnification existing in
favor of the Indemnified Parties as provided in the Home Beneficial Articles
or the Home Beneficial Bylaws or similar organizational documents of any of
its subsidiaries as in effect as of the date of the Merger Agreement or
pursuant to any indemnification agreements between Home Beneficial and any of
the Indemnified Parties with respect to matters occurring prior to the
Effective Time will survive the Merger and will continue in full force and
effect to the fullest extent and for the maximum term permitted by law, and
shall be enforceable by the Indemnified Parties against the Surviving
Corporation. In addition, AGC Life has agreed to maintain in effect for not
less than six years from the Effective Time the current policies of directors'
and officers' liability insurance maintained by Home Beneficial (provided that
American General may substitute therefor policies of at least equivalent
coverage containing terms and conditions which are no less advantageous) with
respect to matters occurring prior to the Effective Time, provided that in no
event shall American General or the Surviving Corporation be required to pay
to maintain or procure insurance coverage any amount per annum in excess of
200% of the aggregate premiums paid by Home Beneficial for such coverage on an
annualized basis in 1995. In the event the payment of such amount for any year
is insufficient to maintain such insurance or equivalent coverage cannot
otherwise be obtained, the Surviving Corporation will purchase as much
insurance as may be purchased for the amount indicated. These obligations
survive the consummation of the Merger and are intended to benefit each of the
Indemnified Parties.
Conditions to the Merger
The Merger Agreement provides that the respective obligations of Home
Beneficial, AGC Life and American General to effect the Merger are subject to
the satisfaction at or prior to the Effective Time of the following
conditions: (i) the waiting period applicable to the Merger under the HSR Act
shall have expired or been terminated and no action shall have been instituted
by the DOJ or the FTC challenging or seeking to enjoin the Merger, which
action shall not have been withdrawn or terminated; (ii) no statute, rule,
regulation, executive order, decree, ruling or preliminary or permanent
injunction shall have been enacted, entered, promulgated or enforced by any
federal or state court or governmental authority having jurisdiction which
prohibits, restrains, enjoins or restricts consummation of the Merger; (iii)
all third party consents and approvals (other than consents and approvals
required by governmental laws and regulations) shall have been obtained; (iv)
all filings, permits, authorizations, consents, or approvals (including an
order of the State of Missouri Insurance Department approving the Merger as a
statutory merger under Missouri law) required by governmental laws and
regulations to consummate the transactions contemplated by the Merger
Agreement shall have been made; provided, that if all other conditions to the
Closing set forth in the Merger Agreement have been satisfied or waived, the
approvals of the regulatory authorities of the State of Missouri have not been
obtained, and American General has received an opinion of counsel that the use
of a substitute subsidiary to effect the consummation of the Merger will not
affect the qualification of the Merger as a tax-free transaction or have
certain other specified adverse tax consequences to American General, American
General has agreed that it shall effect the Merger through the use of a
substitute subsidiary the use of which is not subject to any governmental laws
and regulations (other than
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the approval of the Virginia State Corporation Commission) and the appropriate
forms shall have been executed, filed and approved as required by the
corporate and insurance laws and regulations of the Commonwealth of Virginia
and the State of Missouri; (v) the Merger Agreement and the Merger shall have
been adopted and approved by the requisite vote of Home Beneficial
shareholders; (vi) the Registration Statement shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order; and (vii) the shares of American General
Common Stock issuable in the Merger shall have been authorized for listing on
the NYSE.
The obligation of Home Beneficial to effect the Merger is subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions: (i) each of American General and AGC Life shall have performed in
all material respects its obligations under the Merger Agreement required to
be performed by it at or prior to the Effective Time; (ii) the representations
and warranties of American General and AGC Life contained in the Merger
Agreement which are qualified with respect to materiality shall be true and
correct in all respects, and such representations and warranties that are not
so qualified shall be true and correct in all material respects, in each case
as of the date of the Merger Agreement and at and as of the Effective Time as
if made at and as of such time (except to the extent such representations and
warranties specifically relate to an earlier date, in which case as of such
earlier date) except as contemplated by the Merger Agreement; (iii) Home
Beneficial shall have received a certificate of the Chairman of the Board, the
President, an Executive Vice President, a Senior Vice President or the Chief
Financial Officer of American General as to the satisfaction of the conditions
in clauses (i) and (ii) of this paragraph; and (iv) Home Beneficial shall have
received an opinion from Debevoise & Plimpton, special counsel to Home
Beneficial, to the effect, on the basis of certain facts, representations by
management of the companies and assumptions set forth in such opinion, that
the Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that American General,
AGC Life and Home Beneficial will each be a party to that reorganization
within the meaning of Section 368(b) of the Code.
The obligations of American General and AGC Life to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions: (i) Home Beneficial shall have performed in all
material respects its obligations under the Merger Agreement required to be
performed by it at or prior to the Effective Time; (ii) the representations
and warranties of Home Beneficial contained in the Merger Agreement which are
qualified with respect to materiality shall be true and correct in all
respects, and such representations and warranties that are not so qualified
shall be true and correct in all material respects, in each case at and as of
the date of the Merger Agreement and at and as of the Effective Time as if
made at and as of such time (except to the extent such representations and
warranties specifically relate to an earlier date, in which case as of such
earlier date), except as contemplated by the Merger Agreement; (iii) American
General and AGC Life shall have received a certificate of the Chairman of the
Board, the President or a Vice President of Home Beneficial as to the
satisfaction of the conditions in clauses (i) and (ii) of this paragraph, and
(iv) American General shall have received an opinion from Skadden, Arps,
Slate, Meagher & Flom LLP, special counsel to American General, to the effect
that, on the basis of certain facts, representations by management of the
companies and assumptions set forth in such opinion, the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that American General, AGC Life and Home
Beneficial will each be a party to that reorganization within the meaning of
Section 368(b) of the Code.
Termination
The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, (i) by mutual written
agreement of Home Beneficial and American General, (ii) by the Board of
Directors of either American General or Home Beneficial, if (a) the Merger
Agreement and the Merger shall fail to receive the requisite vote for approval
and adoption by the shareholders of Home Beneficial at the Special Meeting,
(b) the Merger shall not have been consummated by June 30, 1997, which date
may be extended by written notice of either American General or Home
Beneficial to a date not later than September 30, 1997, if the Merger shall
not have been consummated as a direct result of the failure to obtain certain
regulatory approvals,
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provided that the party seeking to terminate the Merger Agreement shall not
have taken any action that would cause it to be in material violation of any
of its representations, warranties or covenants set forth in the Merger
Agreement, (c) a court of competent jurisdiction or agency or commission shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by the Merger Agreement and such order, decree, ruling or other action shall
have become final and non-appealable provided the party seeking to terminate
the Merger Agreement shall have used all reasonable efforts to remove such
injunction, order or decree, or (d) the Home Beneficial Board shall have
exercised its rights set forth in, and in accordance with the terms of, the
Merger Agreement with respect to an Acquisition Proposal, (iii) by the Home
Beneficial Board (a) pursuant to the exercise of its rights under the Merger
Agreement to abandon the Merger within 10 Trading Days of its receipt of
notice that American General proposes to issue shares of capital stock or
other securities (except for issuances of shares in the ordinary course
pursuant to stock options and restricted stock awards granted under a stock
plan of American General) in connection with any transaction requiring
shareholder approval or (b) if the Trading Average is less than $35.00; and
(iv) by the Board of American General if (a) there has been a breach by Home
Beneficial of any representation or warranty which would be reasonably likely
to have a material adverse effect on Home Beneficial, or (b) there has been a
material breach of any covenants or agreements set forth in the Merger
Agreement on the part of Home Beneficial, which breach is not curable or, if
curable, is not cured within thirty days after written notice of such breach
by American General to Home Beneficial.
As stated above, the Home Beneficial Board would have the right to abandon
the Merger and terminate the Merger Agreement in the event the Trading Average
is less than $35.00 per share. In reaching any such decision to terminate the
Merger Agreement, the Home Beneficial Board would consider such factors as it
considered appropriate under all the facts and circumstances, which could
include but not be limited to the following: (i) the amount by which the
Trading Average of American General Common Stock was less than $35.00 per
share; (ii) the amount by which the 50% limitation on Cash Consideration
exchangeable in the Merger would have to be adjusted in order to enable
special tax counsel to the Companies to deliver the tax opinions required to
consummate the Merger (see "--Allocation Rules--Certain Allocation
Adjustments"), (iii) the trading price of the Home Beneficial Non-Voting
Common Stock; (iv) recent developments in the businesses of American General
and Home Beneficial as of such date; (v) whether to seek American General's
consent to permit Home Beneficial to resolicit its shareholders in
consideration of an agreement not to terminate the Merger Agreement; and (vi)
such other factors as were taken into account initially in approving the
Merger as are relevant at such time. See "THE PROPOSED MERGER--Recommendation
of the Home Beneficial Board and Home Beneficial's Reasons for the Merger."
In the event of termination of the Merger Agreement by either Home
Beneficial or American General as described above, the Merger will be
abandoned and there will generally be no liability or obligation on the part
of American General, Home Beneficial or their respective subsidiaries,
officers and directors, and all obligations of the parties shall terminate,
except for, among other things, (i) certain specified obligations including
without limitation those relating to financial advisory and brokerage fees and
expenses of the Merger and (ii) under the circumstances set forth under "--
Other Acquisition Proposals; Certain Fees" above.
ACCOUNTING TREATMENT
The Merger will be treated as a purchase by American General for accounting
and financial reporting purposes. Under the purchase method of accounting, the
assets and liabilities of Home Beneficial will be recorded on the consolidated
books of American General at their respective fair values at the Effective
Time.
REGULATORY FILINGS AND APPROVALS
The regulatory filings and approvals described below must be made before the
Merger can be effected and certain of such approvals may take a significant
period of time to obtain. Although Home Beneficial and American General
believe that such approvals will be obtained, there can be no assurance that
this will be the case or that such approvals will be obtained in a timely
manner or that such approvals will not be conditioned temporarily or otherwise
encumbered.
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Approval by Insurance Regulators
Before the Merger can be effected, American General will be required to
obtain the prior approvals of the Virginia State Corporation Commission and
the Missouri Department of Insurance, respectively, pursuant to applicable
laws and regulations. American General has made the necessary filings with the
Virginia State Corporation Commission and the Missouri Department of Insurance
to obtain these approvals and is prepared to make any additional filings where
necessary. Notification of approval was received from the Missouri Department
of Insurance on February 25, 1997 and from the Virginia Bureau of Insurance on
February 28, 1997.
Pursuant to the Merger Agreement, Home Beneficial has agreed to use all
reasonable efforts to cause HBLIC to pay a dividend of at least $250 million
(which may be in the form of a demand promissory note) to Home Beneficial on
or before the date immediately prior to the Closing Date. Payment of the
dividend is subject to approval by the Virginia Bureau of Insurance and the
satisfaction or waiver of all conditions to the Closing capable of being
satisfied prior to the Closing Date. On February 28, 1997, the Virginia Bureau
of Insurance approved a dividend by HBLIC to Home Beneficial of up to $300
million, which dividend has been declared by the board of directors of HBLIC
and will be paid on the date immediately prior to the Closing Date, assuming
the satisfaction or waiver of all the conditions to the Merger that are
capable of being satisfied prior to the Closing Date. Under the Merger
Agreement, if such a dividend were paid in an amount less than $250 million,
the Merger Consideration per share of Home Beneficial Common Stock would be
reduced by an amount determined on the basis of the dividend, if any, actually
paid, but in no event by more than $0.55 per share of Home Beneficial Common
Stock. In view of the fact that a dividend in an amount of up to $300 million
has been approved by the Virginia Bureau of Insurance and declared by the
board of directors of HBLIC, it is expected that a dividend in such an amount
will be paid on the date immediately prior to the Closing and that there will
not be a price adjustment.
Antitrust
The Merger is subject to the expiration or termination of the 30-day waiting
period under the HSR Act and no action having been instituted by the DOJ or
the FTC which is not withdrawn or terminated prior to the Effective Time. The
HSR Act, and the rules and regulations thereunder, provide that certain merger
transactions (including the Merger) may not be consummated until required
information and materials have been furnished to the DOJ and the FTC and
certain waiting periods have expired or been terminated. Home Beneficial and
American General made their respective filings with the DOJ and the FTC on
January 14, 1997, and January 15, 1997, respectively, and received notice of
early termination of the waiting period on January 27, 1997.
The DOJ and the FTC frequently scrutinize the legality under the antitrust
laws of transactions such as the Merger. Notwithstanding the expiration of the
HSR waiting period, any time before or after the Effective Time, the FTC, the
DOJ or others can take action under the antitrust laws, including seeking to
enjoin the consummation of the Merger, or seeking the divestiture by American
General of all or any part of the stock or assets of Home Beneficial. There
can be no assurances that a challenge to the Merger on antitrust grounds will
not be made, or if such a challenge is made, that it would not be successful.
Any pre-acquisition notices regarding the competitive impact of the Merger
will be timely filed with various insurance departments in non-domiciliary
states where both Home Beneficial and American General insurance subsidiaries
transact business. Otherwise, after the Merger, any of these insurance
subsidiaries would be subject to a possible order (i) requiring the insurer to
cease transacting a line or lines of business or (ii) denying the license
application of the insurer.
STATE ANTI-TAKEOVER STATUTES
Article 14 of the VSCA prohibits business combination transactions involving
a Virginia corporation (such as Home Beneficial) and an "Interested
Shareholder" (defined generally as any person that directly or indirectly
beneficially owns 10% or more of the outstanding voting stock of the subject
corporation), unless special
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requirements are met or certain exceptions apply, including that the majority
of the disinterested members of the board of directors of the subject
corporation approve the acquisition of shares by such Interested Shareholder.
Because the Home Beneficial Board has approved the Merger Agreement and the
transactions contemplated thereby, the provisions of Article 14 of the VSCA
are not applicable to the Merger. See "COMPARISON OF SHAREHOLDER RIGHTS--Anti-
Takeover Statutes."
Article 14.1 of the VSCA generally denies voting rights to shares purchased
by an acquiring person who has obtained or anticipates obtaining a specified
level of voting control in shares of an issuing public corporation as part of
a control-share acquisition, except to the extent that such voting rights are
conferred by resolution of the shareholders of the issuing public corporation.
A vote of the shareholders to confer voting power under the statute must meet
the criteria set forth in the statute, including the requirement for approval
by a majority of all votes entitled to be cast by each voting group entitled
to vote separately, excluding all interested shares. Because the statute
specifically exempts a merger effected in compliance with the VSCA if the
issuing corporation is a party to the agreement of merger, the provisions of
Article 14.1 are not applicable to the Merger. See "COMPARISON OF SHAREHOLDER
RIGHTS--Anti-Takeover Statutes."
Home Beneficial, directly or through HBLIC, conducts business in a number of
other states throughout the United States, some of which have also enacted
anti-takeover laws. Home Beneficial and American General do not know whether
any of these laws, by their terms, apply to the Merger and have not attempted
to comply with any such laws. Should any person seek to apply any such state
anti-takeover laws, Home Beneficial and American General will take such action
as then appears appropriate, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the
event it is asserted that one or more state anti-takeover statutes is
applicable to the Merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Merger, Home Beneficial and
American General might be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, Home Beneficial and American General might be delayed in, or
prevented from, consummating the Merger.
OPERATIONS AFTER THE MERGER
As a result of the Merger, the separate existence of Home Beneficial and the
Home Beneficial Board will terminate, but the directors of American General
and AGC Life will continue in office. The Merger Agreement does not contain
any provisions either (i) obligating American General to employ any officer or
employee of Home Beneficial following the Merger or (ii) requiring the
election or nomination of any specified individuals or any specified number of
persons to the board of directors of either AGC Life or American General.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of the material federal income tax
consequences of the Merger under existing federal income tax law, which is
subject to change, possibly retroactively. References in this discussion to
Home Beneficial shareholders include holders of voting trust certificates
evidencing beneficial ownership of Home Beneficial Voting Common Stock. This
discussion assumes that shareholders hold Home Beneficial Common Stock as a
capital asset as of the effective date of the Merger. This discussion does not
discuss all aspects of federal income taxation which may be relevant to
particular shareholders in light of their personal circumstances, such as
shareholders whose stock was acquired pursuant to the exercise of an employee
stock option or otherwise as compensation or shareholders who are subject to
special treatment under the federal income tax laws (for example, financial
institutions, insurance companies, tax-exempt organizations, broker-dealers
and foreign persons). This discussion also does not address any aspects of
state, local or foreign tax law. No rulings have been or will be sought from
the Internal Revenue Service with respect to any tax matters relating to the
Merger. EACH SHAREHOLDER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISORS AS
TO THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF
THE MERGER.
The obligation of Home Beneficial to consummate the Merger is conditioned
upon the receipt by Home Beneficial of an opinion from Debevoise & Plimpton,
and the obligation of American General to consummate
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the Merger is conditioned upon the receipt by American General of an opinion
from Skadden, Arps, Slate, Meagher & Flom LLP, in each case substantially to
the effect that, on the basis of certain facts, representations by management
of the companies and assumptions set forth in such opinions, the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that American General, AGC Life and
Home Beneficial will each be a party to that reorganization within the meaning
of Section 368(b) of the Code. Assuming that the Merger does qualify for such
treatment, in the opinion of Debevoise & Plimpton, special counsel to Home
Beneficial, and Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to
American General, subject to the assumptions and limitations described in the
preceding paragraph, the following discussion, to the extent it describes
matters of law and legal conclusions, is an accurate summary of the material
federal income tax consequences of the Merger to the shareholders under the
law in effect as of the date hereof.
The federal income tax consequences to a shareholder will depend on whether
the shareholder receives only American General Common Stock, a combination of
American General Common Stock and cash, or only cash in exchange for the
shareholder's Home Beneficial Common Stock pursuant to the Merger.
Receipt of Only American General Common Stock
A shareholder who receives solely American General Common Stock in exchange
for Home Beneficial Common Stock will not recognize gain or loss upon such
exchange (except as described below with respect to cash that is received in
lieu of fractional shares). Accordingly, (i) the aggregate tax basis of the
American General Common Stock received by the shareholder will be the same as
the aggregate tax basis of the Home Beneficial Common Stock surrendered in
exchange therefor pursuant to the Merger (adjusted with respect to fractional
shares) and (ii) the holding period of the American General Common Stock will
include the holding period of the Home Beneficial Common Stock surrendered in
exchange therefor pursuant to the Merger.
A shareholder who receives cash in lieu of fractional shares will be treated
as having received such fractional shares pursuant to the Merger and then as
having exchanged such fractional shares for cash in a redemption by American
General. The amount of any capital gain or loss attributable to such deemed
redemption of fractional shares will be equal to the difference between the
cash received in lieu of fractional shares and the ratable portion of the tax
basis of the Home Beneficial Common Stock surrendered that is allocated to
such fractional shares. Such gain or loss will constitute long-term capital
gain or loss if, at the effective time of the Merger, such shareholder has
held such Home Beneficial Common Stock for more than one year.
Receipt of Cash and American General Common Stock
Except as described below under "--Additional Considerations," a shareholder
who receives a combination of American General Common Stock and cash in
exchange for Home Beneficial Common Stock will generally recognize capital
gain, but not loss, for federal income tax purposes. The amount of gain, if
any, recognized must be computed separately with respect to each "block" of
Home Beneficial Common Stock surrendered in the Merger. With respect to each
block, gain will be recognized in an amount equal to the lesser of (i) the
amount of gain realized (i.e., the excess of the amount of cash and the fair
market value of American General Common Stock received that is allocable to
such block over the tax basis of such block) and (ii) the amount of cash
received that is allocable to such block. For purposes of such calculation,
the aggregate amount of cash and American General Common Stock received by a
shareholder will be allocated proportionally among the shares of Home
Beneficial Common Stock surrendered in exchange therefor pursuant to the
Merger. Shares of the same class of Home Beneficial Common Stock that were
acquired at the same time in a single transaction will be considered a
separate "block."
The aggregate tax basis of the American General Common Stock received by a
shareholder will be the same as the aggregate tax basis of the Home Beneficial
Common Stock surrendered in exchange therefor pursuant to the Merger,
decreased by the total amount of cash received and increased by the amount of
gain recognized. The holding period of the American General Common Stock will
include the holding period of the Home Beneficial Common Stock surrendered in
exchange therefor.
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Receipt of Only Cash
Except as described below under "--Additional Considerations," a shareholder
who receives solely cash in exchange for Home Beneficial Common Stock will
recognize capital gain or loss in an amount equal to the difference between
the amount of cash received and the aggregate tax basis of the Home Beneficial
Common Stock surrendered. Gain or loss must be calculated separately for each
block of Home Beneficial Common Stock held by a shareholder.
Additional Considerations
With respect to shareholders who receive cash in the Merger, it is possible
that, under certain circumstances, the gain recognized could be treated as
dividend income rather than capital gain unless the requirements of Section
302 of the Code are satisfied. In order to determine whether those
requirements are satisfied, a shareholder is treated as receiving solely
American General Common Stock in the Merger (instead of the cash actually
received) and then receiving cash from American General in a hypothetical
redemption of those shares. The hypothetical redemption will satisfy the
requirements under Section 302 if it either (i) is "not essentially equivalent
to a dividend" or (ii) has the effect of a "substantially disproportionate"
redemption of American General Common Stock. Whether such hypothetical
redemption of American General Common Stock is "not essentially equivalent to
a dividend" depends on the individual facts and circumstances of each
shareholder but in any event must result in a meaningful reduction of a
shareholder's proportionate stock interest in American General. Generally, in
the case of a Home Beneficial shareholder whose stock interest in American
General (relative to the total number of American General shares outstanding)
is minimal, and who exercises no control over the affairs of American General,
any actual reduction in proportionate interest will be treated as
"meaningful." Alternatively, the hypothetical redemption of the American
General Common Stock will be "substantially disproportionate" if the ratio
which the American General Common Stock (and any other American General voting
stock) owned by the shareholder after the hypothetical redemption bears to all
of the voting stock of American General at such time is less than 80% of the
ratio which the American General Common Stock (and any other American General
voting stock) hypothetically owned by the shareholder after the Merger but
before the redemption bears to all of the voting stock of American General at
such time. If the receipt of cash is treated as having the effect of a
dividend, only the portion of the recognized gain that is not in excess of the
shareholder's ratable share of the accumulated earnings and profits of
American General will be taxable as a dividend.
In applying the foregoing tests, there must be taken into account not only
actual ownership of stock but also stock constructively owned by a shareholder
by reason of certain attribution rules under Section 318 of the Code. Under
these rules, a shareholder is treated as owning the stock owned by certain
family members, stock subject to an option to acquire such stock, stock owned
by certain estates and trusts of which the shareholder is a beneficiary, and
stock owned by certain affiliated entities. Under certain circumstances, an
individual who actually owns no American General Common Stock but pursuant to
Section 318 of the Code constructively owns American General Common Stock by
reason of attribution from family members may avoid such attribution by filing
a timely agreement with the Internal Revenue Service under Section 302(c)(2)
of the Code and the regulations thereunder. BECAUSE OF THE COMPLEXITY OF THESE
RULES, EACH HOLDER OF HOME BENEFICIAL COMMON STOCK WHO RECEIVES A COMBINATION
OF CASH AND AMERICAN GENERAL COMMON STOCK IN THE MERGER OR WHO OTHERWISE
BELIEVES THESE RULES MIGHT APPLY TO HIM OR HER IS PARTICULARLY URGED TO
CONTACT HIS OR HER OWN TAX ADVISOR.
Withholding
Unless an exemption applies, the Exchange Agent will be required to
withhold, and will withhold, 31% of any cash payments to which a stockholder
or other payee is entitled pursuant to the Merger, unless the stockholder or
other payee provides his or her tax identification number (social security
number or employer identification number) and certifies that such number is
correct. Each stockholder and, if applicable, each other payee is required to
complete and sign the Form W-9 that will be included as part of the
transmittal letter to avoid backup withholding (or IRS Form W-8 if the
stockholder is a nonresident alien or foreign entity), unless an applicable
exemption exists and is proved in a manner satisfactory to American General
and the Exchange Agent.
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EACH SHAREHOLDER IS STRONGLY ADVISED TO CONSULT HIS OR HER OWN TAX ADVISORS
AS TO PARTICULAR FACTS AND CIRCUMSTANCES WHICH MAY BE UNIQUE TO SUCH
SHAREHOLDER AND ALSO AS TO ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES ARISING OUT OF THE MERGER.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES
The shares of American General Common Stock issuable in connection with the
Merger have been registered under the Securities Act. Such shares will be
freely transferable under the Securities Act, except for shares issued to any
person who may be deemed to be an affiliate, as such term is defined under the
Securities Act for purposes of Rule 145 (an "Affiliate"), of Home Beneficial
or American General at the time of the Special Meeting. Affiliates may not
sell their shares of American General Common Stock acquired in connection with
the Merger except pursuant to (i) an effective Registration Statement under
the Securities Act covering the resale of such shares, (ii) the conditions
contemplated by paragraph (d) of Rule 145, or (iii) any other applicable
exemption from the registration requirements of the Securities Act. Persons
who may be deemed to be Affiliates of Home Beneficial or American General
generally include individuals or entities that may be deemed to control, be
controlled by or be under common control with Home Beneficial or American
General, and may include officers, directors and principal shareholders of
Home Beneficial or American General.
STOCK EXCHANGE LISTING
The obligations of the parties to the Merger Agreement to consummate the
Merger are subject to the shares of American General Common Stock to be issued
in connection with the Merger being authorized for listing on the NYSE. See
"THE PROPOSED MERGER--The Merger Agreement--Conditions to the Merger."
RIGHTS OF DISSENTING SHAREHOLDERS
Home Beneficial Non-Voting Common Stock
Section 13.1-730 of the VSCA (as effective July 1, 1996) provides that no
dissenters' rights are available for the shares of any class or series of
shares which, at the record date fixed to determine the shareholders entitled
to receive notice of and to vote at the meeting of shareholders to act upon
the agreement or plan of merger, were either (x) listed on a national
securities exchange or on the National Association of Securities Dealers
Automated Quotation System or (y) held of record by at least 2,000
shareholders, unless, among other things, in either case (i) the holders of
such class or series of shares are required by the terms of such agreement or
plan to accept for such shares anything except cash or shares of the acquiring
corporation listed subject to notice of issuance on a national securities
exchange or held of record by at least 2,000 shareholders of record, or (ii)
the transaction to be voted on is an "affiliated transaction" that has not
been approved by a majority of "disinterested directors."
Holders of Home Beneficial Non-Voting Common Stock have no dissenters'
rights with respect to the Merger because (i) as of the Record Date, the Home
Beneficial Non-Voting Common Stock was listed on Nasdaq and (ii) the holders
of such shares are required by the terms of the Merger Agreement to accept
cash or listed shares of American General Common Stock.
Home Beneficial Voting Common Stock
A shareholder of Home Beneficial Voting Common Stock (and a holder of voting
trust certificates evidencing beneficial ownership of such shares) who objects
to the Merger (a "Dissenting Shareholder") and who complies with provisions of
Article 15 of Title 13.1 of the VSCA ("Article 15") may demand the right to
receive a cash payment, if the Merger is consummated, for the fair value of
his or her stock immediately before the Merger Effective Date, exclusive of
any appreciation or depreciation in anticipation of the Merger unless such
exclusion would be inequitable. In order to receive payment, a Dissenting
Shareholder must deliver to Home Beneficial prior to the Special Meeting a
written notice of intent to demand payment for his or her shares
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if the Merger is consummated (an "Intent to Demand Payment") and must not vote
his or her shares in favor of the Merger. A VOTE AGAINST THE MERGER WILL NOT
ITSELF CONSTITUTE SUCH WRITTEN NOTICE AND A FAILURE TO VOTE WILL NOT
CONSTITUTE A TIMELY WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT.
A shareholder of record of Home Beneficial Voting Common Stock may assert
dissenters' rights as to fewer than all the shares registered in his or her
name only if the shareholder dissents with respect to all shares beneficially
owned by any one person and notifies Home Beneficial in writing of the name
and address of each person on whose behalf he or she asserts dissenters'
rights. The rights of such a partial dissenter are determined as if the shares
to which he or she dissents and such shareholder's other shares were
registered in the names of different shareholders. A beneficial shareholder of
Home Beneficial Voting Common Stock may assert dissenters' rights as to shares
held on his or her behalf by a shareholder of record only if (i) such
shareholder submits to Home Beneficial the record shareholder's written
consent of the dissent not later than the time when the beneficial shareholder
assets dissenters' rights, and (ii) such shareholder dissents with respect to
all shares of which he or she is the beneficial shareholder or over which he
or she has power to direct the vote.
Within 10 days after the Effective Date, Home Beneficial is required to
deliver a notice in writing (a "Dissenter's Notice") to each Dissenting
Shareholder who has filed an Intent to Demand Payment and who has not voted
such shares in favor of the Share Exchange. The Dissenter's Notice shall (i)
state where the demand for payment (the "Payment Demand") shall be sent and
where and when stock certificates shall be deposited; (ii) supply a form for
demanding payment; (iii) set a date by which Home Beneficial must receive the
Payment Demand; and (iv) be accompanied by a copy of Article 15. A Dissenting
Shareholder who is sent a Dissenter's Notice must submit the Payment Demand
and deposit his or her stock certificates in accordance with the terms of, and
within the time frames set forth in, the Dissenter's Notice. As a part of the
Payment Demand, the dissenting Shareholder must certify whether he or she
acquired beneficial ownership of the shares before or after the date of the
first public announcement of the terms of the proposed Share Exchange (the
"Announcement Date"), which was December 23, 1996. Home Beneficial will
specify the Announcement Date in the Dissenter's Notice.
Except with respect to shares acquired after the Announcement Date, Home
Beneficial shall pay a Dissenting Shareholder the amount Home Beneficial
estimates to be the fair value of his or her shares, plus accrued interest.
Such payment shall be made within 30 days of receipt of the Dissenting
Shareholder's Payment Demand. As to shares acquired after the Announcement
Date, Home Beneficial is only obligated to estimate the fair value of the
shares, plus accrued interest, and to offer to pay this amount to the
Dissenting Shareholder conditioned upon the Dissenting Shareholder's agreement
to accept it in full satisfaction of his or her claim.
If a Dissenting Shareholder believes that the amount paid or offered by Home
Beneficial is less than the fair value of his or her shares, or that the
interest due is incorrectly calculated, that Dissenting Shareholder may notify
Home Beneficial of his or her own estimate of the fair value of his shares and
amount of interest due and demand payment of such estimate (less any amount
already received by the Dissenting Shareholder) (the "Estimate and Demand").
The Dissenting Shareholder must notify Home Beneficial of the Estimate and
Demand within 30 days after the date Home Beneficial makes or offers to make
payment to the Dissenting Shareholder.
Within 60 days after receiving the Estimate and Demand, Home Beneficial must
either commence a proceeding in the appropriate circuit court to determine the
fair value of the Dissenting Shareholder's shares and accrued interest, or
Home Beneficial must pay each Dissenting Shareholder whose demand remains
unsettled the amount demanded. If a proceeding is commenced, the court must
determine all costs of the proceeding and must assess those costs against Home
Beneficial, except that the court may assess costs against all or some of the
Dissenting Shareholders to the extent the court finds that the Dissenting
Shareholders did not act in good faith in demanding payment of the Dissenting
Shareholder's Estimates.
The foregoing discussion is a summary of the material provisions of Article
15. Holders of Home Beneficial Voting Common Stock (and holders of voting
trust certificates evidencing beneficial ownership of such shares) are
strongly encouraged to review carefully the full text of Article 15, which is
included as Exhibit C to this
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Proxy Statement/Prospectus. The provisions of Article 15 are technical and
complex, and a shareholder failing to comply strictly with them may forfeit
his Dissenting Shareholder's rights. Any shareholder who intends to dissent
from the Merger should review the text of those provisions carefully and also
should consult with his attorney. NO FURTHER NOTICE OF THE EVENTS GIVING RISE
TO DISSENTERS' RIGHTS OR ANY STEPS ASSOCIATED THEREWITH WILL BE FURNISHED TO
HOLDERS OF SHARES OF HOME BENEFICIAL VOTING COMMON STOCK OR VOTING TRUST
CERTIFICATES EVIDENCING BENEFICIAL OWNERSHIP OF SUCH SHARES, EXCEPT AS
INDICATED ABOVE OR OTHERWISE REQUIRED BY LAW.
Any Dissenting Shareholder who perfects his or her right to be paid the fair
value of his shares will recognize gain or loss, if any, for federal income
tax purposes upon the receipt of cash for his shares. The amount of gain or
loss and its character as ordinary or capital gain or loss will be determined
in accordance with applicable provisions of the Code. See "--Certain Federal
Income Tax Consequences of the Merger."
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COMPARISON OF SHAREHOLDER RIGHTS
The rights of shareholders of Home Beneficial are currently governed by the
VSCA, the Home Beneficial Articles and the Home Beneficial Bylaws. Upon
consummation of the Merger, Home Beneficial shareholders who receive Stock
Consideration will become shareholders of American General and their rights
will be governed by the TBCA, the American General Articles and the American
General Bylaws, which differ in certain material respects from the VSCA, the
Home Beneficial Articles and the Home Beneficial Bylaws. The following is a
summary of certain differences between the rights of Home Beneficial
shareholders and those of American General shareholders.
The following summary does not purport to be a complete description of the
rights of shareholders of Home Beneficial or the rights of shareholders of
American General or a comprehensive comparison of such rights, and is
qualified in its entirety by reference to the VSCA and the TBCA, to the Home
Beneficial Articles and the Home Beneficial Bylaws, and to the American
General Articles and the American General Bylaws. For more information
regarding reviewing or obtaining a copy of the charter documents or bylaws of
either company, see "AVAILABLE INFORMATION."
AUTHORIZED CAPITAL STOCK
The authorized capital stock of Home Beneficial consists of 12,800,000
shares of Home Beneficial Voting Common Stock and 19,200,000 shares of Home
Beneficial Non-Voting Common Stock. As of December 31, 1996, there were
outstanding 8,060,660 shares of Home Beneficial Voting Common Stock and
8,992,910 shares of Home Beneficial Non-Voting Common Stock. The authorized
capital stock of American General consists of 300,000,000 shares of American
General Common Stock and 60,000,000 shares of American General Preferred
Stock. As of December 31, 1996, there were outstanding 203,090,677 shares of
American General Common Stock and 2,317,701 shares of American General 7%
Mandatorily Convertible Preferred Stock (the "American General 7% Preferred
Stock").
VOTING RIGHTS
Home Beneficial Common Stock is divided into Home Beneficial Voting Common
Stock and Home Beneficial Non-Voting Common Stock. Except for preemptive
rights and voting rights, Home Beneficial Voting Common Stock and Home
Beneficial Non-Voting Common Stock are identical in all respects. The holders
of Home Beneficial Voting Common Stock are entitled to one vote per share. The
holders of Home Beneficial Non-Voting Common Stock have no voting rights
except in certain limited circumstances specified in the VSCA including, but
not limited to, the following: (i) the right to vote separately as a class
with respect to any proposed amendment to the Home Beneficial Articles that
adversely affects the rights of holders of Home Beneficial Non-Voting Common
Stock including, but not limited to, any amendment otherwise requiring
shareholder approval that would (a) increase or decrease the aggregate number
of authorized shares of Home Beneficial Non-Voting Common Stock; (b) effect an
exchange, reclassification or cancellation of all or any part of the shares of
Home Beneficial Non-Voting Common Stock; (c) effect an exchange, or create a
right of exchange, of all or any part of the shares of another class into the
shares of Home Beneficial Non-Voting Common Stock; (d) change the
designations, preferences, limitations or relative rights of the shares of
Home Beneficial Non-Voting Common Stock; (e) change the shares of Home
Beneficial Non-Voting Common Stock into a different number of shares of Home
Beneficial Non-Voting Common Stock; (f) create a new class of shares having
rights and preferences prior and superior to the shares of Home Beneficial
Non-Voting Common Stock or increase the rights and preferences of any class
having rights and preferences prior to or superior to the shares of Home
Beneficial Non-Voting Common Stock; (g) increase the rights, preferences or
number of authorized shares of any class that, after giving effect to the
amendment, have rights or preferences with respect to distributions or to
dissolution that are prior, superior or substantially equal to shares of Home
Beneficial Non-Voting Common Stock and (h) cancel or otherwise affect
dividends on the shares of Home Beneficial Non-Voting Common Stock which have
accrued but have not been declared; (ii) the right to vote together with the
holders of Home Beneficial Voting Common Stock with respect to any merger the
terms of which will affect the holders of Home Beneficial Voting
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Common Stock in the same or substantially similar way as the holders of Home
Beneficial Non-Voting Common Stock; (iii) the right to vote separately as a
class on a plan of merger or share exchange if the plan contains a provision
which, if contained in the proposed amendment to the Home Beneficial Articles,
would entitle the class or series to vote as a separate voting group on the
amendment pursuant to the provisions set forth in clause (i) above; and (iv)
in certain other circumstances specified by VSCA.
All holders of American General Common Stock have the right to one vote per
share with respect to all matters submitted to a vote of American General
shareholders.
Holders of American General 7% Preferred Stock will generally be entitled to
vote together as a single class with holders of American General Common Stock
on all matters requiring a shareholder vote, on the basis of 4/5 of a vote per
share of American General 7% Preferred Stock. In addition, if full cumulative
dividends on the American General 7% Preferred Stock are not paid for six
quarterly dividend periods, the number of directors of American General
constituting the entire American General Board shall be increased by two
persons and the holders of shares of American General 7% Preferred Stock,
voting separately as a class together with the holders of shares of all other
series of capital stock of American General ranking on a parity with the
American General 7% Preferred Stock as to the payment of dividends and having
the then present right to elect one or more directors as a result of a
dividend arrearage but not then entitled to other separate voting rights to
elect one or more directors in the event of such an arrearage ("Class Voting
Stock"), shall have the right to elect such directors to fill such positions.
Such right, when vested, will continue until all dividends in arrears and
payable on the shares of American General 7% Preferred Stock have been paid in
full, whereupon the terms of office of all persons previously elected as
directors by the holders of shares of American General 7% Preferred Stock and
such other Class Voting Stock shall forthwith terminate and the number of the
American General Board shall be reduced accordingly.
VOTING TRUST AGREEMENT
As of December 31, 1996, 5,181,165 shares of Home Beneficial Voting Common
Stock, constituting 64.3% of the 8,060,660 shares then outstanding, were held
by trustees under a voting trust agreement dated as of May 1, 1984, which, by
virtue of a voting trust extension agreement dated as of May 1, 1987,
continues in force until May 11, 1997 (the "1984 Voting Trust"), unless
earlier terminated pursuant to its terms. The Voting Trustees, each of whom is
a director of Home Beneficial and HBLIC, are R. W. Wiltshire, L.W. Richardson,
R. W. Wiltshire, Jr., G. T. Richardson and D. N. Hoppes (together, the "Voting
Trustees"). Their mailing address is 3901 West Broad Street, Richmond,
Virginia 23230. The Voting Trustees are given exclusive voting power of the
Home Beneficial Voting Common Stock subject to the 1984 Voting Trust, but must
vote or execute consents in accordance with the instructions of the holders of
voting trust certificates with respect to any action submitted to a vote of
the holders of Home Beneficial Voting Common Stock as to which a majority of
the Voting Trustees then in office favor an affirmative vote, where such
action, if approved by the holders of Home Beneficial Voting Common Stock in
accordance with and to the extent required by law and the Home Beneficial
Articles, would result in: (i) the increase or decrease of the authorized
number of shares of Home Beneficial Voting Common Stock; (ii) an exchange,
reclassification, or cancellation of all or part of the shares of Home
Beneficial Voting Common Stock; (iii) an exchange, or right of exchange, of
all or any part of the shares of another class into the shares of Home
Beneficial Voting Common Stock; (iv) any change that may be adverse to the
designations, preferences, limitations, voting rights or relative to other
rights of any nature of the shares of Home Beneficial Voting Common Stock; (v)
any change of the shares of Home Beneficial Voting Common Stock into a
different number of shares of the same class or into the same or a different
number of shares, either with or without par value, of other classes of stock;
(vi) the creation of a new class of stock, or change of a class with
subordinate and inferior rights into a class having rights and preferences
prior and superior to shares of Home Beneficial Voting Common Stock, or any
increase of the rights and preferences of any class having rights and
preferences prior or superior to shares of Home Beneficial Voting Common
Stock; (vii) any limitation or denial of preemptive rights of shares of Home
Beneficial Voting Common Stock; (viii) the sale, lease, exchange, mortgage,
pledge or other disposition of all, or substantially all, the property and
assets of Home Beneficial; (ix) the merger
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or consolidation of Home Beneficial with or into any other corporation, or of
any other corporation with or into Home Beneficial; or (x) the dissolution of
Home Beneficial. If a majority of the Voting Trustees shall oppose any such
matter, the Voting Trustees need not solicit, obtain or follow directions from
the holders of the voting trust certificates, and such majority of Voting
Trustees opposing any such proposal are authorized and empowered to vote all
the shares of Home Beneficial Voting Common Stock held by the Voting Trustees
under the 1984 Voting Trust against such proposal. A majority vote of the
Voting Trustees controls actions to be taken by them; they may vote in person
or by proxy to another Voting Trustee with or without direction how to vote.
They may vote for themselves as directors and officers of Home Beneficial and
fix their compensation provided it be commensurate with the duties and
responsibilities of the office or position held. They may name successor
trustees in event of death, resignation, removal from the Commonwealth of
Virginia or incapacity of any Voting Trustee. They receive no compensation for
their services as Voting Trustees. In the event that by virtue of a stock
dividend, stock split, reclassification of stock or subscription the Voting
Trustees receive further Home Beneficial Voting Common Stock, it is to be held
by them subject to all of the provisions of the 1984 Voting Trust.
In the event that as a result of any merger, consolidation, sale of assets
or property, exchange or other cause, the shares of Home Beneficial Voting
Common Stock held by the Voting Trustees should be converted into and become
shares of another corporation, the 1984 Voting Trust shall be terminated
automatically unless the amount of voting stock in such other corporation
received by participants in the 1984 Voting Trust as a result of the
conversion would thereafter represent more than one-third of the issued and
outstanding voting stock of such other corporation if it has no class of stock
registered under the Exchange Act, or more than one-twentieth of the issued
and outstanding voting stock of such other corporation if it has a class of
stock so registered, in either of which cases the 1984 Voting Trust shall
continue in force according to its terms. The 1984 Voting Trust will expire on
the earlier of (i) consummation of the Merger or (ii) May 11, 1997.
See "SECURITY OWNERSHIP--Security Ownership of Certain Stockholders,
Directors and Management of Home Beneficial--Voting Trust" for additional
information regarding the rights of the holders of voting trust certificates
to instruct the Voting Trustees as to how to vote on the Merger and the effect
on the continued existence of the 1984 Voting Trust if the Merger is
consummated.
Home Beneficial Non-Voting Common Stock, which has no vote on most matters,
is publicly traded in the over-the-counter market and is not subject to the
1984 Voting Trust.
American General has no similar voting trust agreements.
AMERICAN GENERAL PREFERRED SHARE PURCHASE RIGHTS
On July 27, 1989, the American General Board authorized the issuance of one
preferred share purchase right (a "Right") for each share of American General
Common Stock outstanding on August 7, 1989 and for each share of American
General Common Stock issued thereafter but prior to the earlier of the
Distribution Date and the Termination Date (as each such term is defined
below). A Right is attached to each share of American General Common Stock and
entitles the registered holder to purchase from American General one one-
hundredth of a share of Series A Junior Participating Preferred Stock, par
value $1.50 per share, of American General (the "American General Junior
Preferred Shares") at a price of $120 per one one-hundredth of an American
General Junior Preferred Share, subject to certain adjustments.
The Rights will expire on August 7, 1999, unless the expiration date is
extended or the Rights are redeemed earlier (any such date being the
"Termination Date"). The Rights are not exercisable or transferable separately
from the shares of American General Common Stock until the "Distribution Date"
which will occur on the earlier of (i) 10 business days following the first
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired beneficial ownership of 15% or more of
the outstanding American General Common Stock and any other shares of capital
stock of American General entitled to vote generally in the election of
directors or entitled to vote in respect of any merger, consolidation, sale of
all
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or substantially all of American General's assets, liquidation, dissolution or
winding up of American General (the "Voting Stock") or (ii) 10 business days
following the commencement of, or the first public announcement of an
intention to commence, a tender or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of affiliated or
associated persons of 25% or more of the then outstanding Voting Stock.
In the event American General is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earnings
power should be sold or otherwise transferred, each holder of a Right will
have the right to receive, upon payment of the right's then current exercise
price, common stock of the acquiring company which has a market value of two
times the exercise price of the Right. In the event that any person becomes an
Acquiring Person, each holder of a Right will thereafter have the right to
receive upon exercise thereof that number of shares of American General Common
Stock (or under certain circumstances, Common Stock-equivalent American
General Junior Preferred Shares) having a market value of two times the
exercise price of the Rights.
At any time 10 business days after a person or group of affiliated or
associated persons has become an Acquiring Person and prior to the acquisition
by any person or group of 50% or more of the outstanding Voting Stock, the
American General Board may exchange the Rights (other than Rights acquired or
beneficially owned by such Acquiring Person, which Rights held by such
Acquiring Person shall then be null and void), in whole or in part, at an
exchange ratio of one share of American General Common Stock (or one one-
hundredth of a share of American General Junior Preferred Stock),
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction, for each two shares of American General Common Stock for which
the Right is then exercisable.
At any time prior to the close of business on the tenth day following the
first public announcement that a person or group of affiliated or associated
persons has become an Acquiring Person, the American General Board may redeem
the then outstanding Rights in whole, but not in part, at a price of $.01 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction (the "Rights Redemption Price"). Any such redemption of
the Rights may be made effective at such time, on such basis and with such
conditions as the American General Board in its sole discretion may establish.
The purchase price payable, and the number of American General Junior
Preferred Shares or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the American General Junior Preferred Shares.
The number of outstanding Rights and the number of one one-hundredth of an
American General Junior Preferred Share issuable upon exercise of each Right
are also subject to adjustment in the event of reclassification of securities,
or recapitalization or reorganization of American General or other transaction
involving American General which has the effect, directly or indirectly, of
increasing by more than one percent the proportionate share of the outstanding
shares of any class of equity securities of American General or any of its
subsidiaries beneficially owned by any Acquiring Person, in any such case,
prior to an exchange by American General as described above.
The terms of the Rights may be amended, including extending the expiration
date, by the American General Board without the consent of the holders of the
Rights, except in certain circumstances.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire American
General on terms not approved by the American General Board. The Rights should
not interfere with any merger or other business combination approved by the
American General Board since the Rights may be redeemed by American General at
the Rights Redemption Price prior to the time that a person or group has
acquired beneficial ownership of 50% or more of the Voting Stock. The rights
under the shareholders rights plan will cause substantial dilution to a person
or group that attempts to acquire American
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General on terms not approved by the American General Board. The Rights should
not interfere with any merger or other business combination approved by the
American General Board since the Rights may be redeemed by American General at
a specified price prior to the time that a person or group has acquired
beneficial ownership of 50% or more of the Voting Stock. See also
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION."
Home Beneficial shareholders who receive the Stock Consideration will
receive the associated American General Preferred Share Purchase Rights with
the shares of American General Common Stock they receive in the Merger.
AMENDMENTS TO CHARTER AND BYLAWS
Under the VSCA and the Home Beneficial Articles, an amendment to the Home
Beneficial Articles generally would require the approval of the holders of
more than two-thirds of the shares of each class entitled to vote thereon and
more than two-thirds of the total shares entitled to vote thereon. Under the
VSCA, the holders of a class of securities have the right to vote separately
as a class with respect to any charter amendments that would alter certain
terms of such class as specified in the VSCA. Under the TBCA and the American
General Articles, an amendment to the American General Articles generally
would require the approval of the holders of two-thirds of the shares entitled
to vote thereon, or, if any class is entitled to vote separately thereon, the
approval of the holders of two-thirds of the shares of such class entitled to
vote thereon and two-thirds of the total shares entitled to vote thereon.
Under the VSCA and the Home Beneficial Bylaws, the Home Beneficial Board and
the Home Beneficial shareholders are each empowered to adopt, alter, amend or
repeal the Home Beneficial Bylaws, except that the Home Beneficial Board is
prohibited from taking such action in relation to any bylaw with respect to
which the shareholders have specifically provided that such bylaw is not
subject to amendment or repeal by the Home Beneficial Board. Under the
American General Articles, except as expressly provided in the American
General Bylaws, the American General Board may alter, amend or repeal the
American General Bylaws without shareholder approval, although bylaws made by
the American General Board, and the power conferred upon the American General
Board to amend such bylaws, may be altered or repealed by the shareholders.
The American General Bylaws provide that, unless otherwise provided in the
American General Articles, the power to alter, amend, or repeal the American
General Bylaws or adopt new bylaws is vested in the American General Board,
subject to repeal or change by action of the affirmative vote of the holders
of at least 75% of the then outstanding shares of all classes entitled to vote
generally in the election of directors, voting together as a single class.
PREEMPTIVE RIGHTS; CUMULATIVE VOTING
The holders of Home Beneficial Voting Common Stock have preemptive rights
with respect to Home Beneficial Voting Common Stock, but such rights do not
extend to treasury stock, stock issued for services or property (other than
money) or to stock issued to officers or employees pursuant to a plan approved
by stockholders. Neither the holders of Home Beneficial Non-Voting Stock nor
the shareholders of American General have any preemptive rights to acquire
unissued shares of the corporation's capital stock. Neither the shareholders
of Home Beneficial nor the shareholders of American General have any rights to
cumulate votes with respect to the election of directors.
BOARDS OF DIRECTORS
The Home Beneficial Board currently consists of nine members, which is
subject to change by action of the Home Beneficial Board provided that,
pursuant to the Home Beneficial Bylaws, the Home Beneficial Board shall
consist of a minimum of nine and a maximum of eleven members. The American
General Board consists of eleven directors, which is subject to change by
action of the American General Board provided that, pursuant to the American
General Bylaws, the American General Board shall consist of at least three
members but no more than 25 members. Members of the Board of Directors of each
of Home Beneficial and American General are elected at each annual meeting of
shareholders for terms expiring at the succeeding annual meeting. Neither Home
Beneficial nor American General has a classified board of directors.
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REMOVAL OF DIRECTORS
Under the VSCA, the shareholders of a corporation may remove one or more
directors with or without cause unless the articles of incorporation provide
otherwise. However, if a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in
the vote to remove him or her. The Home Beneficial Bylaws provide that any
director may be removed from office, with or without cause, by the affirmative
vote of the holders of at least a majority of the shares of Home Beneficial
Voting Common Stock entitled to be cast in the election of directors at a
meeting of shareholders called for that purpose.
Under the TBCA, a corporation's bylaws or articles of incorporation may
provide that at any meeting of shareholders called expressly for that purpose,
one or more directors may be removed, with or without cause, by a vote of the
holders of a specified portion, but not less than a majority, of the shares
then entitled to vote in an election of directors. Subject to the rights of
any class or series of stock having a preference over the American General
Common Stock as to dividends or upon liquidation to elect directors under
specified circumstances, the American General Bylaws provide that any director
may be removed, with or without cause, by the affirmative vote of the holders
of at least 75% of the combined voting power of the outstanding shares of all
classes of stock entitled to vote generally in an election of directors,
voting together as a single class.
NEWLY-CREATED DIRECTORSHIPS AND VACANCIES
Under the VSCA, except as noted below, whenever a vacancy occurs on a board
of directors, including a vacancy resulting from an increase in the number of
directors, it may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum, unless the articles of
incorporation provide otherwise. The Home Beneficial Bylaws provide that if
any vacancy shall occur in the Home Beneficial Board such vacancy may be
filled by a majority of the remaining directors, though less than a quorum, or
by a plurality of the votes cast at a meeting of shareholders. The Home
Beneficial Board may by amendment to the Home Beneficial Bylaws decrease or
increase by 30% or less the number of directors last elected by the
shareholders. A directorship created by reason of an increase in the number of
directors by action of the Home Beneficial Board may be filled by the Home
Beneficial Board for a term of office continuing only until the next election
of directors (whether at an annual or special shareholders meeting).
Under the TBCA and the American General Bylaws, subject to the rights of any
holders of a class or series of stock having a preference over the American
General Common Stock as to dividends or upon liquidation to elect directors
under specified circumstances, any vacancy on the American General Board
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by the affirmative vote of a majority of
the American General Board then in office, even though less than a quorum,
provided that any director so elected shall hold office only for the remainder
of the term of the director whose departure caused the vacancy. A directorship
created by reason of an increase in the number of directors by action of the
American General Board may be filled by the American General Board for a term
of office continuing only until the next election of directors (whether at an
annual or special shareholders meeting), provided that the American General
Board shall not fill more than two such directorships during the period
between two successive annual meetings of shareholders.
NOMINATION OF DIRECTORS
Pursuant to the Home Beneficial Bylaws, the Home Beneficial Board or a
committee appointed by the Home Beneficial Board shall select a slate of
nominees to be voted on for election as directors at each annual meeting.
Nominations of persons for election as directors of the corporation may also
be made by any Home Beneficial shareholder entitled to vote for the election
of directors at the meeting who delivers to the Corporate Secretary of Home
Beneficial notice of such nomination not later than (i) with respect to an
election to be held at an annual meeting of stockholders one hundred and
twenty days prior to the anniversary date of the previous year's annual
meeting and (ii) with respect to an election to be held at a special meeting
of stockholders for the election of directors, the close of business on the
tenth day following the date on which notice of such meeting is first given.
Such notice of nomination must contain certain specified information with
respect to the shareholder making the proposal, and the nominee or nominees.
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Subject to the rights of any class or series of stock having a preference
over the American General Common Stock as to dividends or upon liquidation to
elect directors under specified circumstances, pursuant to the American
General Bylaws, nominations of persons for election as directors of the
corporation may be made by the board of directors or a committee appointed by
the board of directors or by any shareholder entitled to vote for the election
of directors generally. However, any shareholder entitled to vote in the
election of directors generally may nominate one or more persons for election
as directors only if written notice of such shareholder's intent to make such
nomination or nominations has been given to the Secretary of American General
not later than sixty days nor more than ninety days prior to any meeting of
shareholders called for the election of directors, except that in the event
that less than seventy days notice of the date of the meeting is given to
shareholders, such written notice shall be delivered not later than the close
of business on the tenth day following the day on which notice of the meeting
was mailed to shareholders. Each such notice must contain certain specified
information with respect to the shareholder making the proposal, and the
nominee or nominees.
SPECIAL MEETINGS OF THE SHAREHOLDERS
Under the VSCA and the Home Beneficial Bylaws, special meetings of the
shareholders may be called by the Chairman of the Board, the Home Beneficial
Board or the President, and shall be called upon the written request delivered
to the Secretary of the holders of at least 35% of the shares entitled to vote
at the meeting.
Under the TBCA and the American General Bylaws, special meetings of the
shareholders shall be called by the Chairman of the Board, the President, or
the Secretary upon the written request of the holders of at least 10% of the
shares entitled to vote at the meeting.
SHAREHOLDER ACTION BY WRITTEN CONSENT
Under the VCSA, the unanimous written consent of all shareholders entitled
to vote is required in order to approve any action without a meeting.
The TBCA provides that any action required to be taken at an annual or
special meeting of shareholders may be taken without a meeting if all
shareholders entitled to vote with respect to the action consent in writing to
such action or, if the corporation's articles of incorporation so provide, if
a consent in writing shall be signed by the holders of shares having not less
than the minimum number of votes necessary to take such action at a meeting of
shareholders. The American General Articles do not contain such a provision.
VOTE REQUIRED FOR MERGERS
Unless the articles of incorporation provide for a greater or lesser vote or
the board of directors requires a greater vote, the VSCA generally requires
the affirmative vote of the holders of more than two-thirds of the shares
entitled to vote to approve a merger and, if any class of shares (such as the
Home Beneficial Voting Common Stock) is entitled to vote as a class on the
approval of a merger, the affirmative vote of the holders of at least two-
thirds of the shares of such class. The VSCA does not require shareholders of
the surviving corporation to vote in a merger if, among other things, after
the merger (i) the articles of incorporation of the surviving corporation will
not differ from its articles of incorporation before the merger and (ii) each
shareholder of the surviving corporation whose shares were outstanding
immediately prior to the effective date of the merger will hold the same
number of shares, with identical designations, preferences, limitations, and
relative rights, immediately after the merger. The Home Beneficial Articles
increase the vote required to approve a merger with a party owning 10% or more
of the outstanding share of any class of Home Beneficial capital stock ("10%
Shareholder") to not less than 80% of the Home Beneficial Voting Common Stock
unless the merger has been approved by the Home Beneficial Board prior to such
party's becoming a 10% Shareholder.
Unless the board of directors requires a greater vote, the TBCA generally
requires the affirmative vote of the holders of at least two-thirds of the
shares entitled to vote to approve a merger, or if any class of shares is
entitled to vote as a class on the approval of a merger, the affirmative vote
of the holders of at least two-thirds of
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<PAGE>
the shares in each such class and the affirmative vote of the holders of at
least two-thirds of the shares otherwise entitled to vote. The TBCA does not
require a vote by the shareholders of the surviving corporation if after the
merger (i) the articles of incorporation of the surviving corporation will not
differ from its articles of incorporation before the merger; (ii) each
shareholder of the surviving corporation whose shares were outstanding
immediately prior to the effective date of the merger will hold the same
number of shares, with identical designations, preferences, limitations and
relative rights immediately after the merger; (iii) the voting power of the
number of voting shares outstanding immediately after the merger, plus the
voting power of the number of voting shares issuable as a result of the
merger, will not exceed by more than 20% the voting power of the total number
of voting shares of the surviving corporation before the merger; (iv) the
number of participating shares outstanding immediately after the merger, plus
the number of participating shares issuable as a result of the merger, will
not exceed by more than 20% the total number of participating shares of the
surviving corporation outstanding immediately before the merger; and (v) the
board of directors of the surviving corporation adopts a resolution approving
the plan of merger. The American General Articles do not contain any
provisions relating to shareholder approval of mergers.
VOTE REQUIRED FOR SALES OF ASSETS
Unless the articles of incorporation provides for a greater or lesser vote
or the board of directors requires a greater vote, the VSCA generally requires
the affirmative vote of the holders of a more than two-thirds of the shares
entitled to vote to approve the sale, lease, exchange or other disposition of
all or substantially all the corporation's assets if other than in the usual
and regular course of business. The VSCA does not require shareholder approval
for a sale of assets in the usual and regular course of business, unless the
articles of incorporation provide otherwise. The Home Beneficial Articles
increase the vote required to approve the sale or lease of all or
substantially all of the property or assets of Home Beneficial in a
transaction with a 10% Shareholder unless the transaction has been approved by
the Home Beneficial Board prior to such party's becoming a 10% Shareholder.
The TBCA generally requires the affirmative vote of the holders of at least
two-thirds of the shares entitled to vote to approve the sale, lease, exchange
or other disposition of all or substantially all the corporation's assets if
other than in the usual and regular course of business, or if any class of
shares is entitled to vote as a class on the approval of a sale, lease,
exchange or other disposition of all or substantially all the corporation's
assets, the vote required for approval of such transaction is the affirmative
vote of the holders of at least two-thirds of the shares in each such class
and the affirmative vote of the holders of at least two-thirds of the shares
otherwise entitled to vote. The TBCA does not require shareholder approval of
a sale of assets in the usual and regular course of business unless otherwise
specified in the articles of incorporation. Under the TBCA, a sale of assets
shall be deemed to be in the usual and regular course of business if the
corporation shall, directly or indirectly, either continue to engage in one or
more businesses or apply a portion of the consideration received in connection
with the transaction to the conduct of a business in which it engages
following the transaction. The American General Articles do not contain any
provisions relating to shareholder approval of such dispositions.
ANTI-TAKEOVER STATUTES
The TBCA has no anti-takeover provisions similar to the Virginia statutes
described below.
Certain provisions of the VSCA and the Home Beneficial Articles may have the
effect of delaying, making more difficult or preventing a change in control or
acquisition of Home Beneficial by means of a tender offer, a proxy contest or
otherwise. These provisions, as summarized below, are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and
to encourage persons seeking to acquire control of Home Beneficial first to
negotiate with Home Beneficial. Home Beneficial believes that the benefits
derived from requiring the proponent of an unfriendly or unsolicited proposal
to negotiate with Home Beneficial outweigh the disadvantages of discouraging
such proposals because, among other things, negotiations with respect to such
proposals could result in an improvement of their terms.
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<PAGE>
Virginia Affiliated Transactions Statute
Home Beneficial is also subject to Article 14 of the VSCA (the "Affiliated
Transactions Statute"). The Affiliated Transactions Statute generally
prohibits a publicly held Virginia corporation from engaging in an "affiliated
transaction" with an "interested shareholder" for a period of three years
after the date of the transaction in which the person became an interested
shareholder, unless (i) a majority of disinterested directors approved in
advance the transaction in which the interested shareholder became an
interested shareholder or (ii) the affiliated transaction is approved by the
affirmative vote of a majority of the disinterested directors and the holders
of two-thirds of the voting shares other than the shares beneficially owned by
the interested shareholder. A corporation may engage in an affiliated
transaction with an interested shareholder beginning three years after the
date of the transaction in which the person became an interested shareholder,
if the transaction is approved by a majority of the disinterested directors or
by two-thirds of the disinterested shareholders or if it complies with certain
statutory fair price provisions.
Subject to certain exceptions, under the VSCA an "interested shareholder" is
a person who, together with affiliates and associates, beneficially owns 10%
or more of the corporation's outstanding voting securities. "Affiliated
transaction" includes: (i) any merger or share exchange with an interested
shareholder; (ii) the transfer to any interested shareholder of corporate
assets with a fair market value greater than 5% of the corporation's
consolidated net worth; (iii) the issuance to any interested shareholder of
voting shares with a fair market value greater than 5% of the fair market
value of all outstanding voting shares of the corporation; (iv) any
reclassification of securities or corporate reorganization that will have the
effect of increasing by 5% or more the percentage of the corporation's
outstanding voting shares held by any interested shareholder and (v) any plan
or proposal for dissolution of the corporation proposed by or on behalf of any
interested shareholder.
Because the Home Beneficial Board has approved the Merger Agreement and the
transactions contemplated thereby, the provisions of the Affiliated
Transactions Statute are not applicable to the Merger.
Control Share Acquisition Statute
Home Beneficial is also subject to Article 14.1 of the VSCA (the "Control
Share Acquisition Statute"). The Control Share Acquisition Statute provides
that shares of a publicly held Virginia corporation that are acquired in a
"control share acquisition" generally will have no voting rights unless such
rights are conferred on those shares by the vote of a majority of all the
outstanding shares other than interested shares. A control share acquisition
is defined, with certain exceptions, as the acquisition of the beneficial
ownership of voting shares which would cause the acquirer to have voting power
within the following ranges or to move upward from one range into another: (i)
20% to 33 1/3%; (ii) 33 1/3% to 50%; or (iii) more than 50%, of such votes.
The Control Share Acquisition Statute does not apply to an acquisition of
shares of a publicly held Virginia corporation pursuant to a merger or share
exchange effected in compliance with the VSCA if the issuing public company is
a party to the merger or share exchange agreement.
Because the Control Share Acquisition Statute specifically exempts a merger
effected in compliance with the VSCA if the publicly held Virginia corporation
is a party to the merger agreement, the provisions of the Control Share
Acquisition Statute are not applicable to the Merger.
SUPERMAJORITY VOTING PROVISION
The Home Beneficial Articles provide that the affirmative vote of not less
than 80% of the Home Beneficial Voting Common Stock shall be required to
approve (i) a "business combination" with a 10% Shareholder or (ii) any
reclassification of securities, recapitalization or other transactions
designed to decrease the number of holders of the Home Beneficial Voting
Common Stock after a party has become a 10% Shareholder. This supermajority
vote requirement does not apply if, in the case of a business combination, the
Home Beneficial Board approves the transaction prior to the time that the 10%
Shareholder acquires its 10% or more beneficial ownership or, in the case of a
transaction described in (ii) above, the Home Beneficial Board unanimously
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<PAGE>
recommends the transaction to the holders of the Home Beneficial Voting Common
Stock. Because the Home Beneficial Board has approved the Merger Agreement and
the transactions contemplated thereby, the supermajority vote requirement is
not applicable to the Merger. The American General Bylaws and the American
General Articles do not contain similar supermajority voting requirements.
DISSENTERS' RIGHTS
Under the VSCA, a dissenting shareholder of a corporation participating in
certain transactions, under varying circumstances, may receive cash in the
amount of the fair value of his or her shares (as determined by agreement or
by a court) in lieu of the consideration otherwise receivable in any such
transaction. Dissenters' rights are not available with respect to a plan of
merger or share exchange or a proposed sale or exchange of property to holders
of shares of any class or series which, on the record date fixed to determine
the shareholders entitled to vote at the meeting of shareholders at which such
action is to be acted upon were (i) listed on a national securities exchange
or on Nasdaq or (ii) held of record by not fewer than 2,000 shareholders
unless in either case (x) the articles of incorporation provide otherwise, (y)
the holders are required to accept any consideration other than (A) cash, (B)
shares of the surviving corporation or of any other corporation whose shares
are listed on a national securities exchange or are held by more than 2,000
shareholders of record or (C) any combination thereof, or (z) the transaction
is an "Affiliated Transaction" not approved by the Board of Directors. The
VSCA also provides dissenters' rights in connection with (i) sales of
substantially all of a corporation's assets and (ii) control-share
acquisitions. See "THE PROPOSED MERGER--Rights of Dissenting Shareholders."
Under the TBCA, a shareholder generally has the right to dissent from any
merger to which the corporation is a party, from any sale of all or
substantially all assets of the corporation, or from any plan of exchange and
to receive fair value for his or her shares. However, dissenters' rights are
not available with respect to a plan of merger in which there is a single
surviving corporation or with respect to any plan of exchange if (1) the
shares held by the shareholder are part of a class, shares of which are listed
on a national securities exchange or held of record by not less than 2,000
holders on the record date fixed to determine the shareholders entitled to
vote on the plan of merger or the plan of exchange and (2) the shareholder is
not required by the terms of the plan of merger or plan of exchange to accept
for his or her shares any consideration other than (a) shares of a corporation
that, immediately after the effective time of the merger or exchange, will be
part of a class of shares that are (i) listed, or authorized for listing upon
official notice of issuance, on a national securities exchange or (ii) held of
record by not less than 2,000 holders and (b) cash in lieu of fractional
shares otherwise entitled to be received.
LIMITATION ON DIRECTOR'S LIABILITY
The Home Beneficial Articles limit the liability of its officers and
directors to the corporation or its shareholders for monetary damages to $1.00
except for liabilities resulting from such persons having engaged in willful
misconduct or a knowing violation of the criminal law or federal or state
securities laws. The Home Beneficial Articles thus effectively eliminate
director and officer liability to the corporation or its stockholders to the
fullest extent permitted by the VSCA, as now or hereafter in effect.
The American General Articles, in accordance with Texas law, provide that a
director of the corporation shall not be liable to the corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except to the extent the director is found liable for
(i) a breach of the director's duty or loyalty to the corporation or its
shareholders; (ii) an act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the law; (iii) a transaction
from which the director received an improper benefit, whether or not the
benefit resulted from an action taken within the scope of the director's
office; (iv) an act or omission for which the liability of a director is
expressly provided by statute; or (v) an act related to an unlawful stock
repurchase or payment of a dividend. In addition, the American General
Articles provide that any repeal or amendment of the foregoing provisions by
the shareholders of the corporation shall be prospective only and shall not
adversely affect any limitation on the liability of a director of the
corporation existing at the time of such repeal or amendment, and that, in
addition to the circumstances in which the director
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<PAGE>
of the corporation is not liable as set forth in the preceding sentences, the
director shall not be liable to the fullest extent permitted by any provisions
of the statutes of Texas later enacted that further limits the liability of a
director.
INDEMNIFICATION
The VSCA permits, and the Home Beneficial Articles require, indemnification
of its officers and directors against all liabilities imposed or asserted
against them by reason of having been an officer or director of Home
Beneficial (including derivative actions), except in the case of willful
misconduct or a knowing violation of criminal law. The Home Beneficial
Articles also permit Home Beneficial to indemnify employees and agents against
liabilities imposed or asserted against them by reason of having been an
employee or agent of Home Beneficial to the same extent as is mandated for
officers and directors. The Home Beneficial Articles require indemnification
to the fullest extent permitted by the VSCA, as now or hereafter in effect.
Under the TBCA, a corporation has the power to indemnify directors,
officers, employees and agents of the corporations against certain liabilities
and to purchase and maintain liability insurance for those persons. The
American General Bylaws provide that American General will indemnify any
person who was or is a named defendant or respondent or is threatened to be
made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, or any appeal of such action, suit or proceeding and any
inquiry or investigation that could lead to such an action, suit or
proceeding, by reason of the fact that he is or was a director, officer or
employee of American General, or is or was serving at the request of American
General as a director, officer or employee of another foreign or domestic
corporation, against judgments, penalties, fines, amounts paid in settlement
and reasonable expenses actually incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed, (i) in the case of conduct in his or her official
capacity as a director of American General, to be in the best interests of
American General, and (ii) in all other cases, to be not opposed to the best
interests of American General, except that no indemnification shall be made
available where such person is found liable for willful or intentional
misconduct in the performance of his or her duty to American General.
DIVIDENDS
Under the TBCA and subject to any restrictions in a corporation's articles
of incorporation, the board of directors of a corporation may authorize and
the corporation may make distributions; provided, that a distribution may not
be made if (i) after giving effect to the distribution, the corporation would
be insolvent or (ii) the distribution exceeds the surplus of the corporation.
Notwithstanding the limitations on distributions set forth in clauses (i) and
(ii) above, a corporation may make a distribution involving a purchase or
redemption of any of its own shares if the purchase or redemption is made by
the corporation to: (i) eliminate fractional shares, (ii) collect or
compromise indebtedness owed by or to the corporation, (iii) pay dissenting
shareholders entitled to payment for their shares under the TBCA or (iv)
effect the purchase or redemption of redeemable shares in accordance with the
TBCA.
Holders of American General Common Stock are entitled to receive dividends
when, as and if declared by the American General Board out of any funds
legally available therefore, and are entitled upon liquidation, after claims
of creditors and preferences of any series of American General Preferred
Stock, to receive pro rata the net assets of American General.
Under the VSCA, the board of directors may authorize and the corporation may
pay dividends or make other distributions to its shareholders subject to the
following limitation: No dividend or other distribution may be paid or made
if, after giving effect to the dividend or distribution (i) the corporation
would not be able to pay its debts as they become due in the ordinary course
of business or (ii) the corporation's total assets would be less than the sum
of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of the dividend or distribution,
to satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those receiving the dividend or
distribution. A Virginia corporation may acquire
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its own shares subject to the above limitations that apply to distributions
and the shares so acquired constitute shares of the same class of stock.
Holders of Home Beneficial Voting Common Stock are entitled to receive
ratably such cash dividends when, if, and as may be declared by the Home
Beneficial Board out of funds legally available therefor and only if at such
time an equal per share dividend shall be declared and paid to the holders of
Home Beneficial Non-Voting Common Stock, and vice versa. Holders of Home
Beneficial Voting Common Stock and Home Beneficial Non-Voting Common Stock are
entitled to participate ratably in any stock dividends except that the holders
of Home Beneficial Voting Common Stock may receive either Home Beneficial
Voting Common Stock or Home Beneficial Non-Voting Common Stock or any
combination thereof, while holders of Home Beneficial Non-Voting Common Stock
may receive only Home Beneficial Non-Voting Common Stock.
In the event of any liquidation, dissolution or winding-up of Home
Beneficial, the holders of Home Beneficial Voting Common Stock and the holders
of Home Beneficial Non-Voting Common Stock will be entitled to share pro rata
in the net assets of Home Beneficial remaining, if any, after payment or
provision for payment in respect of the debts and other liabilities of Home
Beneficial.
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<PAGE>
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF AMERICAN GENERAL
American General does not know of any person that owns more than five
percent of the American General Common Stock or the American General 7%
Preferred Stock, except for those listed below. The percentage ownership has
been calculated based on the number of issued and outstanding shares of
American General Common Stock and the American General 7% Preferred Stock as
of December 31, 1996.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT OF
BENEFICIAL OWNER TITLE OF CLASS OWNED CLASS
------------------- ------------------ ------------------- ----------
<S> <C> <C> <C>
INVESCO PLC 11
Devonshire Square
London EC2M 4YR
England..................... Common Stock 14,961,901 (1) 7.4%
The Capital Group Companies,
Inc.
333 South Hope Street
Los Angeles, CA 90071....... Common Stock 13,958,210 (2) 6.9%
Putnam Investments, Inc.
One Post Office Square
Boston, Massachusetts
02109....................... Common Stock 13,062,886 (3) 6.4%
Fayez Sarofim & Co. ("Sarofim
Co.") and
Fayez S. Sarofim
Two Houston Center
Suite 2907
Houston, Texas.............. Common Stock 13,010,479 (4) 6.1%
* * *
The Lucy B. Gooding
1995 Living Trust
2970 St. Johns Avenue
Jacksonville, FL............ 7% Preferred Stock 753,422 (5) 32.5%
The Bryan Trust
One Independent Drive
Jacksonville, FL............ 7% Preferred Stock 479,236 (6) 20.7%
The Olive Julia Gibson
Bryan Testamentary Trust
One Independent Drive
Jacksonville, FL............ 7% Preferred Stock 186,506 (6) 8.1%
</TABLE>
- --------
(1) Based on a Schedule 13G dated February 10, 1997. INVESCO PLC and certain
of its subsidiaries report shared voting and investment power with respect
to all of the shares reported in the table.
(2) Based on a Schedule 13G dated February 12, 1997. The Capital Group
Companies, Inc. reports sole voting power with respect to 59,350 of such
shares and sole dispositive power with respect to 13,958,210 of such
shares and disclaims beneficial ownership with respect to 13,958,210 of
such shares.
(3) Based on a Schedule 13G dated January 27, 1997. Putnam Investments, Inc.
reports shared voting power with respect to 113,108 of such shares.
(4) Based on a Schedule 13G dated February 13, 1997. Mr. Sarofim is chairman,
president and principal shareholder of Sarofim Co. He reports that through
Sarofim Co., Sarofim Trust Co. (each of which is a registered investment
adviser) and certain trusts of which Mr. Sarofim is trustee, he may be
deemed to share investment power with respect to all of the shares
reported in the table. He shares voting power with Sarofim Co. and Sarofim
Trust Co. with respect to not more than 11,234,551 of such shares. Such
investment power, voting power, or both, also may be deemed to be shared
with clients of Sarofim Co. or Sarofim Trust Co., or with trustees, other
fiduciaries, clients or others. The shares reported in the table exclude
13,100 shares owned by family members of Mr. Sarofim, but as to which Mr.
Sarofim and Sarofim Co. disclaim beneficial ownership.
(5) Lucy B. Gooding, Jack E. Brooks, and Bonnie H. Smith are trustees of The
Lucy B. Gooding 1995 Living Trust.
(6) Jacob F. Bryan IV, G. Howard Bryan, and Julia Olive Craig Brooke are
beneficiaries and/or trustees of The Bryan Trust and The Olive Julia
Gibson Bryan Testamentary Trust. In addition to the shares reported in the
table, G. Howard Bryan has direct beneficial ownership of 8,033 shares of
the American General 7% Preferred Stock.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS, DIRECTORS AND MANAGEMENT OF HOME
BENEFICIAL
Management and 5% Stockholders
The following table shows as of December 31, 1996, the beneficial ownership
of all Home Beneficial Voting Common Stock and Home Beneficial Non-Voting
Common Stock by each director of Home Beneficial and by any other person or
entity known to Home Beneficial to own more than 5% of the outstanding shares
of both classes taken together. To the extent that shares held beneficially by
spouses or relatives of directors of Home Beneficial are included, such
directors disclaim beneficial ownership. The amounts shown for Home Beneficial
Voting Common Stock include beneficial ownership evidenced by voting trust
certificates of the 1984 Voting Trust, but exclude shares of Home Beneficial
Voting Common Stock held by the Voting Trustees thereunder.
DIRECTORS/(1)/
<TABLE>
<CAPTION>
AMOUNT PERCENT
NAME OF DIRECTOR TITLE OF CLASS BENEFICIALLY OWNED OF CLASS(/2/)
- ---------------- -------------- ------------------ -------------
<S> <C> <C> <C>
H. D. Garnett........... Voting Common -- --
Non-Voting Common 2,600/(3)/ *
W. G. Hancock........... Voting Common 89,560/(4)//(5)//(6)/ 1.11
Non-Voting Common 4 *
D. N. Hoppes............ Voting Common 13,536/(7)//(8)/ *
Non-Voting Common 7,264/(8)/ *
G. T. Richardson........ Voting Common 291,475/(7)//(9)/ 3.62
Non-Voting Common 11,774 *
L. W. Richardson........ Voting Common 349,324/(4)//(7)//(9)//(1)/(0)/ 4.33
Non-Voting Common 89,179/(4)//(1)/(0)/ *
J. M. Wiltshire, Jr..... Voting Common -- --
Non-Voting Common 6,000 *
R. W. Wiltshire......... Voting Common 788,752/(4)//(7)//(1)/(1)/ 9.79
Non-Voting Common 660/(1)/(1)/ *
R. W. Wiltshire, Jr..... Voting Common 37,110/(7)//(1)/(1)/ *
Non-Voting Common 32,679/(4)//(1)/(1)/ *
W. B. Wiltshire......... Voting Common 36,950/(7)//(1)/(1)/ *
Non-Voting Common 21,786/(4)//(1)/(1)/ *
All directors as a
group.................. Voting Common 1,606,707 19.93
Non-Voting Common 171,946 1.91
5% STOCKHOLDERS
(OTHER THAN DIRECTORS AND VOTING TRUSTEES)
<CAPTION>
NAME AND ADDRESS OF AMOUNT PERCENT
5% STOCKHOLDER TITLE OF CLASS BENEFICIALLY OWNED OF CLASS
------------------- -------------- ------------------ --------
<S> <C> <C> <C>
Dixie Company/(1)/(2)/ Voting Common 2,373,552/(7)//(8)/ 29.45
P. O. Box 12312 Non-Voting Common 434,332/(8)/ 4.83
Richmond, Virginia
23241-0312
Estate of Mary Morton Voting Common 1,174,427/(7)/ 14.57
Parsons/(1)/(3)/
P. O. Box 85678 Non-Voting Common -- --
Richmond, Virginia
23285-5678
</TABLE>
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<PAGE>
- --------
(1) There are no executive officers of Home Beneficial who are not
directors.
(2) Where an asterisk is shown, the percentage is less than 1%.
(3) All of the shares of Home Beneficial Non-Voting Common Stock shown for
Mr. Garnett are owned jointly with his wife.
(4) Includes an aggregate of 26,240 shares of Home Beneficial Voting Common
Stock (of which 22,696 shares are evidenced by voting trust certificates
of the 1984 Voting Trust) and 12,710 shares of Home Beneficial Non-
Voting Common Stock held by directors as trustees or custodians for the
benefit of children (that are not described in other footnotes to this
table), or by their wives.
(5) The ownership for Mr. Hancock excludes 188,800 shares of Home Beneficial
Voting Common Stock held in trust for the benefit of his mother, with
remainder to her issue, in which Mr. Hancock has a vested one-third
beneficial interest subject to partial divestment upon any future
children of his mother.
(6) Includes 2,400 shares of Home Beneficial Voting Common Stock held by Mr.
Hancock and his brother and sister as trustees under inter-vivos trusts
created by their mother for the benefit of her six grandchildren, three
of whom are children of Mr. Hancock.
(7) Some portion or all of the shares of Home Beneficial Voting Common Stock
shown for each of the indicated directors or stockholders are subject to
the 1984 Voting Trust, and their beneficial ownership as to those shares
is evidenced by voting trust certificates that have been issued to them
thereunder. The number of shares of Home Beneficial Voting Common Stock
deposited in the 1984 Voting Trust by each of them is as follows: D. N.
Hoppes--13,536; G. T. Richardson--258,448; L. W. Richardson--330,860; R.
W. Wiltshire--586,276; R. W. Wiltshire, Jr.--10,640; W. B. Wiltshire--
10,492; Dixie Company--2,313,656; and Estate of Mary Morton Parsons--
1,174,427.
(8) All of the voting trust certificates and the shares of Home Beneficial
Non-Voting Common Stock are held of record by Dixie Company and may be
acquired by Mrs. Hoppes pursuant to her power to revoke an inter vivos
trust. Such voting trust certificates and shares of Home Beneficial Non-
Voting Common Stock are also included in the table for Dixie Company.
(9) Includes voting trust certificates for 235,138 shares of Home Beneficial
Voting Common Stock held by a trust of which G. T. Richardson is one of
two trustees sharing voting and investment power. L. W. Richardson has a
contingent one-half remainder interest in the assets of the trust. The
ownership shown includes all such shares for G. T. Richardson and
excludes all such shares for L. W. Richardson.
(10) Includes 4,253 shares of Home Beneficial Voting Common Stock, voting
trust certificates for 25,538 shares of Home Beneficial Voting Common
Stock subject to the 1984 Voting Trust and 37,712 shares of Home
Beneficial Non-Voting Common Stock held by Mr. Richardson, as trustee
with sole voting and shared investment power, for the benefit of a member
of his immediate family.
(11) 141,804 shares of Home Beneficial Voting Common Stock, voting trust
certificates for 94,976 shares of Home Beneficial Voting Common Stock
subject to the 1984 Voting Trust and 660 shares of Home Beneficial Non-
Voting Common Stock are held by the Estate of Essie Lee Wiltshire for the
life of R. W. Wiltshire with a vested remainder interest in the children
of R. W. Wiltshire. R. W. Wiltshire is the sole executor of the Estate of
Essie Lee Wiltshire. During the life of R. W. Wiltshire the income from
the foregoing shares is paid to his children. In addition, R. W.
Wiltshire has a life estate in voting trust certificates evidencing
450,524 shares of Home Beneficial Voting Common Stock subject to the 1984
Voting Trust, with remainder to his children. R. W. Wiltshire, Jr. and W.
B. Wiltshire have vested one-fourth beneficial interests in all of the
foregoing shares, subject to partial divestment upon any further children
of R. W. Wiltshire. The ownership shown includes such shares for R. W.
Wiltshire and excludes all such shares for R. W. Wiltshire, Jr. and W. B.
Wiltshire. Both R. W. Wiltshire, Jr. and W. B. Wiltshire also have the
same vested one-fourth remainder interests subject to partial divestment
in voting trust certificates for 17,528 shares of Home Beneficial Voting
Common Stock and 123,308 shares of Home Beneficial Non-Voting Common
Stock in which various children and grandchildren of R. W. Wiltshire
residing in other households have an interest for his life. The ownership
shown for R. W. Wiltshire, R. W. Wiltshire, Jr. and W. B. Wiltshire does
not reflect any of such shares, except in the case of R. W. Wiltshire,
Jr. for voting trust certificates evidencing 8,764 shares of Home
Beneficial Voting Common Stock held by him for his own benefit and 26,445
shares of Home Beneficial Non-Voting Common Stock held by him as
custodian for his minor children and, in the case of W. B. Wiltshire, for
voting trust certificates evidencing 8,764 shares of Home Beneficial
Voting Common Stock held by him for his own benefit and 17,630 shares of
Home Beneficial Non-Voting Common Stock held by him as custodian for his
minor children.
(12) Dixie Company is the nominee of Jefferson National Bank, Richmond,
Virginia, which holds the shares shown in a number of fiduciary accounts
that it administers.
(13) Clinton Webb and NationsBank, N.A., Richmond, Virginia, are the co-
executors of the Estate of Mary Morton Parsons.
Voting Trust
As of December 31, 1996, 5,181,165 shares of Home Beneficial Voting Common
Stock, constituting 64.3% of the 8,060,660 shares then outstanding, were held
by the Voting Trustees pursuant to the 1984 Voting Trust. See "COMPARISON OF
SHAREHOLDER RIGHTS--Voting Trust Agreement." The Voting Trustees are given
exclusive voting power of the Home Beneficial Voting Common Stock subject to
the 1984 Voting Trust, but must vote or execute consents in accordance with
the instructions of the holders of voting trust certificates with respect to
any of a number of specified matters submitted to a vote of the holders of
Home Beneficial Voting Common Stock as to which a majority of the Voting
Trustees then in office favor an affirmative vote that, if approved by the
holders of Home Beneficial Voting Common Stock in accordance with and to the
extent required by law and the Home Beneficial Articles, would have a
fundamental effect on the rights of the holders of Home
84
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Beneficial Voting Common Stock, including the merger or consolidation of Home
Beneficial with or into any other corporation, or of any other corporation
with or into Home Beneficial. If a majority of the Voting Trustees shall
oppose any such matter, the Voting Trustees need not solicit, obtain or follow
directions from the holders of the voting trust certificates, and such
majority of Voting Trustees opposing any such proposal are authorized and
empowered to vote all the shares of Home Beneficial Voting Common Stock held
by the Voting Trustees under the 1984 Voting Trust against such proposal. THE
HOME BENEFICIAL BOARD UNDERSTANDS THAT ALL OF THE VOTING TRUSTEES UNDER THE
1984 VOTING TRUST FAVOR AN AFFIRMATIVE VOTE ON THE MERGER. ACCORDINGLY, UNDER
THE TERMS OF THE 1984 VOTING TRUST, IN VOTING ON THE MERGER, THE VOTING
TRUSTEES HAVE NO DISCRETION AND MUST VOTE PROPORTIONATE AMOUNTS OF HOME
BENEFICIAL VOTING COMMON STOCK HELD BY THEM ONLY IN ACCORDANCE WITH THE
INSTRUCTIONS OF THE HOLDERS OF VOTING TRUST CERTIFICATES OF SUCH VOTING TRUST.
In the event that as a result of a merger, the shares of Home Beneficial
Voting Common Stock held by the Voting Trustees should be converted into and
become shares of another corporation, the 1984 Voting Trust shall be
terminated automatically unless the amount of voting stock in such other
corporation received as a result of the conversion would thereafter represent
more than one-twentieth of the issued and outstanding voting stock of such
other corporation if it has a class of stock registered under the Exchange
Act, in which case the 1984 Voting Trust shall continue in force according to
its terms. If the Merger is consummated, the Home Beneficial Voting Common
Stock held by the Voting Trustees will be converted into less than five
percent (5%) of American General Common Stock issued and outstanding, and the
1984 Voting Trust, if it has not otherwise expired by its terms prior to the
effective date of the Merger, will automatically terminate.
Holders of voting trust certificates who wish to exercise their dissenters'
rights should review carefully "THE PROPOSED MERGER--Rights of Dissenting
Shareholders--Home Beneficial Voting Common Stock."
LEGAL MATTERS
The legality of the American General Common Stock to be issued in the Merger
will be passed upon for American General by Susan A. Jacobs, Associate General
Counsel of American General. Debevoise & Plimpton, special counsel to Home
Beneficial, and Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to
American General, will each render opinions with respect to certain federal
income tax consequences of the Merger. See "THE PROPOSED MERGER--Certain
Federal Income Tax Consequences of the Merger." Certain other legal matters in
connection with the Merger will be passed upon for Home Beneficial by its
general counsel, Mays & Valentine, L.L.P.
EXPERTS
The consolidated financial statements of Home Beneficial at December 31,
1996 and 1995, and for each of the three years in the period ended December
31, 1996, incorporated by reference in the Proxy Statement of Home Beneficial,
which is referred to and made a part of this Prospectus and Registration
Statement, have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report incorporated by reference herein, and are
incorporated by reference herein in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of American General and its
subsidiaries at December 31, 1996, 1995, and 1994, and for each of the three
years in the period ended December 31, 1996, and the consolidated financial
statements and schedules of American General and its subsidiaries at December
31, 1995, 1994, and 1993, and for each of the three years in the period ended
December 31, 1995, incorporated by reference in the Proxy Statement of Home
Beneficial, which is referred to and made a part of this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports incorporated by reference herein, and
are incorporated by reference herein in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
85
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ANNEX A --
COMPOSITE
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN GENERAL CORPORATION,
AGC LIFE INSURANCE COMPANY
AND
HOME BENEFICIAL CORPORATION
DATED AS OF DECEMBER 22, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
* This Composite Conformed Copy reflects amendments entered into as of January
22, 1997 and as of March 3, 1997, relating to certain minor technical
matters.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I THE MERGER................................................ 1
Section 1.1 The Merger................................................ 1
Section 1.2 Closing................................................... 1
Section 1.3 Effective Time of the Merger.............................. 1
Section 1.4 Directors and Officers of the Surviving Corporation....... 2
ARTICLE II SHAREHOLDER APPROVAL...................................... 2
Section 2.1 Shareholder Meeting....................................... 2
Section 2.2 Proxy Statement/Prospectus; Registration Statement........ 2
Section 2.3 No False or Misleading Statements......................... 2
ARTICLE III CONVERSION AND EXCHANGE OF SECURITIES..................... 3
Section 3.1 Conversion of Shares...................................... 3
Section 3.2 Election Procedure........................................ 4
Section 3.3 Issuance of Purchaser Common Stock and Payment of Cash
Consideration; Proration.................................. 5
Section 3.4 Fractional Interests...................................... 6
Section 3.5 Dissenting Shares......................................... 6
Section 3.6 Exchange of Certificates.................................. 7
Section 3.7 No Liability.............................................. 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB....... 8
Section 4.1 Organization.............................................. 8
Section 4.2 Capitalization............................................ 8
Section 4.3 Sub and Purchaser Subsidiaries............................ 9
Section 4.4 Authority Relative to this Agreement...................... 10
Section 4.5 Consents and Approvals; No Violations..................... 10
Section 4.6 Purchaser SEC Reports..................................... 11
Section 4.7 Statutory Financial Statements............................ 11
Section 4.8 Absence of Certain Changes................................ 11
Section 4.9 Litigation................................................ 12
Section 4.10 Absence of Undisclosed Liabilities........................ 12
Section 4.11 No Default................................................ 12
Section 4.12 Taxes..................................................... 12
Section 4.13 Title to Property......................................... 13
Section 4.14 Insurance Practices; Permit and Insurance Licenses........ 13
Section 4.15 Regulatory Filings........................................ 13
Section 4.16 Investments............................................... 13
Section 4.17 Reserves.................................................. 14
Section 4.18 Ownership of Company Common Stock......................... 14
Information in Proxy Statement/Prospectus and Registration
Section 4.19 Statement................................................. 14
Section 4.20 Brokers................................................... 14
Section 4.21 Environmental Matters..................................... 14
Section 4.22 Disclosure................................................ 15
Section 4.23 Investigation by Purchaser................................ 15
Section 4.24 Financing................................................. 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 16
Section 5.1 Organization.............................................. 16
Section 5.2 Capitalization............................................ 16
Section 5.3 Company Subsidiaries...................................... 16
Section 5.4 Authority Relative to this Agreement...................... 17
Section 5.5 Consents and Approvals; No Violations..................... 17
</TABLE>
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Section 5.6 Company SEC Reports....................................... 18
Section 5.7 Statutory Financial Statements............................ 18
Section 5.8 Absence of Certain Changes................................ 18
Section 5.9 Litigation................................................ 19
Section 5.10 Absence of Undisclosed Liabilities........................ 19
Section 5.11 No Default................................................ 19
Section 5.12 Taxes..................................................... 19
Section 5.13 Title to Property......................................... 20
Section 5.14 Insurance Practices; Permits and Insurance Licenses....... 20
Section 5.15 Regulatory Filings........................................ 21
Section 5.16 Investments............................................... 21
Section 5.17 Reserves.................................................. 21
Section 5.18 Repurchases of Company Common Stock....................... 22
Information in Proxy Statement/Prospectus and Registration
Section 5.19 Statement................................................. 22
Section 5.20 Brokers................................................... 22
Section 5.21 Employee Benefit Plans; ERISA............................. 22
Section 5.22 Labor Relations; Employees................................ 24
Section 5.23 Environmental Matters..................................... 24
Section 5.24 Related Party Transactions................................ 25
Section 5.25 Affiliates................................................ 25
Section 5.26 Opinion of Financial Advisor.............................. 25
Section 5.27 Derivatives............................................... 25
Section 5.28 Contracts................................................. 25
Section 5.29 Investment Advisor; Investment Company.................... 26
Section 5.30 Disclosure................................................ 26
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER.................... 26
Section 6.1 Conduct of Business by the Company Pending the Merger..... 26
Section 6.2 Conduct of Business by Purchaser Pending the Merger....... 28
Section 6.3 Investment Restrictions................................... 29
ARTICLE VII ADDITIONAL AGREEMENTS..................................... 29
Section 7.1 Access and Information.................................... 29
Section 7.2 Acquisition Proposals..................................... 29
Section 7.3 Fiduciary Duties; Certain Fees............................ 30
Section 7.4 Filings; Other Action..................................... 30
Section 7.5 Public Announcements...................................... 31
Section 7.6 Employee Benefits......................................... 31
Section 7.7 Stock Exchange Listing.................................... 31
Section 7.8 Company Indemnification Provisions........................ 31
Section 7.9 Comfort Letters........................................... 32
Section 7.10 Tax Matters............................................... 32
Section 7.11 Intercompany Dividend..................................... 32
Section 7.12 Additional Matters........................................ 33
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER.................. 33
Conditions to Each Party's Obligation to Effect the
Section 8.1 Merger.................................................... 33
Conditions to Obligation of the Company to Effect the
Section 8.2 Merger.................................................... 34
Conditions to Obligations of Purchaser and Sub to Effect
Section 8.3 the Merger................................................ 34
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER......................... 35
Section 9.1 Termination by Mutual Consent............................. 35
Section 9.2 Termination by Either Purchaser or the Company............ 35
Section 9.3 Termination by the Company................................ 35
</TABLE>
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Section 9.4 Termination by Purchaser................................. 35
Section 9.5 Effect of Termination and Abandonment.................... 36
ARTICLE X GENERAL PROVISIONS....................................... 36
Section 10.1 Survival of Representations, Warranties and
Agreements............................................... 36
Section 10.2 Notices.................................................. 36
Section 10.3 Descriptive Headings..................................... 37
Section 10.4 Entire Agreement; Assignment............................. 37
Section 10.5 Governing Law............................................ 37
Section 10.6 Expenses................................................. 37
Section 10.7 Amendment................................................ 37
Section 10.8 Waiver................................................... 37
Section 10.9 Counterparts; Effectiveness.............................. 38
Section 10.10 Severability; Validity; Parties in Interest.............. 38
Section 10.11 Enforcement of Agreement................................. 38
</TABLE>
EXHIBITS
Exhibit A--Plan of Merger
Exhibit B--Form of Affiliate Agreement
Exhibit C--Form of Tax Representation Letter
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TABLE OF DEFINED TERMS
<TABLE>
<S> <C>
Acquisition Proposal............................................ Section 7.2
Agreement....................................................... Recitals
Annual Statutory Statements of the Purchaser.................... Section 4.7
Annual Statutory Statements of the Company...................... Section 5.7
Average Purchaser Price......................................... Section 3.1
Cash Consideration.............................................. Section 3.1
Cash Election................................................... Section 3.2
Certificates.................................................... Section 3.1
Closing......................................................... Section 1.2
Closing Date.................................................... Section 1.2
Code............................................................ Recitals
Stock Consideration............................................. Section 3.1
Company......................................................... Recitals
Company Common Stock............................................ Section 3.1
Company Contracts............................................... Section 5.28
Company Disclosure Letter....................................... First paragraph
to Article V
Company Insurance Subsidiaries.................................. Section 5.3
Company Investments............................................. Section 5.16
Company Material Adverse Effect................................. Section 5.1
Company SEC Reports............................................. Section 5.6
Company Subsidiaries............................................ Section 5.3
Company Plans................................................... Section 7.6
Company Special Meeting......................................... Section 2.1
Company Non-Voting Stock........................................ Section 3.1
Company Voting Stock............................................ Section 3.1
Confidentiality Agreement....................................... Section 7.1
Derivatives..................................................... Section 5.27
Dissenting Share................................................ Section 3.5
Dividend Adjustment............................................. Section 7.11
Effective Time.................................................. Section 1.3
Election........................................................ Section 3.2
Election Deadline............................................... Section 3.2
Election Form................................................... Section 3.2
Encumbrances.................................................... Section 5.13
Environmental Laws.............................................. Section 4.21
ERISA........................................................... Section 5.21
ERISA Affiliate................................................. Section 5.21
Exchange Act.................................................... Section 2.3
Exchange Agent.................................................. Section 3.6
Exchange Ratio.................................................. Section 3.1
GAAP............................................................ Section 4.6
Governmental Entity............................................. Section 4.5
Governmental Requirements....................................... Section 4.5
HSR Act......................................................... Section 4.5
ICA............................................................. Section 5.29
Indemnified Party............................................... Section 7.8
Indemnified Parties............................................. Section 7.8
Issuance Notice................................................. Section 6.2
Mailing Date.................................................... Section 3.2
</TABLE>
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Merger Consideration............................................ Section 3.1
MGBC............................................................ Section 1.1
Moody's......................................................... Section 3.6
Non-Electing Shares............................................. Section 3.3
PBGC............................................................ Section 5.21
Per Share Amount................................................ Section 3.1
Permitted Company Liens......................................... Section 5.13
Permitted Investments........................................... Section 6.3
Plan of Merger.................................................. Recitals
Plans........................................................... Section 5.21
Proxy Statement/Prospectus...................................... Section 2.2
Purchaser....................................................... Recitals
Purchaser Common Stock.......................................... Section 3.1
Purchaser Disclosure Letter..................................... First paragraph
to Article IV
Purchaser Insurance Subsidiares................................. Section 4.3
Purchaser Investments........................................... Section 4.16
Purchaser Material Adverse Effect............................... Section 4.1
Purchaser Plans................................................. Section 7.6
Purchaser Preferred Stock....................................... Section 4.2
Purchaser SEC Reports........................................... Section 4.6
Purchaser Significant Subsidiaries.............................. Section 4.3
Purchaser Stock Options......................................... Section 4.2
Purchaser Subsidiaries.......................................... Section 4.3
Quarterly Statutory Statements of Purchaser..................... Section 4.7
Quarterly Statutory Statements of the Company................... Section 5.7
Registration Statement.......................................... Section 2.2
S&P............................................................. Section 3.6
SEC............................................................. Section 2.2
Securities Act.................................................. Section 2.2
SFAS............................................................ Section 5.21
Shares.......................................................... Section 3.1
State Statutory Accounting Principles........................... Section 4.7
Statutory Financial Statements of Purchaser..................... Section 4.7
Statutory Financial Statements of the Company................... Section 5.7
Stock Election.................................................. Section 3.2
Sub............................................................. Recitals
Surviving Corporation........................................... Section 1.1
Taxes........................................................... Section 4.12
Tax Returns..................................................... Section 4.12
Trading Average................................................. Section 3.1
Virginia Statutory Accounting Principles........................ Section 5.7
VSCA............................................................ Section 1.1
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 22, 1996 and amended as
of January 22, 1997 and as of March 3, 1997, by and among AMERICAN GENERAL
CORPORATION, a Texas corporation ("Purchaser"), AGC LIFE INSURANCE COMPANY, a
Missouri corporation and a wholly-owned subsidiary of Purchaser ("Sub"), and
HOME BENEFICIAL CORPORATION, a Virginia corporation (the "Company").
WHEREAS, the respective Boards of Directors of Purchaser, Sub and the
Company have approved the merger of the Company with and into Sub (the
"Merger") upon the terms and subject to the conditions set forth in this
Agreement and Plan of Merger (this "Agreement") and the Plan of Merger in the
form attached hereto as Exhibit A (the "Plan of Merger"); and
WHEREAS, Purchaser, Sub and the Company intend that the Merger qualify as a
tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement and the Plan of Merger, at the Effective Time (as defined in Section
1.3 hereof), the Company shall be merged with and into Sub in accordance with
the applicable provisions of the Virginia Stock Corporation Act (the "VSCA")
and The General and Business Corporation Law of Missouri (the "MGBC") and the
separate corporate existence of the Company shall thereupon cease, and Sub
shall be the surviving corporation in the Merger (the "Surviving Corporation")
and all of its rights, privileges, powers, immunities, purposes and franchises
shall continue unaffected by the Merger. The Merger shall have the effects set
forth in the VSCA and in the MGBC. Pursuant to the Merger, (a) the Articles of
Incorporation of Sub as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation, until
thereafter amended as provided by law and such Articles of Incorporation and
(b) the Bylaws of Sub as in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation, until thereafter amended as
provided by law, such Bylaws and the Articles of Incorporation of the
Surviving Corporation.
Section 1.2 Closing. The Company shall as promptly as practicable notify
Purchaser, and Purchaser and Sub shall as promptly as practicable notify the
Company, when the conditions to such party's or parties' obligation to effect
the Merger contained in Article VIII have been satisfied. The closing of the
Merger (the "Closing") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, at 10:00 a.m., New York time, on the sixth business
day after the later of these notices has been given (the "Closing Date"),
unless another date or place is agreed to in writing by the parties hereto;
provided, however, that the parties hereto agree to use all reasonable efforts
to consummate the Closing on March 31, 1997, or as soon as practicable
thereafter.
Section 1.3 Effective Time of the Merger. The Merger shall become effective
when appropriate Articles of Merger are executed and filed with the Virginia
State Corporation Commission as provided by, and with the effects provided in,
Section 13.1-721A of the VSCA and with the Secretary of State of the State of
Missouri as provided by Section 351.440 of the MGBC, or at such later time as
the parties hereto shall have designated in such filings as the effective time
of the Merger (the "Effective Time"), which filings shall be made as soon as
practicable after the closing of the transactions contemplated by this
Agreement in accordance with Section 1.2 hereof.
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Section 1.4 Directors and Officers of the Surviving Corporation. The
directors and officers of Sub immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation at the Effective Time.
The directors and officers of the Surviving Corporation shall hold office
until their respective successors shall have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation.
ARTICLE II
SHAREHOLDER APPROVAL
Section 2.1 Shareholder Meeting. In order to consummate the Merger, the
Company, acting through its Board of Directors and subject to Section 7.3,
shall, in accordance with applicable law, duly call, give notice of, convene
and hold a special meeting of its shareholders (the "Company Special
Meeting"), as soon as practicable after the Registration Statement (as
hereinafter defined) is declared effective, for the purpose of voting upon the
adoption of this Agreement. Subject to Section 7.3, the Company shall include
in the Proxy Statement/Prospectus (as hereinafter defined) the recommendation
of the Board of Directors of the Company that shareholders of the Company vote
in favor of the approval of the Merger and the adoption of this Agreement.
Section 2.2 Proxy Statement/Prospectus; Registration Statement. In
connection with the solicitation of approval of the principal terms of this
Agreement and the Merger by the Company's shareholders, the Company and
Purchaser shall as promptly as practicable prepare and file with the
Securities and Exchange Commission ("SEC") a preliminary proxy statement
relating to the Merger and this Agreement and use reasonable best efforts to
obtain and furnish the information required to be included by the SEC in the
Proxy Statement/Prospectus (as hereinafter defined). The Company, after
consultation with Purchaser, shall respond as promptly as practicable to any
comments made by the SEC with respect to the preliminary proxy statement and
shall cause a definitive proxy statement to be mailed to its shareholders at
the earliest practicable date. Such definitive proxy statement shall also
constitute a prospectus of Purchaser with respect to the Purchaser Common
Stock (as hereinafter defined) to be issued in the Merger (such proxy
statement and prospectus are referred to herein as the "Proxy
Statement/Prospectus"), which prospectus is to be filed with the SEC as part
of a registration statement on Form S-4 (the "Registration Statement") for the
purpose of registering the Purchaser Common Stock under the Securities Act of
1933, as amended (the "Securities Act"). Purchaser shall as promptly as
practicable prepare and file with the SEC the Registration Statement.
Purchaser, after consultation with the Company, shall respond as promptly as
practicable to any comments made by the SEC with respect to the Registration
Statement, and shall use reasonable best efforts to have the Registration
Statement declared effective by the SEC. Purchaser shall also take any action
required to be taken under applicable state securities laws in connection with
the issuance of Purchaser Common Stock in the Merger, and the Company shall
furnish all information concerning the Company and the holders of Company
Common Stock (as hereinafter defined) as may be reasonably requested by
Purchaser in connection with such action.
Section 2.3 No False or Misleading Statements. The information provided and
to be provided by each of Purchaser and the Company specifically for use in
the Registration Statement and the Proxy Statement/Prospectus shall not, with
respect to the information supplied by such party, in the case of the
Registration Statement, on the date the Registration Statement becomes
effective and, in the case of the Proxy Statement/ Prospectus, on the date
upon which the Proxy Statement/Prospectus is mailed to the shareholders of the
Company or on the date upon which approval of the Merger by the shareholders
of the Company is obtained, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of Purchaser and the Company agrees
to correct as promptly as practicable any such information provided by it that
shall have become false or misleading in any material respect and to take all
steps necessary to file with the SEC and have declared effective or cleared by
the SEC any amendment or supplement to the Registration Statement or the Proxy
Statement/Prospectus so as to correct the same and to cause the Proxy
Statement/Prospectus as so corrected to be disseminated to the Company's
shareholders to the
A-2
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extent required by applicable law. The Registration Statement and the Proxy
Statement/Prospectus shall comply as to form in all material respects with the
provisions of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and other applicable law.
ARTICLE III
CONVERSION AND EXCHANGE OF SECURITIES
Section 3.1 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any of the parties hereto or any
holder of any of the following securities:
(a) Each share of Class A Common Stock (Voting), par value $0.3125 per
share, of the Company (the "Company Voting Stock") and each share of Class
B Common Stock (Non-Voting), par value $0.3125 per share, of the Company
(the "Company Non-Voting Stock"; the Company Voting Stock and the Company
Non-Voting Stock, collectively, the "Company Common Stock"; and the shares
of such Company Common Stock, the "Shares") issued and outstanding
immediately prior to the Effective Time (other than Shares to be cancelled
pursuant to Section 3.1(c) hereof) shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into the right to receive such number of duly authorized, validly
issued, fully paid and nonassessable shares of Purchaser Common Stock (as
defined below) or cash, in accordance with the following:
(i) a fraction of a duly authorized, validly issued, fully paid and
nonassessable share of common stock of Purchaser (together with the
attached Series A Junior Participating Preferred Stock Purchase Rights,
issued in accordance with the Rights Agreement, dated as of July 27,
1989, between Purchaser and Texas Commerce Bank, as Rights Agent, as
amended by the First Amendment Rights Agreement, dated as of October
26, 1992, between Purchaser and First Chicago Trust Company of New
York, as Rights Agent, as such amended agreement may be amended from
time to time, the "Purchaser Common Stock"), par value $0.50 per share
(the "Common Stock Consideration"), calculated by dividing (x) $39.00
(the "Per Share Amount") by (y) the Average Purchaser Price (as
hereinafter defined), rounded to four decimal places (such fraction
being referred to herein as the "Exchange Ratio"). As used herein, the
"Average Purchaser Price" shall mean the average of the high and low
sales prices, regular way, of Purchaser Common Stock as reported in The
Wall Street Journal during the ten consecutive New York Stock Exchange
trading days (each, a "Trading Day") ending on (and including) the
fifth Trading Day prior to the Effective Time (the "Trading Average");
provided, however, that if the Trading Average is less than $35.00,
then the Average Purchaser Price shall be $35.00; and/or
(ii) $39.00 in cash, without any interest thereon (the "Cash
Consideration"; the Common Stock Consideration and the Cash
Consideration, collectively, the "Merger Consideration"),
in each case as the holder thereof shall have elected or be deemed to have
elected, in accordance with and subject to the limitations set forth in
Section 3.2 hereof. The Per Share Amount and the Cash Consideration may be
reduced as provided in Section 7.11. All Shares of Company Common Stock
converted or exchanged into Merger Consideration shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such Shares of Company
Common Stock shall thereafter represent the right to receive, upon the
surrender of such certificate in accordance with the provisions of Section
3.6, only the applicable Merger Consideration. The holders of such
certificates previously evidencing such Shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Shares of Company Common Stock except as otherwise
provided herein or by law.
(b) Each share of Common Stock of Sub, par value $100.00 per share,
issued and outstanding immediately prior to the Effective Time, shall
remain outstanding and shall be unchanged after the Merger and shall
thereafter constitute all of the issued and outstanding capital stock of
the Surviving Corporation.
(c) All Shares of Company Common Stock that are owned by the Company as
treasury stock and any Shares of Company Common Stock owned by Purchaser or
Sub or any other direct or indirect wholly owned
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Purchaser Subsidiary (as defined in Section 4.3(b) hereof) shall, at the
Effective Time, be canceled and retired and shall cease to exist and no
Purchaser Common Stock or other consideration shall be delivered in
exchange therefor except for any shares held in a Purchaser Subsidiary
separate account or mutual fund.
(d) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") shall cease to have any rights as stockholders of the
Company, except the right to receive the Merger Consideration for each
Share held by them.
(e) The calculations of the computations required by this Article III
(including any adjustments required under Section 7.11) shall be prepared
by Purchaser prior to the Closing Date and shall be set forth in a
statement furnished to the Company showing in reasonable detail the manner
of calculation.
(f) At the Effective Time, the stock transfer books of the Company shall
be closed as to holders of the Company Common Stock immediately prior to
the Effective Time and no transfer of the Company Common Stock by any such
holder shall thereafter be made or recognized. If, after the Effective
Time, certificates are properly presented in accordance with this Article
III to the Exchange Agent (as hereinafter defined), such certificates shall
be cancelled and exchanged for certificates representing the number of
shares of Purchaser Common Stock, and a check representing the amount of
cash, if any, into which the Company Common Stock represented thereby was
converted in the Merger.
Section 3.2 Election Procedure. Each holder (or beneficial owner through
appropriate and customary documentation and instructions) of Shares (other
than holders of Shares to be canceled as set forth in Section 3.1(c)) shall
have the right to submit a request specifying the number of Shares that such
holder desires to have converted into shares of Purchaser Common Stock in the
Merger and the number of Shares that such holder desires to have converted
into the right to receive Cash Consideration in the Merger in accordance with
the following procedure:
(a) Subject to Section 3.3, each holder of Shares may specify in a
request made in accordance with the provisions of this Section 3.2 (herein
called an "Election") (i) the number of Shares owned by such holder that
such holder desires to have converted into Purchaser Common Stock in the
Merger (a "Stock Election") and (ii) the number of Shares owned by such
holder that such holder desires to have converted into the right to receive
the Cash Consideration in the Merger (a "Cash Election").
(b) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of
loss and title to the certificates theretofore representing shares of
Company Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent) in such form as Purchaser and the
Company shall mutually agree (the "Election Form") shall be mailed thirty
days prior to the anticipated Effective Time or on such other date as
Purchaser and the Company shall mutually agree (the "Mailing Date") to each
holder of record of Company Common Stock as of the record date for the
Company Special Meeting.
(c) Any Election shall have been made properly only if the Exchange Agent
shall have received, by 5:00 p.m. local time in the city in which the
principal office of such Exchange Agent is located, on the fifth day prior
to the anticipated Effective Time (or such other time and date as Purchaser
and the Company shall mutually agree) (the "Election Deadline"), an
Election Form properly completed and signed and accompanied by certificates
for the Shares to which such Election Form relates (or customary affidavits
and indemnification regarding the loss or destruction of such certificate
or certificates or by an appropriate guarantee of delivery of such
certificates, as set forth in such Election Form, from a member of any
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the
United States provided such certificates are in fact delivered to the
Exchange Agent by the time required in such guarantee of delivery). Failure
to deliver Shares covered by such a guarantee of delivery within the time
set forth on such guarantee shall be deemed to invalidate any otherwise
properly made Election.
(d) Any Company stockholder may at any time prior to the Election
Deadline revoke or change his or her Election by written notice received by
the Exchange Agent prior to the Election Deadline accompanied by a properly
completed and signed, revised Election Form or by withdrawal of his or her
certificates for
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Shares, or of the guarantee of delivery of such certificates, previously
deposited with the Exchange Agent. All Elections shall be revoked
automatically if the Exchange Agent is notified in writing by Purchaser or
the Company that this Agreement has been terminated. In the event an
Election Form is revoked prior to the Election Deadline, the shares of
Company Common Stock represented by such Election Form shall be promptly
returned without charge to the person submitting the Election Form upon
written request to that effect from the holder who submitted the Election
Form. The Exchange Agent shall have reasonable discretion to determine
whether any election, revocation or change has been properly or timely made
and to disregard immaterial defects in the Election Forms, and any good
faith decisions of the Exchange Agent regarding such matters shall be
binding and conclusive. The Exchange Agent shall be under no obligation to
notify any person of any defect in an Election Form.
(e) Within fifteen calendar days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, Purchaser shall cause the Exchange Agent to effect the
allocation among the holders of Company Common Stock of rights to receive
Purchaser Common Stock or Cash Consideration in the Merger in accordance
with Section 3.3.
Section 3.3 Issuance of Purchaser Common Stock and Payment of Cash
Consideration; Proration. The manner in which each Share (other than Shares to
be canceled as set forth in Section 3.1(c)) shall be converted into Purchaser
Common Stock or the right to receive the Cash Consideration at the Effective
Time shall be as set forth in this Section 3.3. All references to
"outstanding" Shares in this Section 3.3 shall mean (i) all Shares outstanding
immediately prior to the Effective Time, minus (ii) Shares owned by Purchaser
or Sub or any direct or indirect wholly owned Purchaser Subsidiary except for
any shares held in a Purchaser Subsidiary separate account or mutual fund.
(a) As is more fully set forth below, the aggregate number of Shares to be
converted into Purchaser Common Stock pursuant to the Merger shall not exceed
75% of all outstanding Shares, and the number of Shares to be converted into
the right to receive the Cash Consideration pursuant to the Merger shall not
be less than 25% of all outstanding Shares and not more than 50% of all
outstanding Shares.
(b) If Stock Elections are received for a number of Shares that is in the
aggregate 75% or less of the outstanding Shares, each Share covered by a Stock
Election shall be converted in the Merger into a fraction of a share of
Purchaser Common Stock equal to the Exchange Ratio.
(c) If Stock Elections are received for a number of Shares that is in the
aggregate more than 75% of the outstanding Shares, then:
(i) Each Non-Electing Share and each Share for which a Cash Election has
been received shall be converted into the right to receive the Cash
Consideration in the Merger;
(ii) The Exchange Agent will distribute a fraction of a share of
Purchaser Common Stock equal to the Exchange Ratio with respect to a number
of such Shares equal to 75% of the outstanding Shares;
(iii) Shares covered by a Stock Election and not fully converted into the
right to receive Purchaser Common Stock as set forth in clause (ii) above
shall be converted in the Merger into the right to receive the Cash
Consideration multiplied by the number of such Shares; and
(iv) The distributions of Purchaser Common Stock and of Cash
Consideration contemplated by the preceding clauses (ii) and (iii) shall be
made on a pro rata basis among all Shares as to which Stock Elections have
been made.
(d) If Cash Elections are received for a number of Shares that is in the
aggregate 50% or less of the outstanding Shares, each Share covered by a Cash
Election shall be converted in the Merger into the right to receive the Cash
Consideration.
(e) If Cash Elections are received for a number of Shares that is in the
aggregate more than 50% of the outstanding Shares, then:
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(i) Each Non-Electing Share and each Share for which a Stock Election has
been received shall be converted in the Merger into a fraction of a share
of Purchaser Common Stock equal to the Exchange Ratio;
(ii) The Exchange Agent will distribute Cash Consideration with respect
to a number of such Shares equal to 50% of the number of outstanding
Shares;
(iii) Each Share covered by a Cash Election and not fully converted into
the right to receive the Cash Consideration as set forth in clause (ii)
above shall be converted in the Merger into the right to receive a number
of shares of Purchaser Common Stock equal to the Exchange Ratio; and
(iv) The distributions of Cash Consideration and of Purchaser Common
Stock contemplated by the preceding clauses (ii) and (iii) shall be made on
a pro rata basis among all Shares as to which Cash Elections have been
made.
(f) If Non-Electing Shares are not converted under either Section 3.3(c) or
Section 3.3(e), the Exchange Agent shall distribute with respect to such Non-
Electing Shares:
(i) Cash Consideration with respect to a number of such Non-Electing
Shares, that will result in the sum of (A) the number of Shares converted
into cash pursuant to this Section 3.3(f) and (B) the number of Shares for
which Cash Elections have been received being as close as practicable to
50% of the outstanding Shares;
(ii) Non-Electing Shares not converted into the right to receive the Cash
Consideration as set forth in the preceding sentence shall be converted in
the Merger into the right to receive a number of shares of Purchaser Common
Stock equal to the Exchange Ratio multiplied by the number of such Shares;
and
(iii) The distribution of Cash Consideration and of Purchaser Common
Stock contemplated by the preceding clauses (i) and (ii) shall be made on a
pro rata basis among all Non-Electing Shares.
(g) For the purposes of this Section 3.3, outstanding Shares as to which an
Election is not in effect at the Election Deadline shall be called "Non-
Electing Shares". If Purchaser and the Company shall determine that any
Election is not properly made with respect to any Shares, such Election shall
be deemed to be not in effect, and the Shares covered by such Election shall,
for purposes hereof, be deemed to be Non-Electing Shares.
(h) If required by special counsel to the Company or special counsel to
Purchaser in order for such counsel to provide the opinions required by
Section 8.2(b) or Section 8.3(b), respectively, the number "50%" in Sections
3.3(d), (e) and (f) above shall be adjusted to a number reasonably required by
such counsel, provided that after giving effect to such adjustment the number
of Shares to be converted into Purchaser Common Stock pursuant to the Merger
shall not exceed 75% of all outstanding Shares.
Section 3.4 Fractional Interests. No certificates or scrip representing
fractional shares of Purchaser Common Stock shall be issued in connection with
the Merger, and such fractional interests will not entitle the owner thereof
to any rights as a shareholder of Purchaser. In lieu of a fractional interest
in a share of Purchaser Common Stock, each holder of a Share or Shares of
Company Common Stock exchanged pursuant to Section 3.1(c) who would otherwise
have been entitled to receive a fraction of a share of Purchaser Common Stock
shall receive cash (without interest) in an amount equal to the product of
such fractional interest multiplied by the Average Purchaser Price.
Section 3.5 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, no Share of Company Voting Stock, the holder of which shall have
complied with the provisions of Article 15 of the VSCA as to dissenter's
rights (a "Dissenting Share"), shall be deemed converted into and to represent
the right to receive Merger Consideration hereunder, and the holders of
Dissenting Shares, if any, shall be entitled to payment, solely from the
Surviving Corporation, of the appraised value of such Dissenting Shares to the
extent permitted by and in accordance with the provisions of Article 15 of the
VSCA; provided, however, that (a) if any holder of Dissenting Shares shall,
under the circumstances permitted by the VSCA, subsequently deliver a written
withdrawal of his or her demand for appraisal of such Dissenting Shares, or
(b) if any holder fails to establish his or her entitlement to rights to
payment as provided in such Article 15, or (c) if neither any holder of
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Dissenting Shares nor the Surviving Corporation has filed a petition demanding
a determination of the value of all Dissenting Shares within the time provided
in such Article 15, such holder or holders (as the case may be) shall forfeit
such right to payment for such Dissenting Shares pursuant to such Article 15,
and each such Share shall not be considered a Dissenting Share but shall
thereupon be treated as a Non-Electing Share for purposes of Section 3.2. The
Company shall give Purchaser (i) prompt notice of any written demands for
appraisal of any Company Common Stock, attempted withdrawals of such demands,
and any other instruments received by the Company relating to shareholders'
rights of appraisal and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the VSCA. The Company
shall not, except with the prior written consent of Purchaser, voluntarily
make any payment with respect to any demands for appraisals of Company Common
Stock, offer to settle or settle any such demands or approve any withdrawal of
any such demands.
Section 3.6 Exchange of Certificates. (a) As soon as practicable after the
execution and delivery of this Agreement and, in any event, not less than five
Trading Days prior to the mailing of the Proxy Statement/Prospectus to holders
of Company Common Stock, Purchaser shall designate a bank or trust company (or
such other person or persons as shall be reasonably acceptable to Purchaser
and Company) to act as exchange agent (the "Exchange Agent") in effecting the
exchange of Certificates of Company Common Stock for Merger Consideration
pursuant to Section 3.1(a) hereof (and cash in lieu of fractional interests in
accordance with Section 3.4). Upon the surrender of each such Certificate
representing Shares of Company Common Stock, the Exchange Agent shall pay the
holder of such Certificate the applicable Merger Consideration (and cash in
lieu of fractional interests in accordance with Section 3.4), and such
Certificate shall forthwith be cancelled. Until so surrendered and exchanged,
each such Certificate that prior to the Effective Time represented Shares of
Company Common Stock (other than Certificates representing Dissenting Shares
which are not to be treated as Non-Electing Shares pursuant to Section 3.3(g)
or Shares of Company Common Stock to be cancelled in accordance with Section
3.1(c)) shall represent solely the right to receive Merger Consideration (and
cash in lieu of fractional interests in accordance with Section 3.4). No
interest shall be paid or accrued on Merger Consideration.
(b) As of or as promptly as practicable after the Effective Time, Purchaser
shall deposit or cause to be deposited in trust with the Exchange Agent, for
the benefit of the holders of Shares of Company Common Stock, for exchange in
accordance with this Article III, the aggregate Merger Consideration.
(c) The cash portion of the aggregate Merger Consideration shall be invested
by the Exchange Agent, as directed by and for the benefit of the Surviving
Corporation, provided that such investments shall be limited to direct
obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, commercial paper rated of the highest
quality by Moody's Investor Services, Inc. ("Moody's") or Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. ("S&P"), and certificates of
deposit issued by a commercial bank whose long-term debt obligations are rated
at least A2 by Moody's or at least A by S&P, in each case having a maturity
not in excess of one year.
(d) As promptly as practicable following the date which is six months after
the Effective Time, the Exchange Agent shall deliver to the Surviving
Corporation all cash, shares of Purchaser Common Stock, Certificates and other
documents in its possession relating to the transactions described in this
Agreement and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a Certificate may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws and, in the case of Dissenting Shares, subject to applicable law) receive
in exchange therefor the applicable Merger Consideration (and cash in lieu of
fractional interests in accordance with Section 3.4), without any interest
thereon.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares of Company Common
Stock. If, after the Effective Time, Certificates formerly representing Shares
of Company Common Stock are presented to the Surviving Corporation or the
Exchange
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Agent, they shall be cancelled and (subject to applicable abandoned property,
escheat and similar laws and, in the case of Dissenting Shares, subject to
applicable law) exchanged for Merger Consideration (and cash in lieu of
fractional interests in accordance with Section 3.4), as provided in this
Article III.
(f) No dividends or other distributions declared or made after the Effective
Time with respect to shares of Purchaser Common Stock shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of
Purchaser Common Stock such holder is entitled to receive, and no cash payment
in lieu of fractional interests shall be paid pursuant to Section 3.4, in each
case, until the holder of such Certificate shall surrender such Certificate,
in accordance with the provisions of this Agreement.
(g) The Exchange Agent or Purchaser shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Company Common Stock such amounts as the Exchange Agent, Purchaser
or the Surviving Corporation, as the case may be, is required to deduct and
withhold with respect to such payment under the Code or any provision of
state, local or foreign tax law. Any amounts so withheld shall be treated for
all purposes of this Agreement as having been paid to the holder of the
Company Common Stock in respect of which such deduction and withholding was
made.
Section 3.7 No Liability. Neither Purchaser, the Company nor the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock
for any Merger Consideration in respect of such shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Purchaser, the posting by such person
of a bond in customary form and amount as indemnity against any claim that may
be made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration (and cash in lieu of fractional interests in accordance with
Section 3.4), without any interest or other payments thereon, upon due
surrender and delivery of such Certificate pursuant to this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB
Except as otherwise disclosed to the Company in a letter delivered to it
prior to the execution hereof (which letter contains appropriate references to
identify the representations and warranties herein to which the information in
such letter relates) (the "Purchaser Disclosure Letter"), Purchaser represents
and warrants to the Company as follows:
Section 4.1 Organization. Each of Purchaser and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the States
of Texas and Missouri, respectively, with the corporate power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted or
presently proposed to be conducted. Sub is duly licensed or authorized as an
insurance company in the State of Missouri and in each other jurisdiction
where it is required to be licensed or authorized. Each of Purchaser and Sub
is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not individually
or in the aggregate have a material adverse effect on the business, assets,
liabilities, results of operations or financial condition of Purchaser, Sub
and the Purchaser Subsidiaries (as hereinafter defined), taken as a whole (a
"Purchaser Material Adverse Effect").
Section 4.2 Capitalization. As of September 30, 1996: (i) the authorized
capital stock of Purchaser consists of 300,000,000 shares of Purchaser Common
Stock and 60,000,000 shares of Preferred Stock, par value $1.50 per share of
Purchaser ("Purchaser Preferred Stock"), (ii) 203,624,209 shares of Purchaser
Common
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Stock, and 2,317,701 shares of Purchaser Preferred Stock (all of which are
shares in the series designated 7% Convertible Preferred Stock), were issued
and outstanding and (iii) stock options to acquire 2,976,119 shares of
Purchaser Common Stock (the "Purchaser Stock Options") were outstanding under
all stock option plans of Purchaser. All of the issued and outstanding shares
of capital stock of Purchaser are validly issued, fully paid and nonassessable
and free of preemptive rights. All of the shares of Purchaser Common Stock
reserved for issuance in exchange for shares of Company Common Stock at the
Effective Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. Since September 30, 1996 to the date hereof, no shares of
Purchaser's capital stock have been issued, except Purchaser Common Stock
issued pursuant to (i) the exercise of Purchaser Stock Options, and (ii)
restricted stock awards (covering 5,000 shares of Purchaser Common Stock)
granted under a stock plan of Purchaser. Except for (a) Purchaser Stock
Options, (b) 2,317,701 shares of 7% Convertible Preferred Stock of Purchaser,
(c) 5,000,000 shares of 6% Convertible Monthly Income Preferred Securities,
Series A, of American General Delaware, L.L.C. and (d) the Series A Junior
Participating Preferred Stock Purchase Rights attached to the Purchaser Common
Stock as of the date of this Agreement, there are no options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Purchaser to issue, transfer, sell, redeem, repurchase
or otherwise acquire any shares of its capital stock.
Section 4.3 Sub and Purchaser Subsidiaries. (a) The authorized capital stock
of Sub consists of 250,000 shares of Common Stock, par value $100.00 per
share. As of the date hereof, 141,041 shares of Common Stock of Sub are issued
and outstanding and are owned by Purchaser.
(b) Each subsidiary of Purchaser, other than Sub (collectively the
"Purchaser Subsidiaries"), is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
and has the corporate power and authority and all necessary government
approvals to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority or necessary
governmental approvals would not individually or in the aggregate have a
Purchaser Material Adverse Effect. Each Purchaser Subsidiary is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not individually or in the aggregate have a Purchaser
Material Adverse Effect. Section 4.3(b) of the Purchaser Disclosure Letter
sets forth the name of each of the Purchaser Subsidiaries that is as of the
date hereof a significant subsidiary as such term is defined in Rule 1-02 of
Regulation S-X under the Exchange Act (collectively, the "Purchaser
Significant Subsidiaries").
(c) Section 4.3(c) of the Purchaser Disclosure Letter sets forth the name of
each of the Purchaser Significant Subsidiaries that is as of the date hereof
an insurance company (collectively, the "Purchaser Insurance Subsidiaries").
Except as set forth in the Purchaser SEC Reports or Section 4.3(c) of the
Purchaser Disclosure Letter, each of the Purchaser Insurance Subsidiaries is
(i) duly licensed or authorized as an insurance company in its jurisdiction of
incorporation and (ii) duly licensed or authorized as an insurance company in
each other jurisdiction where it is required to be so licensed or authorized.
(d) Except as set forth in the Purchaser SEC Reports or Section 4.3(d) of
the Purchaser Disclosure Letter, Purchaser is, directly or indirectly, the
record and beneficial owner of all of the outstanding shares of capital stock
of Sub and of each of the Purchaser Significant Subsidiaries, there are no
proxies with respect to any such shares, and no equity securities of Sub or of
any Purchaser Significant Subsidiary are or may become required to be issued
by reason of any options, warrants, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable or exercisable for, shares of any capital
stock of Sub or of any Purchaser Significant Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which Purchaser or
any Purchaser Significant Subsidiary is or may be bound to issue, redeem,
purchase or sell additional shares of capital stock of Sub or of any Purchaser
Significant Subsidiary or securities convertible into or exchangeable or
exercisable for any such shares. Except as set forth
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in the Purchaser SEC Reports or Section 4.3(d) of the Purchaser Disclosure
Letter, all of such shares so owned by Purchaser are validly issued, fully
paid and nonassessable and are owned by it free and clear of Encumbrances (as
hereinafter defined) securing obligations not reflected in the Purchaser SEC
Reports.
Section 4.4 Authority Relative to this Agreement. Each of Purchaser and Sub
has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution, delivery and performance
of this Agreement by Purchaser and Sub and the consummation by Purchaser and
Sub of the transactions contemplated hereby have been duly authorized by the
Board of Directors of Purchaser and Sub, and by Purchaser as the sole
shareholder of Sub by written consent, and no other corporate proceedings on
the part of Purchaser or Sub are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Purchaser and Sub and (assuming this
Agreement constitutes a valid and binding obligation of the Company)
constitutes a valid and binding agreement of each of Purchaser and Sub,
enforceable against Purchaser and Sub in accordance with its terms, subject to
applicable bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights generally from time to time in effect and to
general equitable principles.
Section 4.5 Consents and Approvals; No Violations. Except (a) for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act, the Exchange Act, state or
foreign laws relating to takeovers, state securities or blue sky laws, state
insurance laws and the regulations promulgated thereunder and the filing of
the Articles of Merger as required by the VSCA and the MGBC (collectively, the
"Governmental Requirements"), or (b) where the failure to make any filing
with, or to obtain any permit, authorization, consent or approval of, any
court or tribunal or administrative, governmental or regulatory body, agency,
commission, division, department, public body or other authority (a
"Government Entity") would not prevent or delay the consummation of the
Merger, or otherwise prevent Purchaser or Sub from performing their respective
obligations under this Agreement, and would not individually or in the
aggregate have a Purchaser Material Adverse Effect, no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution, delivery and performance of this Agreement by
Purchaser and Sub and the consummation of the transactions contemplated by
this Agreement. Except as set forth in Section 4.5 of the Purchaser Disclosure
Letter, no consent or approval of any other party (other than any Governmental
Entity) is required to be obtained by Purchaser or Sub for the execution,
delivery or performance of this Agreement or the performance by Purchaser or
Sub of the transactions contemplated hereby, except where the failure to
obtain any such consent or approval would not prevent or delay the
consummation of the Merger, or otherwise prevent Purchaser or Sub from
performing their respective obligations under the Agreement, or would not
individually or in the aggregate have a Purchaser Material Adverse Effect.
Neither the execution, delivery or performance of this Agreement by Purchaser
or Sub, nor the consummation by Purchaser or Sub of the transactions
contemplated hereby, nor compliance by Purchaser or Sub with any of the
provisions hereof, will (i) conflict with or result in any breach of any
provisions of the Articles of Incorporation or Bylaws of Purchaser or Sub or
the Articles or Certificate of Incorporation, as the case may be, or Bylaws of
any of the Purchaser Subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, acceleration, vesting,
payment, exercise, suspension or revocation) under, any of the terms,
conditions, or provisions of any note, bond, mortgage, deed of trust, security
interest, indenture, license, contract, agreement, plan or other instrument or
obligation to which Purchaser, Sub or any of the Purchaser Subsidiaries is a
party or by which any of them or any of their properties or assets may be
bound, (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Purchaser, Sub, any Purchaser Subsidiary or any of
their properties or assets, (iv) result in the creation or imposition of any
Encumbrance on any asset of Purchaser, Sub or any Purchaser Subsidiary, or (v)
cause the suspension or revocation of any permit, license, governmental
authorization, consent or approval necessary for Purchaser, Sub or any of the
Purchaser Subsidiaries to conduct its business as currently conducted, except
in the case of clauses (ii), (iii), (iv) and (v) for violations, breaches,
defaults, terminations, cancellations, accelerations, creations, impositions,
suspensions or revocations which would not individually or in the aggregate
have a Purchaser Material Adverse Effect.
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Section 4.6 Purchaser SEC Reports. Purchaser has delivered to the Company
true and complete copies of each Annual Report on Form 10-K, Quarterly Report
on Form 10-Q, Current Report on Form 8-K, Proxy Statement, Schedule 13D filed
with respect to Purchaser, Form S-4, and the prospectus included in any other
registration statement as presently in effect and as last amended, pursuant to
which Purchaser has registered equity securities for sale in underwritten
offerings (including any amendments thereto), filed by Purchaser with the SEC
since January 1, 1993 through the date hereof (collectively, the "Purchaser
SEC Reports"). As of the respective dates such Purchaser SEC Reports were
filed or, if any such Purchaser SEC Reports were amended, as of the date such
amendment was filed, each of the Purchaser SEC Reports (i) complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act, and the rules and regulations promulgated thereunder and
(ii) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Each of (x) the audited and consolidated financial
statements of Purchaser (including any related notes and schedules) included
(or incorporated by reference) in its Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and (y) the unaudited consolidated
interim financial statements of Purchaser (including any related notes and
schedules) included (or incorporated by reference) in its Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996, fairly present, in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Purchaser and the Purchaser Subsidiaries as
of the dates thereof and the consolidated results of their operations and
changes in their financial position for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements).
Section 4.7 Statutory Financial Statements. The Annual Statements and
Quarterly Statements of the Purchaser Insurance Subsidiaries, as filed with
the departments of insurance for all applicable domiciliary states for the
years ended December 31, 1994 and December 31, 1995 (the "Annual Statutory
Statements of Purchaser") and the quarters ended March 31, June 30 and
September 30, 1995, and March 31, June 30, and September 30, 1996
(collectively, the "Quarterly Statutory Statements of Purchaser"),
respectively, together with all exhibits and schedules thereto (all Annual
Statutory Statements of Purchaser and all Quarterly Statutory Statements of
Purchaser, together with all exhibits and schedules thereto, referred to in
this Section 4.7 are hereinafter referred to as the "Statutory Financial
Statements of Purchaser"), have been prepared in accordance with the
accounting practices prescribed or permitted by the departments of insurance
for all applicable domiciliary states for purposes of financial reporting to
the respective state's insurance regulators ("State Statutory Accounting
Principles"), and such accounting practices have been applied on a basis
consistent with State Statutory Accounting Principles throughout the periods
involved, except as expressly set forth in the notes, exhibits or schedules
thereto, and the Statutory Financial Statements of Purchaser present fairly in
all material respects the financial position and the results of operations for
the Purchaser Insurance Subsidiaries as of the dates and for the periods
therein in accordance with State Statutory Accounting Principles. Purchaser
has delivered to the Company true and complete copies of the Annual Statutory
Statements of Purchaser and the Quarterly Statutory Statements of Purchaser.
Section 4.8 Absence of Certain Changes. Since September 30, 1996, there has
been no event or condition (other than (i) any event or condition resulting
from general economic conditions (including without limitation changes in
interest rates), (ii) any occurrence or condition affecting the life insurance
industry generally (including without limitation any change or proposed change
in insurance laws or regulations in any jurisdiction), and, in the case of
each of clauses (i) and (ii), not having a unique or disproportionate effect
on the Purchaser, or (iii) any occurrence or condition arising out of the
transactions contemplated by this Agreement or the public announcement
thereof) which has had (or is reasonably likely to result in) a Purchaser
Material Adverse Effect, and Purchaser and the Purchaser Significant
Subsidiaries have in all material respects conducted their businesses in the
ordinary course consistent with past practices and have not taken any action
which, if taken after the date hereof, would violate Section 6.2 hereof.
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Section 4.9 Litigation. Except as disclosed in Section 4.9 of the Purchaser
Disclosure Letter or the Purchaser SEC Reports, there is no suit, action,
proceeding or investigation (whether at law or equity, before or by any
federal, state or foreign court, tribunal, commission, board, agency or
instrumentality, or before any arbitrator) pending or, to the best knowledge
of Purchaser, threatened against or affecting Purchaser, Sub or any of the
Purchaser Subsidiaries, the outcome of which, in the reasonable judgment of
Purchaser, is likely individually or in the aggregate to have a Purchaser
Material Adverse Effect, nor is there any judgment, decree, injunction, rule
or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Purchaser, Sub or any of the
Purchaser Subsidiaries having, or which, insofar as can reasonably be
foreseen, in the future may have, a Purchaser Material Adverse Effect.
Section 4.10 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which are accrued or reserved against in Purchaser's financial
statements (or reflected in the notes thereto) included in the Purchaser SEC
Reports or disclosed in Section 4.10 of the Purchaser Disclosure Letter or
which were incurred after September 30, 1996 in the ordinary course of
business and consistent with past practices or in connection with the
transactions contemplated by this Agreement or liabilities incurred in
connection with acquisitions made after September 30, 1996, Purchaser and the
Purchaser Subsidiaries do not have any material liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature required by
GAAP to be reflected in a consolidated balance sheet (or reflected in the
notes thereto) of Purchaser.
Section 4.11 No Default. Except as set forth in the Purchaser SEC Reports or
Section 4.11 of the Purchaser Disclosure Letter, neither Purchaser, Sub nor
any of the Purchaser Subsidiaries is in violation or breach of, or default
under (and no event has occurred which with notice or the lapse of time or
both would constitute a violation or breach of, or default under) any term,
condition or provision of (a) its Articles or Certificate of Incorporation, as
the case may be, or Bylaws, (b) any note, bond, mortgage, deed of trust,
security interest, indenture, license, agreement, plan, contract, lease,
commitment or other instrument or obligation to which Purchaser, Sub or any of
the Purchaser Subsidiaries is a party or by which they or any of their
properties or assets may be bound or affected, (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to Purchaser, Sub
or any of the Purchaser Subsidiaries or any of their properties or assets, or
(d) any permit, license, governmental authorization, consent or approval
necessary for Purchaser, Sub or any of the Purchaser Subsidiaries to conduct
their respective businesses as currently conducted, except in the case of
clauses (b), (c) and (d) above for violations, breaches or defaults which
would not individually or in the aggregate have a Purchaser Material Adverse
Effect.
Section 4.12 Taxes. (a) Except as set forth in the Purchaser SEC Reports or
Section 4.12 of the Purchaser Disclosure Letter:
(i) Purchaser and the Purchaser Subsidiaries have (x) duly filed (or
there has been filed on their behalf) with the appropriate governmental
authorities all material Tax Returns (as hereinafter defined) required to
be filed by them on or prior to the date hereof, and (y) duly paid in full
or made provision in accordance with GAAP (or there has been paid or
provision has been made on their behalf) for the payment of all material
Taxes (as hereinafter defined) for all periods or portions thereof ending
through the date hereof;
(ii) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Returns of Purchaser or the Purchaser Subsidiaries wherein an
adverse determination or ruling in any one such proceeding or in all such
proceedings in the aggregate would have a Purchaser Material Adverse
Effect; and
(iii) the Internal Revenue Service has completed examinations of the
consolidated federal income Tax Returns of Purchaser for all periods
through and including December 31, 1987. Except as set forth in the
Purchaser SEC Reports, all issues have been settled with respect to such
examinations. The Internal Revenue Service is examining as of the date
hereof the consolidated federal income Tax Returns of Purchaser for the
years 1988 through 1992.
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(b) "Taxes" shall mean all federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties
applicable thereto. "Tax Returns" shall mean all federal, state, local and
foreign tax returns, declarations, statements, reports, schedules, forms and
information returns and any amendments to any of the foregoing relating to
Taxes.
Section 4.13 Title to Property. Except as set forth in the Purchaser SEC
Reports or Section 4.13 of the Purchaser Disclosure Letter, each of Purchaser
and the Purchaser Subsidiaries (i) has good and valid title to all of its
properties, assets and other rights that do not constitute real property, free
and clear of all Encumbrances, except for such Encumbrances that do not,
individually or in the aggregate, have a Purchaser Material Adverse Effect,
and (ii) owns, has valid leasehold interests in or valid contractual rights to
use, all of the assets, tangible and intangible, used by, or necessary for the
conduct of, its business except where the failure to have such valid leasehold
interests or such valid contractual rights do not, individually or in the
aggregate, have a Purchaser Material Adverse Effect.
Section 4.14 Insurance Practices; Permit and Insurance Licenses. (a) The
business of Purchaser and each of the Purchaser Subsidiaries is being
conducted in compliance, in all material respects, with all applicable laws,
including, without limitation, all insurance laws, ordinances, rules,
regulations, decrees and orders of any Governmental Entity, and all material
notices, reports, documents and other information required to be filed
thereunder within the last three years were properly filed in all material
respects and were in compliance in all material respects with such laws.
(b) Purchaser, and each of the Purchaser Insurance Subsidiaries, has all
permits and insurance licenses the use and exercise of which are necessary for
the conduct of its business as now conducted, other than such permits and
insurance licenses the absence of which would not, individually or in the
aggregate, be reasonably expected to have a Purchaser Material Adverse Effect.
The business of Purchaser and each of the Purchaser Insurance Subsidiaries has
been and is being conducted in compliance, in all material respects, with all
such permits and insurance licenses. To the best knowledge of Purchaser, all
such permits and insurance licenses are in full force and effect, and there is
no proceeding or investigation pending or threatened which would reasonably be
expected to lead to the revocation, amendment, failure to renew, limitation,
suspension or restriction of any such permit or insurance license.
Section 4.15 Regulatory Filings. Purchaser and the Purchaser Subsidiaries
have filed all reports, statements, documents, registrations, filings or
submissions required to be filed by any of them with any Governmental Entity,
except where the failure to file, in the aggregate, would not have a Purchaser
Material Adverse Effect; and, to the best knowledge of Purchaser, all such
reports, statements, documents, registrations, filings and submissions were in
all material respects true, complete and accurate when filed.
Section 4.16 Investments. (a) The Statutory Financial Statements of
Purchaser set forth a list, which list is accurate and complete in all
material respects, of all securities, mortgages and other investments
(collectively, the "Purchaser Investments") owned by the Purchaser Insurance
Subsidiaries as of December 31, 1995, together with the cost basis book or
amortized value, as the case may be, as of December 31, 1995. All transactions
in Purchaser Investments by each of the Purchaser Insurance Subsidiaries from
January 1, 1996 to the date hereof have complied in all material respects with
the investment policies of such Purchaser Insurance Subsidiary and all
applicable insurance laws and regulations.
(b) Except as set forth in the Statutory Financial Statements of Purchaser,
the Purchaser Insurance Subsidiaries have good and marketable title to the
Purchaser Investments listed in the Statutory Financial Statements of
Purchaser or acquired in the ordinary course of business since September 30,
1996, other than with respect to those Purchaser Investments which have been
disposed of in the ordinary course of business or as contemplated by this
Agreement or redeemed in accordance with their terms since such date and other
than with respect to statutory deposits which are subject to certain
restrictions on transfer.
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(c) The information provided by Purchaser to the Company indicating the
aggregate amount by which the Purchaser Investments have been written down
from January 1, 1996 through September 30, 1996, and the aggregate amount of
Purchaser Investments in default with respect to the payment of principal or
interest as of September 30, 1996, is true and correct in all material
respects.
Section 4.17 Reserves. The aggregate reserves of the Purchaser Insurance
Subsidiaries as recorded in the Statutory Accounting Statements of Purchaser
have been determined in accordance with generally accepted actuarial
principles consistently applied (except as set forth therein). Except as
disclosed in the Purchaser SEC Reports or Section 4.17 of the Purchaser
Disclosure Letter, the insurance reserving practices and policies of the
Purchaser Insurance Subsidiaries have not changed, in any material respect,
since December 31, 1995, and the results of the application of such practices
and policies are reflected in the Statutory Accounting Statements of
Purchaser. All reserves of the Purchaser Insurance Subsidiaries set forth in
the Statutory Accounting Statements of Purchaser are, to the best knowledge of
Purchaser, fairly stated in accordance with sound actuarial principles and
meet the requirements of the insurance laws of the applicable insurance
authority, except where the failure to so state such reserves or meet such
requirements would not have a Purchaser Material Adverse Effect.
Section 4.18 Ownership of Company Common Stock. As of the date hereof,
Purchaser and the Purchaser Subsidiaries are not beneficial owners (as defined
in Rule 16a-1(a) (2) of the Exchange Act) of any shares of Company Common
Stock except for any shares held in a Purchaser Subsidiary separate account or
mutual fund.
Section 4.19 Information in Proxy Statement/Prospectus and Registration
Statement. The Registration Statement (or any amendment thereof or supplement
thereto), at the date it becomes effective and at the time of the Company
Special Meeting, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation is made by
Purchaser with respect to statements made therein based on information
supplied by the Company in writing for inclusion in the Registration
Statement. None of the information supplied by Purchaser for inclusion or
incorporation by reference in the Proxy Statement/Prospectus will, at the date
mailed to shareholders and at the time of the Company Special Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder.
Section 4.20 Brokers. Other than (i) Insurance Investment Associates and
(ii) Merrill Lynch, Pierce, Fenner & Smith Incorporated, no person is entitled
to any brokerage, financial advisory, finder's or similar fee or commission
payable by Purchaser in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Purchaser.
Section 4.21 Environmental Matters. (a) Except as disclosed in Section 4.21
of the Purchaser Disclosure Letter or the Purchaser SEC Reports, to the
knowledge of Purchaser, (i) each of Purchaser and the Purchaser Subsidiaries
is and has been in compliance in all respects with and, except for ongoing
compliance obligations, including current activities to remove asbestos and
future activities to remove asbestos, if applicable, has no existing
liabilities under, and (ii) there are no written claims or notices by any
person received by Purchaser or any of the Purchaser Subsidiaries that any of
Purchaser or the Purchaser Subsidiaries has not been in compliance in all
respects with or has any existing liabilities under, all applicable laws,
rules, regulations, common law, ordinances, decrees, orders and other binding
legal requirements relating to pollution, the preservation of the environment,
and the exposure to materials in the environment or the work place
("Environmental Laws") with respect to property owned by Purchaser or any of
the Purchaser Subsidiaries, except for such non-compliance or liabilities that
would not be reasonably likely to have a Purchaser Material Adverse Effect.
Except as disclosed in Section 4.21 of the Purchaser Disclosure Letter or the
Purchaser SEC Reports, neither Purchaser nor any of the Purchaser Subsidiaries
is subject to any decrees, orders, decisions of arbitrators or judgments that
impose requirements under Environmental Laws, restrictions under Environmental
Laws, liabilities under Environmental
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Laws, or penalties for violations of Environmental Laws or the aforementioned
requirements or restrictions, except where such requirements, restrictions,
liabilities, or penalties would not be reasonably likely to have a Purchaser
Material Adverse Effect.
(b) Except as disclosed in Section 4.21 of the Purchaser Disclosure Letter
or the Purchaser SEC Reports, with respect to currently owned property and all
property formerly owned, leased or operated by Purchaser or any of the
Purchaser Subsidiaries, including foreclosure property, to the knowledge of
Purchaser, there are no past or present actions, conditions or occurrences
that could form the basis of any outstanding claim under Environmental Laws
against, or liability under such laws of, Purchaser or any of the Purchaser
Subsidiaries, except for such claims or liabilities which in the aggregate
would not reasonably be expected to result in a Purchaser Material Adverse
Effect.
Section 4.22 Disclosure. No representation or warranty by Purchaser or the
Purchaser Subsidiaries in this Agreement (including the Purchaser Disclosure
Letter), and no statement contained in the Purchaser SEC Reports and the
Statutory Financial Statements of Purchaser, contains or will contain any
untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was
made, to make the statements herein or therein not misleading. There is no
fact known to Purchaser which would reasonably be expected to have a Purchaser
Material Adverse Effect which has not been set forth in the Purchaser SEC
Reports, the Statutory Financial Statements of Purchaser or in this Agreement
(including the Purchaser Disclosure Letter).
Section 4.23 Investigation by Purchaser. Purchaser has conducted its own
independent review and analysis of the businesses, assets, financial
condition, and operations of the Company and the Company Subsidiaries (as
hereinafter defined) and acknowledges that Purchaser has been provided access
to certain officers and certain books and records of the Company and the
Company Subsidiaries for this purpose to the extent made available by
representatives of the Company. In entering into this Agreement, Purchaser has
relied solely upon its own investigation and analysis and the warranties
contained herein, and Purchaser:
(a) acknowledges that none of the Company, the Company Subsidiaries or
any of their respective directors, officers, employees, affiliates, agents
or representatives makes any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information
provided or made available to Purchaser or their agents or representatives
prior to the execution of this Agreement, and
(b) agrees, to the fullest extent permitted by law, that none of the
Company, the Company Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives shall have any
liability or responsibility whatsoever to Purchaser on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or made
available, or statements made, to Purchaser prior to the execution of this
Agreement,
except that the foregoing limitations shall not apply to the Company to the
extent the Company makes the specific representations and warranties set forth
in Article V of this Agreement and in the Company Disclosure Letter, but
always subject to the limitations and restrictions contained herein and
therein.
Section 4.24 Financing. At the Effective Time, Purchaser will have
sufficient funds to pay the aggregate Cash Consideration and any other cash
payable in respect of Shares pursuant to Article III, on the terms and subject
to the conditions contemplated by this Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Purchaser in a letter delivered to it prior
to the execution hereof (which letter contains appropriate references to
identify the representations and warranties herein to which the information in
such letter relates) (the "Company Disclosure Letter"), the Company represents
and warrants to Purchaser as follows:
Section 5.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia and has the corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its business as it is now being conducted or presently proposed to be
conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified
would not individually or in the aggregate have a material adverse effect on
the business, assets, liabilities, results of operations or financial
condition of the Company and the Company Subsidiaries, taken as a whole (a
"Company Material Adverse Effect").
Section 5.2 Capitalization. As of September 30, 1996: (i) the authorized
capital stock of the Company consisted of 32,000,000 shares of common stock
consisting of 12,800,000 shares of Company Voting Stock and 19,200,000 shares
of Company Non-Voting Stock and (ii) 8,060,660 shares of Company Voting Stock
and 8,992,910 shares of Company Non-Voting Stock were issued and outstanding.
All of the issued and outstanding shares of Company Voting Stock and Company
Non-Voting Stock are validly issued, fully paid and nonassessable and, except
as provided in the Restated Articles of Incorporation of the Company, free of
preemptive rights. Except as set forth above or as specified in Section 5.2 of
the Company Disclosure Letter, as of the date of this Agreement there are no
shares of capital stock of the Company issued or outstanding or any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating the Company to issue, transfer, sell,
redeem, repurchase or otherwise acquire any shares of its capital stock.
Section 5.3 Company Subsidiaries. (a) Section 5.3 (a) of the Company
Disclosure Letter sets forth the name of each subsidiary of the Company
(collectively, the "Company Subsidiaries") and the state or jurisdiction of
its incorporation. Each Company Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
or necessary governmental approvals would not individually or in the aggregate
have a Company Material Adverse Effect. Each Company Subsidiary is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not individually or in the aggregate have
a Company Material Adverse Effect.
(b) Section 5.3(b) of the Company Disclosure Letter sets forth the name of
each of the Company Subsidiaries that is an insurance company (collectively,
the "Company Insurance Subsidiaries"). Except as disclosed in the Company SEC
Reports (as defined below) or Section 5.3(b) of the Company Disclosure Letter,
each of the Company Insurance Subsidiaries is (i) duly licensed or authorized
as an insurance company in its jurisdiction of incorporation and (ii) duly
licensed or authorized as an insurance company in each other jurisdiction
where it is required to be so licensed or authorized.
(c) Except as set forth in the Company SEC Reports or Section 5.3(c) of the
Company Disclosure Letter, the Company is, directly or indirectly, the record
and beneficial owner of all of the outstanding shares of capital
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stock of each of the Company Subsidiaries, there are no proxies with respect
to any such shares, and no equity securities of any Company Subsidiary are or
may become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable or exercisable for,
shares of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which the Company or
any Company Subsidiary is or may be bound to issue, redeem, purchase or sell
additional shares of capital stock of any Company Subsidiary or securities
convertible into or exchangeable or exercisable for any such shares. Except as
set forth in the Company SEC Reports or Section 5.3(c) of the Company
Disclosure Letter, all of such shares so owned by the Company are validly
issued, fully paid and nonassessable and are owned by it free and clear of any
Encumbrances, restraints on alienation, or any other restrictions with respect
to the transferability or assignability thereof (other than restrictions on
transfer imposed by federal or state securities laws).
(d) Except for the Company Subsidiaries and as set forth in the Statutory
Financial Statements of the Company (as hereinafter defined), the Company SEC
Reports or Section 5.3(d) of the Company Disclosure Letter, the Company does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity that directly or indirectly conducts any
activity which is material to the Company.
Section 5.4 Authority Relative to this Agreement. The Company has the
corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Company's
Board of Directors, and no other corporate proceedings on the part of the
Company, other than obtaining shareholder approval pursuant to Section 2.1
hereof, are necessary to authorize this Agreement or the transactions
contemplated hereby. Subject to the foregoing, this Agreement has been duly
and validly executed and delivered by the Company and (assuming this Agreement
constitutes a valid and binding obligation of Purchaser and Sub) constitutes a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally
from time to time in effect and to general equitable principles.
Section 5.5 Consents and Approvals; No Violations. Except (a) for the
Governmental Requirements, or (b) where the failure to make any filing with,
or to obtain any permit, authorization, consent or approval of, any
Governmental Entity would not prevent or delay the consummation of the Merger,
or otherwise prevent the Company from performing its obligations under this
Agreement, and would not individually or in the aggregate have a Company
Material Adverse Effect, no filing with, and no permit, authorization, consent
or approval of, any Governmental Entity is necessary for the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated by this Agreement. Except as
set forth in Section 5.5 of the Company Disclosure Letter, no consent or
approval of any other party (other than any Governmental Entity) is required
to be obtained by the Company or any Company Subsidiary for the execution,
delivery or performance of this Agreement or the performance by the Company of
the transactions contemplated hereby, except where the failure to obtain any
such consent or approval would not prevent or delay the consummation of the
Merger, or otherwise prevent the Company from performing its obligations under
this Agreement or would not, individually or in the aggregate, have a Company
Material Adverse Effect. Except as set forth in Section 5.5 of the Company
Disclosure Letter, neither the execution, delivery or performance of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, nor compliance by the Company with any of
the provisions hereof, will (i) conflict with or result in any breach of any
provisions of the Restated Articles of Incorporation or Bylaws of the Company
or the Certificate or Articles of Incorporation, as the case may be, or Bylaws
of any of the Company Subsidiaries, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, vesting, payment,
exercise, acceleration, suspension or revocation) under, any of the terms,
conditions or provisions of any note, bond, mortgage, deed of trust, security
interest, indenture,
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license, contract, agreement, plan or other instrument or obligation to which
the Company or any of the Company Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound or affected, (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, of the Company Subsidiaries or any of their
properties or assets, (iv) result in the creation or imposition of any
Encumbrance on any asset of the Company or any Company Subsidiary or (v) cause
the suspension or revocation of any permit, license, governmental
authorization, consent or approval necessary for the Company or any of the
Company Subsidiaries to conduct its business as currently conducted, except in
the case of clauses (ii), (iii), (iv) and (v) for violations, breaches,
defaults, terminations, cancellations, accelerations, creations, impositions,
suspensions or revocations which would not individually or in the aggregate
have a Company Material Adverse Effect.
Section 5.6 Company SEC Reports. The Company has delivered to Purchaser true
and complete copies of each registration statement, report and proxy or
information statement (including exhibits and any amendments thereto) filed by
the Company with the SEC since January 1, 1993 through the date hereof
(collectively, the "Company SEC Reports"). As of the respective dates the
Company SEC Reports were filed or, if any such Company SEC Reports were
amended, as of the date such amendment was filed, each of the Company SEC
Reports (i) complied in all material respects with all applicable requirements
of the Securities Act and Exchange Act, and the rules and regulations
promulgated thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of (x) the
audited consolidated financial statements of the Company (including any
related notes and schedules) included (or incorporated by reference) in its
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and (y)
the unaudited consolidated interim financial statements for the Company
(including any related notes and schedules) included (or incorporated by
reference) in its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, fairly present, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and the Company Subsidiaries as
of the dates thereof and the consolidated results of their operations and
changes in their financial position for the periods then ended (subject to
normal year-end adjustments, in the case of any unaudited interim financial
statements).
Section 5.7 Statutory Financial Statements. The Annual Statements and
Quarterly Statements of the Company Insurance Subsidiaries, as filed with the
Virginia State Corporation Commission for the years ended December 31, 1994
and December 31, 1995 (the "Annual Statutory Statements of the Company") and
the quarters ended March 31, June 30, and September 30, 1995, and March 31,
June 30, and September 30, 1996 (collectively, the "Quarterly Statutory
Statements of the Company"), respectively, together with all exhibits and
schedules thereto (all Annual Statutory Statements of the Company and all
Quarterly Statutory Statements of the Company, together with all exhibits and
schedules thereto, referred to in this Section 5.7 are hereinafter referred to
as the "Statutory Financial Statements of the Company"), have been prepared in
accordance with the accounting practices prescribed or permitted by the
Virginia State Corporation Commission for purposes of financial reporting to
the state's insurance regulators ("Virginia Statutory Accounting Principles"),
and such accounting practices have been applied on a basis consistent with
Virginia Statutory Accounting Principles throughout the periods involved,
except as expressly set forth in the notes, exhibits or schedules thereto, and
the Statutory Financial Statements of the Company present fairly in all
material respects the financial position and the results of operations for the
Company Insurance Subsidiaries as of the dates and for the periods therein in
accordance with Virginia Statutory Accounting Principles. The Company has
delivered to Purchaser true and complete copies of the Annual Statutory
Statements of the Company and the Quarterly Statutory Statements of the
Company.
Section 5.8 Absence of Certain Changes. Since September 30, 1996, there has
been no event or condition (other than (i) any event or condition resulting
from general economic conditions (including without limitation changes in
interest rates), (ii) any occurrence or condition affecting the life insurance
industry generally (including without limitation any change or proposed change
in insurance laws or regulations in any
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jurisdiction), and, in the case of each of clauses (i) and (ii), not having a
unique or disproportionate effect on the Company, or (iii) any occurrence or
condition arising out of the transactions contemplated by this Agreement or
the public announcement thereof) which has had (or is reasonably likely to
result in) a Company Material Adverse Effect, and except as set forth in
Section 5.8 of the Company Disclosure Letter, the Company and the Company
Subsidiaries have in all material respects conducted their businesses in the
ordinary course consistent with past practices and have not taken any action
which, if taken after the date hereof, would violate Section 6.1 hereof.
Section 5.9 Litigation. Except as disclosed in the Company SEC Reports or as
set forth in Section 5.9 of the Company Disclosure Letter, there is no suit,
action, proceeding or investigation (whether at law or equity, before or by
any federal, state or foreign court, tribunal, commission, board, agency or
instrumentality, or before any arbitrator) pending or, to the best knowledge
of the Company, threatened against or affecting the Company or any of the
Company Subsidiaries, the outcome of which, in the reasonable judgment of the
Company, is likely individually or in the aggregate to have a Company Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order
of any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Company or any of the Company Subsidiaries
having, or which, insofar as can reasonably be foreseen, in the future may
have, a Company Material Adverse Effect.
Section 5.10 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which are accrued or reserved against in the Company's financial
statements (or reflected in the notes thereto) included in the Company SEC
Reports or disclosed in Section 5.10 of the Company Disclosure Letter or which
were incurred after September 30, 1996 in the ordinary course of business and
consistent with past practices or in connection with the transactions
contemplated by this Agreement, the Company and the Company Subsidiaries do
not have any liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of a nature required by GAAP to be reflected in a consolidated
balance sheet (or reflected in the notes thereto) of the Company.
Section 5.11 No Default. Except as set forth in the Company SEC Reports or
Section 5.11 of the Company Disclosure Letter, neither the Company nor any of
the Company Subsidiaries is in violation or breach of, or default under (and
no event has occurred which with notice or the lapse of time or both would
constitute a violation or breach of, or a default under) any term, condition
or provision of (a) its Articles of Incorporation, as the case may be, or
Bylaws, (b) any note, bond, mortgage, deed of trust, security interest,
indenture, license, agreement, plan, contract, lease, commitment or other
instrument or obligation to which the Company or any of the Company
Subsidiaries is a party or by which they or any of their properties or assets
may be bound or affected, (c) any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of the Company
Subsidiaries or any of their properties or assets, or (d) any permit, license,
governmental authorization, consent or approval necessary for the Company or
any of the Company Subsidiaries to conduct their respective businesses as
currently conducted, except in the case of clauses (b), (c) and (d) above for
breaches, defaults or violations which would not individually or in the
aggregate have a Company Material Adverse Effect.
Section 5.12 Taxes. Except as set forth in the Company SEC Reports or
Section 5.12 of the Company Disclosure Letter:
(a) the Company and the Company Subsidiaries have (i) duly filed (or
there has been filed on their behalf) with the appropriate governmental
authorities all income Tax Returns and all other material Tax Returns
required to be filed by them on or prior to the date hereof, and (ii) duly
paid in full or made provision in accordance with GAAP (or there has been
paid or provision has been made on their behalf) for the payment of all
material Taxes for all periods or portions thereof ending through the date
hereof;
(b) no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
Taxes or Tax Returns of the Company or any Company Subsidiary wherein an
adverse determination or ruling in any one such proceeding or in all such
proceedings in the aggregate would have a Company Material Adverse Effect;
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(c) The federal income Tax Returns of the Company and the Company
Subsidiaries have been examined by the Internal Revenue Service (or the
applicable statutes of limitation for the assessment of federal income
Taxes for such periods have expired) for all periods through and including
December 31, 1994, and no material deficiencies were asserted as a result
of such examinations that have not been resolved and fully paid. Neither
the Company nor any of the Company Subsidiaries has granted any requests,
agreements, consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes with respect to any
Tax Returns of the Company or any of the Company Subsidiaries;
(d) neither the Company nor the Company Subsidiaries is a party to any
material tax sharing, tax indemnity or other agreement or arrangement with
any entity not included in the Company's consolidated financial statements
most recently filed by the Company with the SEC;
(e) none of the Company or any of the Company Subsidiaries has been a
member of any affiliated group within the meaning of Section 1504(a) of the
Code, or any similar affiliated or consolidated group for tax purposes
under state, local or foreign law (other than a group the common parent of
which is the Company), or has any liability for the Taxes of any person
(other than the Company and the Company Subsidiaries) under Treasury
Regulations Section 1.1502-6 or any similar provision of state, local or
foreign law as a transferee or successor, by contract or otherwise; and
(f) to the knowledge of Company, no insurance contracts or insurance
policies issued by Company or any Company Subsidiary fail to comply with
the applicable provisions of Code Section 7702.
Section 5.13 Title to Property. (a) Except as set forth in the Company SEC
Reports or Section 5.13(a) of the Company Disclosure Letter, each of the
Company and the Company Subsidiaries (i) has good and valid title to all of
its properties, assets and other rights that do not constitute real property,
free and clear of all Encumbrances, except for such Encumbrances that do not,
individually or in the aggregate, have a Company Material Adverse Effect, and
(ii) owns, has valid leasehold interests in or valid contractual rights to
use, all of the assets, tangible and intangible, used by, or necessary for the
conduct of, its business, except where the failure to have such valid
leasehold interests or such valid contractual rights do not, individually or
in the aggregate, have a Company Material Adverse Effect.
(b) Except as set forth in the Company SEC Reports or Section 5.13(b) of the
Company Disclosure Letter, each of the Company and the Company Subsidiaries:
(i) owns and has good and marketable title in fee simple to the real
property owned by such party, free and clear of all mortgages, pledges,
liens, charges, encumbrances, defects, security interests, claims,
options and restrictions of all kind ("Encumbrances"), except for (A)
minor imperfections of title, easements and rights of way, none of
which, individually or in the aggregate, materially detracts from the
value of or materially impairs the use of the affected property or
materially impairs the operation of the Company or any of the Company
Subsidiaries and (B) liens for current taxes not yet due and payable
("Permitted Company Liens");
(ii) is in peaceful and undisturbed possession of the space and/or
estate under each lease under which it is a tenant, and there are no
material defaults by it as tenant thereunder; and
(iii) has good and valid rights of ingress and egress to and from all
the real property owned or leased by such party from and to the public
street systems for all usual street, road and utility purposes.
Section 5.14 Insurance Practices; Permits and Insurance Licenses. (a) The
business of the Company and each of the Company Subsidiaries is being
conducted in compliance in all material respects with all applicable laws,
including, without limitation, all insurance laws, ordinances, rules,
regulations, decrees and orders of any Governmental Entity, and all material
notices, reports, documents and other information required to be filed
thereunder within the last three years were properly filed in all material
respects and were in compliance in all material respects with such laws.
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(b) The Company, and each of the Company Insurance Subsidiaries, has all
permits and insurance licenses the use and exercise of which are necessary for
the conduct of its business as now conducted, other than such permits and
insurance licenses the absence of which would not, individually or in the
aggregate, be reasonably expected to have a Company Material Adverse Effect.
The business of the Company and each of the Company Insurance Subsidiaries has
been and is being conducted in compliance, in all material respects, with all
such permits and insurance licenses. To the best knowledge of the Company, all
such permits and insurance licenses are in full force and effect, and there is
no proceeding or investigation pending or threatened which would reasonably be
expected to lead to the revocation, amendment, failure to renew, limitation,
suspension or restriction of any such permit or insurance license.
Section 5.15 Regulatory Filings. The Company has made available for
inspection by Purchaser complete copies of all material registrations, filings
and submissions made since January 1, 1993 by the Company or any of the
Company Subsidiaries with any Governmental Entity and any reports of
examinations issued since January 1, 1993 by any such Governmental Entity that
relate to the Company or any of the Company Subsidiaries. The Company and the
Company Subsidiaries have filed all reports, statements, documents,
registrations, filings or submissions required to be filed by any of them with
any Governmental Entity, except where the failure to file, in the aggregate,
would not have a Company Material Adverse Effect; and, to the best knowledge
of the Company, all such reports, statements, documents, registrations,
filings or submissions were in all material respects true, complete and
accurate when filed.
Section 5.16 Investments. (a) The Statutory Financial Statements of the
Company set forth a list, which list is accurate and complete in all material
respects, of all securities, mortgages and other investments (collectively,
the "Company Investments") owned by the Company Insurance Subsidiaries as of
December 31, 1995, together with the cost basis, book or amortized value, as
the case may be, as of December 31, 1995. Section 5.16(a) of the Company
Disclosure Letter sets forth a list, which list is accurate and complete in
all material respects, of all transactions in the Company Investments by each
Company Insurance Subsidiary from January 1, 1996 to September 30, 1996. All
transactions in Company Investments by each Company Insurance Subsidiary from
September 30, 1996 to the date hereof have complied in all material respects
with the investment policies of such Company Insurance Subsidiary and all
applicable insurance laws and regulations.
(b) Except as set forth in the Statutory Financial Statements of the
Company, the Company Insurance Subsidiaries have good and marketable title to
the Company Investments listed in the Statutory Financial Statements of the
Company or acquired in the ordinary course of business since September 30,
1996, other than with respect to those Company Investments which have been
disposed of in the ordinary course of business or as contemplated by this
Agreement or redeemed in accordance with their terms since such date and other
than Permitted Company Liens or with respect to statutory deposits which are
subject to certain restrictions on transfer.
(c) Section 5.16(c) of the Company Disclosure Letter identifies the Company
Investments listed thereon which have been written down on the September 30,
1996 Statutory Statement of the Company, or to the best knowledge of the
Company, are as of November 30, 1996 in default in the payment of principal or
interest.
(d) Except as set forth in the Statutory Financial Statements of the
Company, there are no Encumbrances on any of the Company Investments, other
than Permitted Company Liens and special deposits reflected in the Statutory
Financial Statements of the Company, and none of the Company Investments
consist of securities loaned to third parties.
Section 5.17 Reserves. The aggregate reserves of the Company Insurance
Subsidiaries as recorded in the Statutory Accounting Statements of the Company
have been determined in accordance with generally accepted actuarial
principles consistently applied (except as set forth therein). Except as
disclosed in the Company SEC Reports or Section 5.17 of the Company Disclosure
Letter, the insurance reserving practices and polices of the Company Insurance
Subsidiaries have not changed, in any material respect, since December 31,
1995 and the results of the application of such practices and policies are
reflected in the Statutory Accounting Statements of
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the Company. All reserves of the Company Insurance Subsidiaries set forth in
the Statutory Accounting Statements of the Company are, to the best knowledge
of the Company, fairly stated in accordance with sound actuarial principles
and meet the requirements of the insurance laws of the applicable insurance
authority, except where the failure to so state such reserves or meet such
requirements would not have a Company Material Adverse Effect.
Section 5.18 Repurchases of Company Common Stock. Since September 30, 1996,
the Company has not repurchased any shares of Company Common Stock.
Section 5.19 Information in Proxy Statement/Prospectus and Registration
Statement. The Proxy Statement/Prospectus (or any amendment thereof or
supplement thereto), at the date mailed to Company shareholders and at the
time of the Company Special Meeting, will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information supplied by Purchaser in writing for including in the
Proxy Statement/Prospectus. None of the information supplied by the Company
for inclusion or incorporation by reference in the Registration Statement
will, at the date it becomes effective and at the time of the Company Special
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement/Prospectus will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 5.20 Brokers. Except for Goldman, Sachs & Co., no person is entitled
to any brokerage, financial advisory, finder's or similar fee or commission
payable by the Company in connection with the transactions contemplated by
this Agreement based upon arrangements made by and on behalf of the Company.
Section 5.21 Employee Benefit Plans; ERISA. (a) Section 5.21(a) of the
Company Disclosure Letter sets forth a list, which is complete and accurate in
all material respects, of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, equity-based award, severance or
termination pay, hospitalization or other medical, accident, disability, life
or other insurance, supplemental unemployment benefits, fringe and other
welfare benefit, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement or arrangement, that is sponsored, maintained or contributed to or
required to be contributed to by the Company or the Company Subsidiaries or by
any trade or business, whether or not incorporated, that together with the
Company would be deemed a "single employer" within the meaning of Section 4001
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or considered as being members of a controlled group of corporations, under
common control, or members of an affiliated service group within the meaning
of Subsections 414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) of
ERISA (each such Subsidiary, trade, business or member an "ERISA Affiliate"),
in each case for the benefit of any employee or terminated employee of the
Company or any of the Company Subsidiaries (the "Plans"). No ERISA Plan is a
"multiemployer pension plan," as defined in Section 3(37) of ERISA, nor is any
ERISA Plan a plan described in Section 4063(a) of ERISA.
(b) With respect to each Plan listed in Section 5.21(a) of the Company
Disclosure Letter, to the extent applicable, the Company has heretofore made
available or has caused to be made available, or will provide or cause to be
provided prior to the Closing, to Purchaser true and complete copies of the
following documents:
(i) a copy of each written Plan;
(ii) a copy of the most recent annual report on Form 5500 and actuarial
report, if required under ERISA, and to the extent they have been prepared
by the Company or its ERISA Affiliates, the most recent report prepared
with respect thereto in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 87, Employer's Accounting for Pensions, SFAS No.
106, Employer's Accounting for Post-Retirement Benefits other than
Pensions, or SFAS No. 112, Employer's Accounting for Post-Employment
Benefits, as the case may be;
(iii) a copy of the most recent Summary Plan Description required under
ERISA with respect thereto;
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(iv) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement and the latest
financial statements thereof; and
(v) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan intended to qualify under Section
401 of the Code.
(c) No material liability under Title IV of ERISA has been incurred by the
Company or any ERISA Affiliate that has not been satisfied in full, and to the
knowledge of the Company, no condition exists that presents a material risk to
the Company or any ERISA Affiliate of incurring a material liability under
such Title, other than liability for premiums due the Pension Benefit Guaranty
Corporation ("PBGC") (which premiums have been paid when due).
(d) No ERISA Plan or any trust established thereunder that is subject to
Section 302 of ERISA and Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal
year of each ERISA Plan ended prior to the Effective Time. To the best
knowledge of the Chief Executive Officer and Chief Financial Officer of the
Company, all contributions required to be made with respect thereto (whether
pursuant to the terms of any ERISA Plan or otherwise) on or prior to the
Effective Time have been timely made.
(e) Except as set forth in the Company SEC Reports or Section 5.21(e) of the
Company Disclosure Letter, none of the Company, any ERISA Affiliate, any ERISA
Plan, and, to knowledge of the Chief Executive Officer and Chief Financial
Officer of the Company, any trust created thereunder and any trustee or
administrator thereof has engaged in a transaction in connection with which
the Company or any ERISA Affiliate, any ERISA Plan, any such trust, or any
trustee or administrator thereof, or any party dealing with any ERISA Plan or
any such trust could be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to sections 4971,
4972, 4975, 4976, 4977, 4979 or 4980 of the Code that could, individually, or
taken together with any amounts arising as a result of noncompliance with any
of the other paragraphs of this Section 5.21, reasonably be expected to result
in a Company Material Adverse Effect.
(f) Except as set forth in the Company SEC Reports or Section 5.21(f) of the
Company Disclosure Letter, to the best knowledge of the Chief Executive
Officer and Chief Financial Officer of the Company, there is no matter pending
(other than routine qualification determination filings, copies of which have
been furnished to Purchaser, or will be promptly furnished to Purchaser when
made) with respect to any of the Plans before the Internal Revenue Service,
Department of Labor or PBGC.
(g) Each of the Company and its ERISA Affiliates has complied in all
material respects with the notice and continuation requirements of section
4980B of the Code and Part 6 of Subtitle B of Title I of ERISA, except where
such noncompliance, individually, or taken together with any amounts arising
as a result of noncompliance with any of the other paragraphs of this Section
5.21, would not result in a Company Material Adverse Effect.
(h) Except as set forth in the Company SEC Reports or Section 5.21(h) of the
Company Disclosure Letter, to the knowledge of the Company, each Plan has been
operated and administered in all material respects in accordance with its
terms and applicable law, including but not limited to ERISA and the Code,
except where such noncompliance, individually, or taken together with any
amounts arising as a result of noncompliance with any of the other paragraphs
of this Section 5.21, would not result in a Company Material Adverse Effect.
(i) Except as set forth in Section 5.21(i) of the Company Disclosure Letter,
the consummation of the transactions contemplated by this Agreement will not
(x) entitle any current or former employee, director or officer of the Company
or any of the Company Subsidiaries to severance pay, unemployment compensation
or any other payment, except as expressly provided in this Agreement or (y)
accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee, director or officer.
(j) Except as set forth in the Company SEC Reports or Section 5.21(j) of the
Company Disclosure Letter, there are no pending or, to the knowledge of the
Company, threatened or anticipated actions, suits or claims by or on behalf of
any Plan, by any employee or beneficiary covered under any Plan, or otherwise
involving any such Plan (other than routine claims for benefits) that could,
individually, or taken together with any amounts
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arising as a result of noncompliance with any of the other paragraphs of this
Section 5.21, reasonably be expected to result in a Company Material Adverse
Effect.
(k) Except as set forth in the Company SEC Reports or Section 5.21(k) of the
Company Disclosure Letter, no Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect to
current or former employees after retirements or other termination of service
(other than (i) coverage mandated by applicable law, (ii) death benefits or
retirements benefits under any "employee pension plan," as that term is
defined in section 3(2) of ERISA, (iii) deferred compensation benefits accrued
as liabilities on the books of the Company or the ERISA Affiliates, or (iv)
benefits, the full cost of which is borne by the current or former employee
(or his beneficiary).
Section 5.22 Labor Relations; Employees. (a) None of the employees of the
Company or the Company Subsidiaries are represented by any labor organization
and, to the knowledge of the Company, no union claims to represent these
employees have been made. To the knowledge of the Company, there have been no
union organizing activities with respect to employees of the Company or the
Company Subsidiaries within the past five years. To the knowledge of the
Company, the Company and Company Subsidiaries are not, and have not been,
engaged in any unfair labor practices as defined in the National Labor
Relations Act or similar applicable law, ordinance or regulation, nor is there
pending any unfair labor practice charge.
(b) The Company and the Company Subsidiaries have not during the past two
years effectuated a "plant closing" or "mass layoff" (as defined in the Worker
Adjustment and Retraining Notification Act) affecting any of their sites of
employment or one or more facilities or operating units within any site of
employment or facility, nor is any such action scheduled within the 90 day
period prior to the Effective Time.
(c) The Company and the Company Subsidiaries have at all times during the
preceding three (3) years, treated their home service agents as employees for
purposes of filings required under applicable tax laws.
Section 5.23 Environmental Matters. (a) Except as disclosed in the Company
SEC Reports or Section 5.23 of the Company Disclosure Letter and in any
environmental report obtained by Purchaser in connection with its due
diligence review of the Company, to the knowledge of the Company, (i) each of
the Company and the Company Subsidiaries is and has been in compliance in all
respects with and, except for ongoing compliance obligations, including
current activities to remove asbestos and future activities to remove
asbestos, if applicable, has no existing liabilities under, and (ii) there are
no written claims or notice by any person received by the Company or any of
the Company Subsidiaries that any of the Company or the Company Subsidiaries
has not been in compliance in all respects with or has any existing
liabilities under, all applicable Environmental Laws with respect to property
owned by the Company or any of the Company Subsidiaries, except for such non-
compliance or liabilities that would not be reasonably likely to have a
Company Material Adverse Effect. Except as disclosed in the Company SEC
Reports or Section 5.23 of the Company Disclosure Letter, neither the Company
nor any of the Company Subsidiaries in subject to any decrees, orders,
decisions of arbitrators or judgments that impose requirements under
Environmental Laws, restrictions under Environmental Laws, liabilities under
Environmental Laws, or penalties for violations of Environmental Laws or the
aforementioned requirements or restrictions, except where such requirements,
restrictions, liabilities, or penalties would not be reasonably likely to have
a Company Material Adverse Effect.
(b) Except as disclosed in the Company SEC Reports or Section 5.23 of the
Company Disclosure Letter and in any environmental report obtained by
Purchaser in connection with its due diligence review of the Company, with
respect to currently owned property and all property formerly owned, leased or
operated by the Company or any of the Company Subsidiaries, including
foreclosure property, to the knowledge of the Company, there are no past or
present actions, conditions or occurrences that could form the basis of any
outstanding claim under Environmental Laws against, or liability under such
laws of, the Company or any of the Company Subsidiaries, except for such
claims or liabilities which in the aggregate would not reasonably be expected
to result in a Company Material Adverse Effect.
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Section 5.24 Related Party Transactions. Except for the transactions
described in the Company SEC Reports or Section 5.24 of the Company Disclosure
Letter, all transactions involving the Company or any of the Company
Subsidiaries that are required to be disclosed in the Company SEC Reports in
accordance with Item 404 of Regulation S-K have been so disclosed, and to the
knowledge of the Company, since December 31, 1995, neither the Company nor any
of the Company Subsidiaries has entered into any transactions that would be
required to be disclosed in future public filings under the Exchange Act
pursuant to such Item which have not already been disclosed in the Company SEC
Reports filed prior to the date hereof.
Section 5.25 Affiliates. Section 5.25 of the Company Disclosure Letter
identifies all persons who, to the knowledge of the Company, may be deemed to
be affiliates of the Company under Rule 145 of the Securities Act, including,
without limitation, all directors and executive officers of the Company. The
Company shall use all reasonable efforts to obtain and deliver to Purchaser
prior to the Closing an executed letter agreement, in the form attached hereto
as Exhibit B, from each of the persons identified on Section 5.25 of the
Company Disclosure Letter, acknowledging that such person is subject to the
provisions of Rule 145(d) promulgated under the Securities Act.
Section 5.26 Opinion of Financial Advisor. The Company has received an
opinion from Goldman, Sachs & Co., dated as of the date hereof, to the effect
that the consideration to be received by the shareholders of the Company
pursuant to the Merger is fair to such shareholders.
Section 5.27 Derivatives. Section 5.27 of the Company Disclosure Letter sets
forth the statement of position, as of September 30, 1996, of the Company and
the Company Subsidiaries with respect to obligations under any futures or
option contracts, swaps, hedges or similar instruments ("Derivatives") to
which the Company or any of the Company Subsidiaries is a party. Except as
disclosed in Section 5.27 of the Company Disclosure Letter, since September
30, 1996, neither the Company nor any of the Company Subsidiaries has entered
into agreements relating to Derivatives.
Section 5.28 Contracts. (a) Section 5.28 of the Company Disclosure Letter
sets forth a list of each contract to which the Company or any of the Company
Subsidiaries is a party or by which it is bound which:
(i) is material to the Company and which is not disclosed as an exhibit
to the Company SEC Reports; or
(ii) is a reinsurance or retrocession contract which requires the payment
of premiums by the Company or the Company Subsidiaries of amounts in excess
of $500,000 per year; or
(iii) contains covenants limiting the freedom of the Company or any of
the Company Subsidiaries to engage in any line of business in any
geographic area or to compete with any person or entity or restricting the
ability of the Company Subsidiaries to acquire equity securities of any
person or entity; or
(iv) is an employment or severance contract applicable to any employee of
the Company or the Company Subsidiaries, including without limitation
contracts to employ executive officers and other contracts with officers or
directors of the Company or any of the Company Subsidiaries, other than
agent contracts with insurance agents and any such contract which by its
terms is terminable by the Company or any of the Company Subsidiaries on
not more than 60 days' notice without material liability (collectively,
together with such contracts as are filed as exhibits to the Company SEC
Reports, the "Company Contracts").
(b) With respect to each of the Company Contracts, to the knowledge of the
Company, except as disclosed in Section 5.28 of the Company Disclosure Letter:
(i) such contract is (assuming due power and authority of, and due
execution and delivery by, the other party or parties thereto) valid and
binding upon each party thereto and is in full force and effect;
(ii) there is no material default or claim of material default thereunder
and no event has occurred which, with the passage of time or the giving of
notice (or both), would constitute a material default thereunder, or would
permit material modification, acceleration or termination thereof; and
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(iii) the consummation of the transactions contemplated by this Agreement
will not give rise to a right of the other party or parties thereto to
terminate such contract or impose liability under the terms thereof on the
Company or any of the Company Subsidiaries; provided, that this
representation shall not be deemed to give assurances regarding rights of
termination based on any decrease in insurance industry ratings of the
Company or the Company Subsidiaries resulting from the declaration and/or
payment of the dividend.
Section 5.29 Investment Advisor; Investment Company. Neither the Company nor
any of the Company Subsidiaries conducts activities of an "investment advisor"
as such term is defined in Section 2 (a) (20) of the Investment Company Act of
1940, as amended ("ICA"), whether or not registered under the Investment
Advisers Act of 1940, as amended. Neither the Company nor any of the Company
Subsidiaries is an "investment company" as defined under the ICA, and neither
the Company nor any of the Company Subsidiaries sponsors any person that is
such an investment company.
Section 5.30 Disclosure. No representation or warranty by the Company or the
Company Subsidiaries in this Agreement (including the Company Disclosure
Letter), and no statement contained in the Company SEC Reports and the
Statutory Financial Statements of the Company, contains or will contain any
untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was
made, to make the statements herein or therein not misleading. There is no
fact known to the Company which would reasonably be expected to have a Company
Material Adverse Effect which has not been set forth in the Company SEC
Reports, the Statutory Financial Statements of the Company or in this
Agreement (including the Company Disclosure Letter).
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger. From the
date hereof until the Effective Time, unless Purchaser shall otherwise agree
in writing, or except as set forth in the Company Disclosure Letter or as
otherwise contemplated by this Agreement, the Company and the Company
Subsidiaries shall conduct their respective businesses in the ordinary course
consistent with past practice and shall use all reasonable efforts to preserve
intact their business organizations and relationships with third parties
(including but not limited to their respective relationships with
policyholders, insureds, agents, underwriters, brokers and investment
customers) and to keep available the services of their present officers and
key employees, subject to the terms of this Agreement. Except as set forth in
the Company Disclosure Letter or as otherwise provided in this Agreement, from
the date hereof until the Effective Time, without the prior written consent of
Purchaser:
(a) the Company shall not adopt or propose any change in its Restated
Articles of Incorporation or Bylaws;
(b) the Company shall not declare, set aside or pay any dividend or other
distribution with respect to any shares of capital stock of the Company
(except for regular quarterly dividends payable in an amount no greater than
$.22 per share until the end of the first fiscal quarter of 1997 and $.23 per
share thereafter), or split, combine or reclassify any of the Company's
capital stock, and the Company and the Company Subsidiaries shall not
repurchase, redeem or otherwise acquire any shares of capital stock or other
securities of, or other ownership interests in, the Company;
(c) subject to Section 7.3, the Company shall not, and shall not permit any
Company Subsidiary to, merge or consolidate with any other person or (except
in the ordinary course of business) acquire a material amount of assets of any
other person;
(d) the Company shall not, and shall not permit any Company Subsidiary to,
sell, lease, license or otherwise surrender, relinquish or dispose of (i) any
material facility owned or leased by the Company or any Company
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Subsidiary or (ii) any assets or property which are material to the Company
and the Company Subsidiaries taken as a whole, except pursuant to existing
contracts or commitments (the terms of which have been disclosed to Purchaser
prior to the date hereof), or in the ordinary course of business consistent
with past practice;
(e) the Company shall not, and shall not permit any Company Subsidiary to,
settle any material audit, make or change any material Tax election or file
amended Tax Returns;
(f) the Company and the Company Subsidiaries shall not issue any capital
stock or other securities or enter into any amendment of any material term of
any outstanding security of the Company, and the Company and the Company
Subsidiaries shall not incur any material indebtedness except in the ordinary
course of business pursuant to existing credit facilities or arrangements,
amend or otherwise increase, accelerate the payment or vesting of the amounts
payable or to become payable under or fail to make any required contribution
to, any Company Plan (as hereinafter defined) or materially increase any non-
salary benefits payable to any employee or former employee, except in the
ordinary course of business consistent with past practice or as otherwise
permitted by this Agreement;
(g) the Company shall not, and shall not permit any Company Subsidiary to,
grant any increase in the compensation or benefits of directors, officers,
employees, consultants or agents of the Company or any Company Subsidiary
other than increases in the ordinary course of business consistent with past
practice;
(h) the Company shall not, and shall not permit any Company Subsidiary to,
enter into or amend any employment agreement or other employment arrangement
with any employee of the Company or any Company Subsidiary, except in the
ordinary course of business consistent with past practices (which past
practices shall not be deemed to include actions taken in connection with the
Merger);
(i) the Company shall not change any method of accounting or accounting
practice by the Company or any Company Subsidiary, except for any such
required change in GAAP or the Virginia Statutory Accounting Principles;
(j) the Company shall not, and shall not permit any Company Subsidiary to,
take any action that would reasonably be expected to cause the Merger to fail
to qualify as a tax-free reorganization within the meaning of Section 368(a)
of the Code;
(k) except as contemplated by Section 6.3, the Company shall not permit any
Company Insurance Subsidiary to conduct transactions in Company Investments
except in compliance with the investment policies of such Company Insurance
Subsidiary in effect on the date hereof and all applicable insurance laws and
regulations;
(l) the Company shall not, and shall not permit any Company Subsidiary to,
enter into any agreement to purchase, or to lease for a term in excess of one
year, any real property, provided that the Company, or any Company Subsidiary,
(i) may as a tenant, or a landlord, renew any existing lease for a term not to
exceed eighteen months and (ii) nothing herein shall prevent the Company, in
its capacity as a landlord, from renewing any lease pursuant to an option
granted prior to the date hereof;
(m) the Company shall not, and shall not permit any Company Subsidiary to,
agree or commit to do any of the foregoing;
(n) except to the extent necessary to comply with the requirements of
applicable laws and regulations, the Company shall not, and shall not permit
any Company Subsidiary to, (i) take, or agree or commit to take, any action
that would make any representation and warranty of the Company hereunder
inaccurate in any material respect at, or as of any time prior to, the
Effective Time, (ii) omit, or agree or commit to omit, to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any material respect at any such time, provided however, that the Company
shall be permitted to take or omit to take such action which (without any
uncertainty) can be cured, and in fact is cured, at or prior to the Effective
Time or (iii) take, or
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agree or commit to take, any action that would result in, or is reasonably
likely to result in, any of the conditions of the Merger set forth in Article
VIII not being satisfied; and
(o) none of the Company Subsidiaries shall make any material change in its
underwriting, claims management or reserving practices.
Section 6.2 Conduct of Business by Purchaser Pending the Merger. From the
date hereof until the Effective Time, unless the Company shall otherwise agree
in writing, or as otherwise contemplated by this Agreement, Purchaser, Sub and
the Purchaser Subsidiaries shall conduct their respective businesses in all
material respects in the ordinary course consistent with past practice and
shall use all reasonable efforts to substantially preserve intact their
business organizations and relationships with third parties (including but not
limited to their respective relationships with policyholders, insureds,
agents, underwriters, brokers and investment customers) and to keep available
the services of their present officers and key employees, subject to the terms
of this Agreement. Except as otherwise provided in this Agreement, from the
date hereof until the Effective Time, without the prior written consent of the
Company:
(a) Purchaser shall not adopt or propose any change in its Articles of
Incorporation or By-Laws that would have any adverse impact on the
transactions contemplated by this Agreement;
(b) Purchaser shall not declare, set aside or pay any dividend or other
distribution with respect to any share of capital stock of Purchaser
(except for regular quarterly dividends), or split, combine or reclassify
the Purchaser Common Stock without agreeing to an appropriate adjustment to
the Exchange Ratio;
(c) Purchaser shall not merge or consolidate with any other person or
(except in the ordinary course of business) acquire a material amount of
assets of any other person, if such merger, consolidation or acquisition
could reasonably be expected to have a material impact on the ability of
Purchaser to consummate the transactions contemplated by this Agreement;
(d) Purchaser shall not issue any shares of capital stock or other
securities (except for issuances of shares in the ordinary course pursuant
to (i) Purchaser Stock Options and (ii) restricted stock awards granted
under a stock plan of Purchaser) in connection with any transaction
requiring shareholder approval unless Purchaser first notifies the Company
in writing (an "Issuance Notice") of such transaction and provides the
Company with information to the reasonable satisfaction of the Company with
respect thereto. Thereafter, the Company shall have the right, by giving
written notice to Purchaser at any time prior to 5:30 p.m. New York City
time, on the tenth Trading Day following receipt of the Issuance Notice, to
abandon the Merger and terminate this Agreement;
(e) Purchaser shall not, and shall not permit any Purchaser Subsidiary
to, take any action that would reasonably be expected to cause the Merger
to fail to qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Code;
(f) Purchaser shall not permit any Purchaser Insurance Subsidiary to
conduct transactions in Purchaser Investments except in compliance with the
investment policies of such Purchaser Insurance Subsidiary and all
applicable insurance laws and regulations;
(g) Purchaser shall not, and shall not permit any Purchaser Subsidiary
to, purchase or otherwise acquire any shares of Company Common Stock;
(h) Purchaser shall not, and shall not permit Sub or any Purchaser
Subsidiary to, agree or commit to do any of the foregoing; and
(i) except to the extent necessary to comply with the requirements of
applicable laws and regulations, Purchaser shall not, and shall not permit
Sub or any Purchaser Subsidiary to, (x) take, or agree or commit to take,
any action that would make any representation and warranty of Purchaser
hereunder inaccurate in any material respect at, or as of any time prior
to, the Effective Time, (y) omit, or agree or commit to omit, to take any
action necessary to prevent any such representation or warranty from being
inaccurate in any material respect, at any such time, provided, however,
that Purchaser shall be permitted to take or omit any such action which
(without any uncertainty) can be cured, and in fact is cured, at or prior
to the Effective
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Time or (z) take, or agree or commit to take, any action that would result
in, or is reasonably likely to result in, any of the conditions of the
Merger set forth in Article VIII not being satisfied.
Section 6.3 Investment Restrictions. (a) From the date hereof until the
Effective Time, each of the Company and each Company Subsidiary shall:
(i) except to the extent contemplated by paragraph (ii) below or except
to the extent consistent with past practice, invest available cash only in
corporate bonds (other than bonds issued by public utilities) rated no
higher than A1 nor lower than Baa3 by Moody's or no higher than A+ nor
lower than BBB-- by S&P, with maturities of not fewer than five nor more
than ten years ("Permitted Investments"); and
(ii) not invest in excess of 30% of available cash in the making of
mortgage loans or purchasing of mortgage backed securities;
provided, however, that nothing in this Section 6.3(a) shall require any
Company Subsidiary to make any investment other than in compliance with the
investment policies of such Company Subsidiary and all insurance laws and
regulations applicable thereto, or prohibit the Company from making
investments, mortgage loans or purchasing mortgage backed securities pursuant
to existing contracts or commitments (the terms of which have been disclosed
to Purchaser prior to the date hereof).
(b) The Company and each Company Subsidiary shall neither purchase nor issue
any put, call, straddle, hedge, interest-rate swap or other similar option or
derivative contract, and the Company shall use all reasonable efforts to sell,
close-out or otherwise liquidate, in an orderly fashion, any such options or
derivatives which it owns.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. The Company and Purchaser shall each
afford to the other and to the other's financial advisors, legal counsel,
accountants, consultants, financing sources, and other authorized
representatives access during normal business hours throughout the period
prior to the Effective Time to all of its books, records, properties, plants
and personnel and, during such period, each shall furnish as promptly as
practicable to the other (a) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal
securities laws, and (b) all other information as such other party reasonably
may request, provided that neither party shall disclose to the other any
competitively sensitive information and no investigation pursuant to this
Section 7.1 shall affect any representations or warranties made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. Each party shall continue to abide by the terms of the confidentiality
agreement between Purchaser and the Company, dated December 4, 1996 (the
"Confidentiality Agreement").
Section 7.2 Acquisition Proposals. The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any
officer, director of employee of, or any investment banker, attorney,
accountant or other advisor or representative of, the Company or any of its
subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any Acquisition Proposal (as hereinafter defined) or
(ii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or agree to or endorse, or take
any other action to facilitate any Acquisition Proposal or any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal; provided, however, that nothing contained
in this Section 7.2 shall prohibit the Board of Directors of the Company from
furnishing information to, or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Acquisition Proposal
if, and only to the extent that (A) the Board of Directors of the Company,
after consultation with and based upon the advice of independent legal
counsel, determines in good faith that such action is necessary for the Board
of Directors of the Company to comply with its fiduciary duties to the
Company's stockholders under applicable law and (B) prior to taking such
action, the Company (x)
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provides reasonable notice to Purchaser to the effect that it is taking such
action and (y) receives from such person or entity an executed confidentiality
agreement in reasonably customary form. Notwithstanding anything in this
Agreement to the contrary, the Company shall as promptly as practicable advise
Purchaser orally and in writing of the receipt by it (or any of the other
entities or persons referred to above) after the date hereof of any
Acquisition Proposal, or any inquiry which could lead to any Acquisition
Proposal, the material terms and conditions of such Acquisition Proposal or
inquiry, and the identity of the person making any such Acquisition Proposal
or inquiry. The Company will keep Purchaser fully informed of the status and
details of any such Acquisition Proposal or inquiry. The term "Acquisition
Proposal" as used herein means any tender or exchange offer involving the
capital stock of the Company or any of the Company Subsidiaries, any proposal
for a merger, consolidation or other business combination involving the
Company or any of the Company Subsidiaries, any proposal or offer to acquire
in any manner a substantial equity interest in, or a substantial portion of
the business or assets of, the Company or any of the Company Subsidiaries, any
proposal or offer with respect to any recapitalization or restructuring of the
Company or any of the Company Subsidiaries, or any proposal or offer with
respect to any other transaction similar to any of the foregoing with respect
to the Company or any of the Company Subsidiaries, other than the Merger
contemplated by this Agreement. Immediately after the execution and delivery
of this Agreement, the Company will cease and terminate any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any possible Acquisition Proposal and shall notify each party
that it, or any officer, director, investment advisor, financial advisor,
attorney or other representative retained by it, has had discussions with
during the 30 days prior to the date of this Agreement that the Board of
Directors of the Company no longer seeks the making of any Acquisition
Proposal.
Section 7.3 Fiduciary Duties; Certain Fees. The Board of Directors of the
Company shall not (i) withdraw or modify, or propose to withdraw or modify, in
a manner adverse to Purchaser or Sub, the approval or recommendation by such
Board of Directors of this Agreement or the Merger, (ii) approve or recommend,
or propose to approve or recommend, any Acquisition Proposal or (iii) enter
into any agreement with respect to any Acquisition Proposal, unless the
Company receives an Acquisition Proposal and the Board of Directors of the
Company determines in good faith, following consultation with outside counsel,
that in order to comply with its fiduciary duties to stockholders under
applicable law it is necessary for the Board of Directors to withdraw or
modify its approval or recommendation of this Agreement or the Merger, approve
or recommend such Acquisition Proposal, enter into an agreement with respect
to such Acquisition Proposal or terminate this Agreement. In the event the
Board of Directors of the Company takes any of the foregoing actions in (i),
(ii) or (iii) or terminates this agreement when an Acquisition Proposal is
outstanding, the Company shall, concurrently with the taking of any such
action, pay to Purchaser $20 million in same day funds. Nothing contained in
this Section 7.3 shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's stockholders
which, in the good faith reasonable judgment of the Board of Directors of the
Company based on the advice of outside counsel, is required under applicable
law; provided that, except as otherwise permitted in this Section 7.3, the
Company does not withdraw or modify, or propose to withdraw or modify, its
position with respect to the Merger or approve or recommend, or propose to
approve or recommend, an Acquisition Proposal. Notwithstanding anything
contained in this Agreement to the contrary, any action by the Board of
Directors permitted by this Section 7.3 shall not constitute a breach of this
Agreement by the Company.
Section 7.4 Filings; Other Action. Subject to the terms and conditions
herein provided, as promptly as practicable, the Company, Purchaser and Sub
shall: (i) promptly make all filings and submissions under the HSR Act and all
filings required by the insurance regulatory authorities in Virginia and in
Missouri, and deliver notices and consents to jurisdiction to state insurance
departments, each as reasonably may be required to be made in connection with
this Agreement and the transactions contemplated hereby, (ii) use reasonable
best efforts to cooperate with each other in (A) determining which filings are
required to be made prior to the Effective Time with, and which material
consents, approvals, permits, notices or authorizations are required to be
obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states or the District of
Columbia, the Commonwealth of Puerto Rico and foreign jurisdictions in
connection with the
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (B) timely making all such filings and
timely seeking all such consents, approvals, permits, notices or
authorizations, and (iii) use reasonable best efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things
necessary or appropriate to consummate the transactions contemplated by this
Agreement as soon as practicable. In connection with the foregoing, the
Company will provide Purchaser, and Purchaser will provide the Company, with
copies of correspondence, filings or communications (or memoranda setting
forth the substance thereof) between such party or any of its representatives,
on the one hand, and any governmental agency or authority or members of their
respective staffs, on the other hand, with respect to this Agreement and the
transactions contemplated hereby.
Section 7.5 Public Announcements. Purchaser, on the one hand, and the
Company, on the other hand, agree that they will not issue any press release
or otherwise make any public statement or respond to any press inquiry with
respect to this Agreement or the transactions contemplated hereby without the
prior approval of the other party (which approval will not be unreasonably
withheld), except as may be required by applicable law.
Section 7.6 Employee Benefits. (a) From and after the Effective Time,
subject to applicable law and except as contemplated hereby, Purchaser and the
Purchaser Subsidiaries will honor, in accordance with their terms, all
employee benefit plans, programs, agreements or arrangements of the Company
and the Company Subsidiaries in effect as of the date hereof (or as modified
in accordance with Section 6.1 hereof) (the "Company Plans"); provided,
however, that nothing herein shall preclude any change effected on a
prospective basis in any Company Plan from and after the Effective Time.
Purchaser and the Purchaser Subsidiaries will provide benefits to employees of
the Company and the Company Subsidiaries who become employees of Purchaser and
the Purchaser Subsidiaries or continue after the Effective Time as employees
of the Company or the Company Subsidiaries which will not, in the aggregate,
be materially less favorable than those provided to other similarly situated
employees of Purchaser, Sub and the Purchaser Subsidiaries from time to time;
provided, however, that Purchaser and the Purchaser Subsidiaries shall be
deemed to have satisfied the foregoing requirement if benefits are provided to
such employees that are no less favorable than those provided to such
employees by the Company immediately prior to the Effective Time. With respect
to the employee benefit plans, programs, agreements or arrangements of
Purchaser and the Purchaser Subsidiaries in effect as of the date hereof (or
as modified in accordance with Section 6.2 hereof) (the "Purchaser Plans"),
Purchaser and the Surviving Corporation shall grant all employees of the
Company and the Company Subsidiaries from and after the Effective Time credit
for service with the Company and the Company Subsidiaries, their affiliates
and predecessors prior to the Effective Time for all purposes, other than the
accrual of benefits for which such service was recognized by the Company and
the Company Subsidiaries. To the extent the Purchaser Plans provide medical or
dental welfare benefits after the Effective Time, such plans shall waive pre-
existing conditions and actively-at-work exclusions to the extent such
exclusions have been satisfied in similar Company Plans and shall provide that
any expenses incurred on or before the Effective Time shall be taken into
account under deductible, coinsurance and maximum out-of-pocket provisions
under such Purchaser Plans.
(b) Purchaser agrees that it will cause the Company to comply with the
Workers Adjustment and Retraining Notification Act, to the extent applicable
to the Company and its subsidiaries, in connection with actions taken after
the Effective Time.
Section 7.7 Stock Exchange Listing. Purchaser shall as promptly as
practicable prepare and submit to the New York Stock Exchange a listing
application covering the shares of Purchaser Common Stock to be issued in
connection with the Merger and this Agreement, and shall use all reasonable
efforts to obtain, prior to the Effective Time, approval for the listing of
such shares, subject to official notice of issuance.
Section 7.8 Company Indemnification Provisions. Purchaser agrees that all
rights to indemnification existing in favor of the present or former
directors, officers, employees, fiduciaries and agents of the Company or any
of the Company Subsidiaries (collectively, the "Indemnified Parties") as
provided in the Company's Restated Articles of Incorporation or By-Laws or the
certificate or articles of incorporation, by-laws or similar
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organizational documents of any of the Company Subsidiaries as in effect as of
the date hereof or pursuant to the terms of any indemnification agreements
entered into between the Company and any of the Indemnified Parties with
respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect (without modification or
amendment, except as required by applicable law or except to make changes
permitted by law that would enlarge the Indemnified Parties' right of
indemnification), to the fullest extent and for the maximum term permitted by
law, and shall be enforceable by the Indemnified Parties against the Surviving
Corporation. At the Closing the Surviving Corporation shall expressly and
directly assume by written instrument all such obligations. Purchaser shall
cause to be maintained in effect for not less than six years from the
Effective Time the current policies of the directors' and officers' liability
insurance maintained by the Company (provided that Purchaser may substitute
therefor policies of at least equivalent coverage containing terms and
conditions which are no less advantageous) with respect to matters occurring
prior to the Effective Time, provided that in no event shall Purchaser or the
Surviving Corporation be required to expend to maintain or procure insurance
coverage pursuant to this Section 7.8 any amount per annum in excess of 200%
of the aggregate premiums paid in 1995 on an annualized basis for such
purpose. In the event the payment of such amount for any year is insufficient
to maintain such insurance or equivalent coverage cannot otherwise be
obtained, the Surviving Corporation shall purchase as much insurance as may be
purchased for the amount indicated. The provisions of this Section 7.8 shall
survive the consummation of the Merger and expressly are intended to benefit
each of the Indemnified Parties.
Section 7.9 Comfort Letters. (a) Purchaser shall use all reasonable efforts
to cause Ernst & Young LLP, Purchaser's independent accountants, to deliver to
the Company a letter dated as of the date of the Proxy Statement/Prospectus
and addressed to the Company, in form and substance reasonably satisfactory to
the Company, in connection with the procedures undertaken by them with respect
to the financial statements and other financial information of Purchaser
contained in the Registration Statement and the other matters contemplated by
AICPA Statement No. 72 and customarily included in comfort letters relating to
transactions similar to the Merger.
(b) The Company shall use all reasonable efforts to cause Ernst & Young LLP,
the Company's independent accountants, to deliver to Purchaser a letter dated
as of the date of the Proxy Statement/Prospectus and addressed to Purchaser,
in form and substance reasonably satisfactory to Purchaser, in connection with
the procedures undertaken by them with respect to the financial statements and
other financial information of the Company and the Company Subsidiaries
contained in the Registration Statement and the other matters contemplated by
AICPA Statement No. 72 and customarily included in comfort letters relating to
transactions similar to the Merger.
Section 7.10 Tax Matters. (a) The Company and Purchaser shall each
reasonably cooperate in connection with obtaining the opinions of special
counsel described in Sections 8.2(b) and 8.3(b) including, without limitation,
providing to special counsel such representations that are reasonably required
by special counsel to enable them to render such opinions. The Company shall
use all reasonable efforts to deliver to Purchaser, as soon as practicable
following the mailing to the shareholders of the Company of the Proxy
Statement/Prospectus, an executed representation letter, substantially in the
form of Exhibit C attached hereto, from each person owning for Federal income
tax purposes 5% or more of the outstanding shares of Company Common Stock as
of the date of this Agreement.
(b) The parties intend the Merger to qualify as a reorganization under
Section 368(a) of the Code; each party and its affiliates shall use all
reasonable efforts to cause the Merger to so qualify; neither party nor any
affiliate shall take any action that would reasonably be expected to cause the
Merger not to so qualify; and the parties will take the position for all
purposes that the Merger so qualifies.
Section 7.11 Intercompany Dividend. On or before the date immediately prior
to the Closing Date, subject to compliance with applicable law, the receipt of
all necessary approvals, and the satisfaction (or waiver) of all of the
conditions to the Closing set forth in Article VIII that are capable of being
satisfied prior to the Closing Date, the Company shall use all reasonable
efforts to cause Home Beneficial Life Insurance Company to
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pay a dividend of at least $250 million to the Company, such dividend to be
paid in the form of a demand promissory note, or such other form as to which
the parties may mutually agree. If such dividend is less than $250 million,
the Per Share Amount and the Cash Consideration shall be reduced by the
"Dividend Adjustment." The Dividend Adjustment shall equal a number of cents
per share equal to 100 multiplied by the product of (a) 0.0378 multiplied by
(b) the difference between $250 million and the actual amount of the dividend
paid to the Company pursuant to this Section 7.11 divided by (c) the number of
outstanding Shares. For example, based on 17,053,570 shares of Company Common
Stock outstanding as of the date of this Agreement, for each $1 million
increment by which the dividend paid pursuant to this Section 7.11 is less
than $250 million, the Dividend Adjustment would result in a reduction in the
Cash Consideration and the Per Share Amount equal to $0.0022 per share of
Company Common Stock.
Section 7.12 Additional Matters. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers,
consents and approvals in connection with the Governmental Requirements and
any other third party consents and to effect all necessary registrations and
filings. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and/or directors of Purchaser, Sub and the Company shall take all
such necessary action.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) any waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated, and no action shall have
been instituted by the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of this transaction,
which action shall have not been withdrawn or terminated;
(b) no statute, rule, regulation, executive order, decree, ruling or
preliminary or permanent injunction shall have been enacted, entered,
promulgated or enforced by any federal or state court or governmental
authority having jurisdiction which prohibits, restrains, enjoins or
restricts consummation of the Merger;
(c) each of the Company and Purchaser shall have obtained the third party
consents and approvals (other than consents and approvals required by
Governmental Requirements) listed in Section 4.5 of the Purchaser
Disclosure Letter or in Section 5.5 of the Company Disclosure Letter and,
in each case, indicated therein as being a condition to the Closing;
(d) each of the Company and Purchaser shall have made such filings, and
obtained such permits, authorizations, consents, or approvals (including an
order of the State of Missouri Insurance Department approving the Merger as
a statutory merger under Missouri law), required by Governmental
Requirements to consummate the transactions contemplated hereby, and the
appropriate forms shall have been executed, filed and approved as required
by the corporate and insurance laws and regulations of the Commonwealth of
Virginia and the State of Missouri; which permits, authorizations,
consents, and approvals may be subject only to (i) conditions customarily
imposed by insurance regulatory authorities in transactions of the type
contemplated by this Agreement, taking into account the financial strength
and experience in the life insurance industry of Purchaser or (ii) other
conditions that would not reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of
Purchaser and its subsidiaries taken as a whole (after giving effect to the
consummation of the Merger); provided, that if all
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<PAGE>
other conditions to the Closing set forth in this Article VIII have been
satisfied or waived, the approval of the regulatory authorities of the
State of Missouri have not been obtained, and Purchaser has received an
opinion of counsel to the effect that, on the basis of certain facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the time of such opinion,
(A) the use of a substitute subsidiary to effect the Merger, (B) the
subsequent merger or reorganization of such substitute subsidiary with or
into Sub, and (C) the subsequent merger or reorganization of Home
Beneficial Life Insurance Company with or into another life insurance
company subsidiary of Purchaser (in a transaction that would have been tax-
free under the applicable provisions of the Code if the Merger had been
effected through the use of Sub), will each be treated as one or more tax-
free transactions under the applicable provisions of the Code, Purchaser
agrees that it shall effect the Merger through the use of a substitute
subsidiary, the use of which is not subject to any Governmental
Requirements (other than the approval of the Virginia State Corporation
Commission);
(e) this Agreement and the Merger shall have been adopted and approved by
the requisite vote of the shareholders of the Company in accordance with
the applicable provisions of the VSCA;
(f) the Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order; and
(g) the shares of Purchaser Common Stock issuable to the Company's
shareholders pursuant to this Agreement shall have been authorized for
listing on the New York Stock Exchange upon official notice of issuance
thereof.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) each of Purchaser and Sub shall have performed in all material
respects its obligations under this Agreement required to be performed by
it at or prior to the Effective Time; the representations and warranties of
Purchaser and Sub contained in this Agreement which are qualified with
respect to materiality shall be true and correct in all respects, and such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and at and as of the Effective Time as if made at and as of such
time (except to the extent such representations and warranties specifically
relate to an earlier date, in which case as of such earlier date) except as
contemplated by this Agreement; and the Company shall have received a
certificate of the Chairman of the Board, the President, an Executive Vice
President, a Senior Vice President or the Chief Financial Officer of
Purchaser as to the satisfaction of this condition; and
(b) the Company shall have received an opinion from Debevoise & Plimpton,
special counsel to the Company, dated the Effective Time, to the effect
that, on the basis of certain facts, representations and assumptions set
forth in such opinion which are consistent with the stated facts existing
at the Effective Time, the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, and that Purchaser, Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
rendering the opinion described in the preceding sentence, such counsel may
require and rely upon representations contained in certificates of officers
of Purchaser, Sub and the Company and their respective subsidiaries and in
the representation letters received from certain shareholders pursuant to
Section 7.10 hereof.
Section 8.3 Conditions to Obligations of Purchaser and Sub to Effect the
Merger. The obligations of Purchaser and Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions:
(a) the Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior
to the Effective Time; and the representations and warranties of
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<PAGE>
the Company contained in this Agreement which are qualified with respect to
materiality shall be true and correct in all respects, and such
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and at and as of the Effective Time as if made at and as of such
time (except to the extent such representations and warranties specifically
relate to an earlier date, in which case as of such earlier date), except
as contemplated by the Company Disclosure Letter or this Agreement; and
Purchaser and Sub shall have received a Certificate of the Chairman of the
Board, the President, or a Vice President of the Company as to the
satisfaction of this condition; and
(b) Purchaser shall have received an opinion from Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel to Purchaser, dated the Effective Time,
to the effect that, on the basis of certain facts, representations and
assumptions set forth in such opinion which are consistent with the stated
facts existing at the Effective Time, the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, and that Purchaser, Sub and the Company will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code. In rendering the opinion described in the preceding sentence,
such counsel may require and rely upon representations contained in
certificates of officers of Purchaser, Sub and the Company and their
respective subsidiaries and in the representation letters received from
certain shareholders pursuant to Section 7.10 hereof.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination by Mutual Consent. This Agreement may be terminated
at any time prior to the Effective Time by mutual written agreement of
Purchaser and the Company.
Section 9.2 Termination by Either Purchaser or the Company. This Agreement
may be terminated and the Merger may be abandoned by action of the Board of
Directors of either Purchaser or the Company if (a) this Agreement and the
Merger shall fail to receive the requisite vote for approval and adoption by
the shareholders of the Company at the Company Special Meeting, (b) the Merger
shall not have been consummated before June 30, 1997; provided, however, that
this Agreement may be extended by written notice of either Purchaser or the
Company to a date not later than September 30, 1997, if the Merger shall not
have been consummated as a direct result of the conditions in Section 8.1(a),
8.1(c) or 8.1(d) not having been satisfied by such date, (c) a United States
federal or state court of competent jurisdiction or United States federal or
state governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and non-appealable, or (d) the Board of Directors of the Company
shall have exercised its rights set forth in, and in accordance with the terms
of, Section 7.3 of this Agreement; provided, that the party seeking to
terminate this Agreement pursuant to clause (b) shall not have taken any
action that would cause it to be in material violation of any of its
representations, warranties or covenants set forth in this Agreement, and the
party seeking to terminate this Agreement pursuant to clause (c) shall have
used all reasonable efforts to remove such injunction, order or decree.
Section 9.3 Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action
of the Board of Directors of the Company (a) pursuant to the exercise of its
rights under Section 6.2(d) or (b) if the Trading Average is less than $35.00.
Section 9.4 Termination by Purchaser. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action
of the Board of Directors of the Purchaser, if (a) there has been a breach by
the Company of any representation or warranty contained in this Agreement
which would be reasonably likely to have a Company Material Adverse Effect or
(b) there has been a material breach
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<PAGE>
of any of the covenants or agreements set forth in this Agreement on the part
of the Company, which breach is not curable or, if curable, is not cured
within thirty days after written notice of such breach has been given by the
Purchaser to the Company.
Section 9.5 Effect of Termination and Abandonment. In the event of
termination of the Agreement and the abandonment of the Merger pursuant to
this Article IX, written notice thereof shall as promptly as practicable be
given to the other parties to this Agreement and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto. If this Agreement is terminated
as provided herein: (i) there shall be no liability or obligation on the part
of Purchaser, the Purchaser Subsidiaries, the Company or the Company
Subsidiaries or their respective officers and directors, and all obligations
of the parties shall terminate, except for the obligations of the parties
pursuant to this Section 9.5, except for the provisions of Sections 4.20,
5.20, 7.5, 10.4, 10.5, 10.6 and 10.10, except for the obligations of the
parties set forth in the Confidentiality Agreement referred to in Section 7.1
hereof (provided, however, that if this Agreement is terminated by the Company
pursuant to Section 9.2(d) or 9.3, Purchaser shall no longer be bound by
paragraph 5 of the Confidentiality Agreement) and except that a party who is
in material breach of its representations, warranties, covenants or agreements
set forth in this Agreement shall be liable for damages occasioned by such
breach, including without limitation any expenses incurred by the other party
in connection with this Agreement and the transactions contemplated hereby,
and (ii) all filings, applications and other submissions made pursuant to the
transactions contemplated by this Agreement shall, to the extent practicable,
be withdrawn from the agency or person to which made.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and Agreements. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement, shall survive beyond the Effective Time except for
Section 4.23. This Section 10.1 shall not limit any covenant or agreement set
forth in this Agreement, which covenants and agreements shall survive the
Effective Time.
Section 10.2 Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given upon (a) confirmation
of receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or when delivered by hand or (c) the expiration of five
business days after the day when mailed by registered or certified mail
(postage prepaid, return receipt requested), addressed to the respective
parties at the following addresses (or such other address for a party as shall
be specified by like notice):
(a) If to Purchaser or Sub, to:
American General Corporation
2929 Allen Parkway
Houston, TX 77019
Telecopy: (713) 831-1300
Attention: Jon P. Newton
With copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Telecopy: (212) 735-2000
Attention: Morris J. Kramer, Esq.
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<PAGE>
(b) If to the Company, to:
Home Beneficial Corporation
3901 West Broad Street
Richmond, VA 23230
Telecopy: (804) 254-9601
Attention: Chief Executive Officer
with copies to:
Mays & Valentine, L.L.P.
NationsBank Center
1111 East Main Street
Richmond, VA 23219
Telecopy: (804) 697-1339
Attention: William R. Derry, Jr., Esq.
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Telecopy: (212) 909-6836
Attention: Paul S. Bird, Esq.
Section 10.3 Descriptive Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.4 Entire Agreement; Assignment. This Agreement (including the
Exhibits, Company Disclosure Letter, Purchaser Disclosure Letter and other
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all other prior agreements and understandings (other than those
contained in the Confidentiality Agreement, which are hereby incorporated by
reference herein), both written and oral, among the parties or any of them,
with respect to the subject matter hereof, including, without limitation, any
transaction between or among the parties hereto. This Agreement shall not be
assigned by operation of law or otherwise, except that Sub may assign all of
its rights and obligations hereunder to any direct wholly-owned subsidiary of
Purchaser which shall then be substituted for Sub for all purposes hereof;
provided, however, that no such assignment shall be made if such assignment
would have a material adverse effect on the Company, the Company's
shareholders or the likelihood that the transaction contemplated hereby would
be consummated.
Section 10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of New York without giving effect to the
provisions thereof relating to conflicts of law; provided, that the laws of
the respective states of incorporation of the parties hereto shall govern the
respective internal rights and obligations of the parties and the effects of
the Merger contemplated hereby.
Section 10.6 Expenses. Except as provided in Section 7.3, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and thereby shall be paid
by the party incurring such expenses, except that those expenses incurred in
connection with printing and mailing the Proxy Statement/Prospectus, as well
as the filing fees relating to the Registration Statement and the HSR Act,
will be shared equally by Purchaser and the Company.
Section 10.7 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 10.8 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and
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<PAGE>
(c) waive compliance with any of the Agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
Section 10.9 Counterparts; Effectiveness. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement. This Agreement shall
become effective when each party hereto shall have received counterparts
thereof signed by all of the other parties hereto.
Section 10.10 Severability; Validity; Parties in Interest. If any provision
of this Agreement, or the application thereof to any person or circumstance is
held invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to other persons or circumstances, shall not be
affected thereby, and to such end, the provisions of this Agreement are agreed
to be severable. Except as provided in Section 7.6 and 7.8, nothing in this
Agreement, express or implied, is intended to confer upon any person not a
party to this Agreement any rights or remedies of any nature whatsoever under
or by reason of this Agreement.
Section 10.11 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any provision of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction, this being in addition to any other remedy to which
they are entitled at law or in equity.
IN WITNESS WHEREOF, each of the Purchaser, Sub and the Company has caused
this Agreement to be executed as of the date first above written.
AMERICAN GENERAL CORPORATION
By /s/ Robert M. Devlin
------------------------------------
Robert M. Devlin President and
Chief Executive Officer
AGC LIFE INSURANCE COMPANY
By /s/ Robert M. Devlin
------------------------------------
Robert M. Devlin Senior Chairman
HOME BENEFICIAL CORPORATION
By /s/ R.W. Wiltshire, Jr.
------------------------------------
R.W. Wiltshire, Jr. President and
Chief Executive Officer
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<PAGE>
EXHIBIT A
PLAN OF MERGER
OF
HOME BENEFICIAL CORPORATION
WITH AND INTO
AGC LIFE INSURANCE COMPANY
1. Corporations Proposing to Merge and Surviving Corporation. Home
Beneficial Corporation, a Virginia corporation (the "Company"), shall be
merged (the "Merger") with and into AGC Life Insurance Company ("Sub"), a
Missouri corporation and a wholly owned subsidiary of American General
Corporation, a Texas corporation ("Purchaser"), pursuant to the terms and
conditions of this Plan of Merger and of the Agreement and Plan of Merger,
dated as of December 22, 1996, by and among the Company, Sub and Purchaser,
and amended as of January 22, 1997 and as of March 3, 1997 (as so amended, the
"Agreement"). The effective time for the Merger (the "Effective Time") shall
be such time as appropriate Articles of Merger are executed and filed with the
Virginia State Corporation Commission and the Secretary of State of the State
of Missouri, or at such later time as the parties shall have designated in
such filings as the effective time of the Merger. Sub shall continue as the
surviving corporation (the "Surviving Corporation") in the Merger and the
separate corporate existence of the Company shall cease.
2. Effects of the Merger. The Merger shall have the effects described in
this Plan of Merger and as set forth in the Virginia Stock Corporation Act
("VSCA") and in The General and Business Corporation Law of Missouri ("MGBC").
3. Articles of Incorporation and Bylaws. The Articles of Incorporation of
Sub as in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation, until thereafter amended as
provided by law and such Articles of Incorporation. The Bylaws of Sub as in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, until thereafter amended as provided by law, such
Bylaws and the Articles of Incorporation of the Surviving Corporation.
4. Officers and Directors. The officers and directors of Sub immediately
prior to the Effective Time shall be the officers and directors of the
Surviving Corporation immediately at and following the Effective Time. The
officers and directors of the Surviving Corporation shall hold office until
their respective successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation.
5. Conversion of Shares, etc.
(a) Conversion of Shares. At the Effective Time, by virtue of the Merger and
without any action on the part of any of the parties hereto or any holder of
any of the following securities:
(i) Each share of Class A Common Stock (Voting), par value $0.3125 per
share, of the Company (the "Company Voting Stock") and each share of Class
B Common Stock (Non-Voting), par value $0.3125 per share, of the Company
(the "Company Non-Voting Stock"; the Company Voting Stock and the Company
Non-Voting Stock, collectively, the "Company Common Stock"; and the shares
of such Company Common Stock, the "Shares") issued and outstanding
immediately prior to the Effective Time (other than Shares to be cancelled
pursuant to subparagraph (a)(iii) hereof) shall, at the Effective Time, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive such number of duly
authorized, validly issued, fully paid and nonassessable shares of
Purchaser Common Stock (as defined below) or cash, in accordance with the
following:
(A) a fraction of a duly authorized, validly issued, fully paid and
nonassessable share of common stock of Purchaser (together with the
attached Series A Junior Participating Preferred Stock Purchase Rights,
issued in accordance with the Rights Agreement, dated as of July 27,
1989, between Purchaser and Texas Commerce Bank, as Rights Agent, as
amended by the First Amendment Rights Agreement,
<PAGE>
dated as of October 26, 1992, between Purchaser and First Chicago Trust
Company of New York, as Rights Agent, as such amended rights agreement
may be amended from time to time, the "Purchaser Common Stock"), par
value $0.50 per share (the "Stock Consideration"), calculated by
dividing (I) $39.00 (the "Per Share Amount") by (II) the Average
Purchaser Price (as hereinafter defined), rounded to four decimal
places (such fraction being referred to herein as the "Exchange
Ratio"). As used herein, the "Average Purchaser Price" shall mean the
average of the high and low sales prices, regular way, per share of
Purchaser Common Stock as reported in The Wall Street Journal during
the ten consecutive New York Stock Exchange trading days (each, a
"Trading Day") ending on (and including) the fifth Trading Day prior to
the Effective Time (the "Trading Average"); provided, however, that if
the Trading Average is less than $35.00, then the Average Purchaser
Price shall be $35.00; and/or
(B) $39.00 in cash, without any interest thereon (the "Cash
Consideration"; the Stock Consideration and the Cash Consideration,
collectively, the "Merger Consideration"),
in each case as the holder thereof shall have elected or be deemed to have
elected, in accordance with and subject to the limitations set forth in
paragraph (b) below. The Per Share Amount and the Cash Consideration may be
reduced in the manner as provided in paragraph (e) below. All Shares of
Company Common Stock converted or exchanged into Merger Consideration shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each certificate previously evidencing any
such Shares of Company Common Stock shall thereafter represent the right to
receive, upon the surrender of such certificate to the Exchange Agent (as
hereinafter defined), in only the applicable Merger Consideration. The
holders of such certificates previously evidencing such Shares of Company
Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares of Company Common
Stock except as otherwise provided herein or by law.
(ii) Each share of Common Stock of Sub, par value $100.00 per share,
issued and outstanding immediately prior to the Effective Time, shall
remain outstanding and shall be unchanged after the Merger and shall
thereafter constitute all of the issued and outstanding capital stock of
the Surviving Corporation.
(iii) All Shares of Company Common Stock that are owned by the Company as
treasury stock and any Shares of Company Common Stock owned by Purchaser or
Sub or any other direct or indirect wholly owned Purchaser Subsidiary
shall, at the Effective Time, be canceled and retired and shall cease to
exist and no Purchaser Common Stock or other consideration shall be
delivered in exchange therefor except for any shares held in a Purchaser
Subsidiary separate account or mutual fund.
(iv) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") shall cease to have any rights as stockholders of the
Company, except the right to receive the Merger Consideration for each
Share held by them.
(v) The calculations of the computations required by this Section 5
(including any adjustments required in paragraph (e) below) shall be
prepared by Purchaser prior to the Closing Date and shall be set forth in a
statement furnished to the Company showing in reasonable detail the manner
of calculation.
(vi) At the Effective Time, the stock transfer books of the Company shall
be closed as to holders of the Company Common Stock immediately prior to
the Effective Time and no transfer of the Company Common Stock by any such
holder shall thereafter be made or recognized. If, after the Effective
Time, certificates are properly presented in accordance with this Section 5
to the Exchange Agent, such certificates shall be cancelled and exchanged
for certificates representing the number of shares of Purchaser Common
Stock, and a check representing the amount of cash, if any, into which the
Company Common Stock represented thereby was converted in the Merger.
(b) Election Procedure. Each holder (or beneficial owner through appropriate
and customary documentation and instructions) of Shares (other than holders of
Shares to be cancelled as set forth in subparagraph (a)(iii) above) shall have
the right to submit a request specifying the number of Shares that such holder
desires to have converted into shares of Purchaser Common Stock in the Merger
and the number of Shares
2
<PAGE>
that such holder desires to have converted into the right to receive Cash
Consideration in the Merger in accordance with the following procedure:
(i) Subject to paragraph (c) below, each holder of Shares may specify in
a request made in accordance with the provisions of this paragraph (b)
(herein called an "Election") (x) the number of Shares owned by such holder
that such holder desires to have converted into Purchaser Common Stock in
the Merger (a "Stock Election") and (y) the number of Shares owned by such
holder that such holder desires to have converted into the right to receive
the Cash Consideration in the Merger (a "Cash Election").
(ii) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of
loss and title to the certificates theretofore representing shares of
Company Common Stock shall pass, only upon proper delivery of such
certificates to the Exchange Agent) in such form as Purchaser and the
Company shall mutually agree (the "Election Form") shall be mailed thirty
days prior to the anticipated Effective Time or on such other date as
Purchaser and the Company shall mutually agree (the "Mailing Date") to each
holder of record of Company Common Stock as of the record date for the
special meeting of the Company's shareholders to be convened and held for
the purpose of voting upon the adoption of the Agreement.
(iii) Any Election shall have been made properly only if the Exchange
Agent shall have received, by 5:00 p.m. local time in the city in which the
principal office of such Exchange Agent is located, on the fifth day prior
to the anticipated Effective Time (or such other time and date as Purchaser
and the Company shall mutually agree) (the "Election Deadline"), an
Election Form properly completed and signed and accompanied by certificates
for the Shares to which such Election Form relates (or customary affidavits
and indemnification regarding the loss or destruction of such certificate
or certificates or by an appropriate guarantee of delivery of such
certificates, as set forth in such Election Form, from a member of any
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the
United States provided such certificates are in fact delivered to the
Exchange Agent by the time required in such guarantee of delivery). Failure
to deliver Shares covered by such a guarantee of delivery within the time
set forth on such guarantee shall be deemed to invalidate any otherwise
properly made Election.
(iv) Any Company stockholder may at any time up to and immediately prior
to the Election Deadline revoke or change his or her Election by written
notice (including by facsimile) received by the Exchange Agent prior to the
Election Deadline accompanied by a properly completed and signed, revised
Election Form or by withdrawal of his or her certificates for Shares, or of
the guarantee of delivery of such certificates, previously deposited with
the Exchange Agent. All Elections shall be revoked automatically if the
Exchange Agent is notified in writing by Purchaser or the Company that this
Agreement has been terminated. In the event an Election Form is revoked
prior to the Election Deadline, the shares of Company Common Stock
represented by such Election Form shall be promptly returned without charge
to the person submitting the Election Form upon written request to that
effect from the holder who submitted the Election Form. The Exchange Agent
shall have reasonable discretion to determine whether any election,
revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith decisions of
the Exchange Agent regarding such matters shall be binding and conclusive.
The Exchange Agent shall be under no obligation to notify any person of any
defect in an Election Form.
(v) Within fifteen calendar days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, Purchaser shall cause the Exchange Agent to effect the
allocation among the holders of Company Common Stock of rights to receive
Purchaser Common Stock or Cash Consideration in the Merger in accordance
with paragraph (c) below.
(c) Issuance of Purchaser Common Stock and Payment of Cash Consideration;
Proration. The manner in which each Share (other than Shares to be canceled as
set forth in subparagraph (a)(iii) above) shall be converted into Purchaser
Common Stock or the right to receive the Cash Consideration at the Effective
Time shall be as set forth in this paragraph (c). All references to
"outstanding" Shares in this paragraph (c) shall mean (i) all Shares
outstanding immediately prior to the Effective Time, minus (ii) Shares owned
by Purchaser or Sub or any direct or indirect wholly owned Purchaser
Subsidiary except for any shares held in a Purchaser Subsidiary separate
account or mutual fund.
3
<PAGE>
(i) As is more fully set forth below, the aggregate number of Shares to
be converted into Purchaser Common Stock pursuant to the Merger shall not
exceed 75% of all outstanding Shares, and the number of Shares to be
converted into the right to receive the Cash Consideration pursuant to the
Merger shall not be less than 25% of all outstanding Shares and not more
than 50% of all outstanding Shares.
(ii) If Stock Elections are received for a number of Shares that is in
the aggregate 75% or less of the outstanding Shares, each Share covered by
a Stock Election shall be converted in the Merger into a fraction of a
share of Purchaser Common Stock equal to the Exchange Ratio.
(iii) If Stock Elections are received for a number of Shares that is in
the aggregate more than 75% of the outstanding Shares, then:
(A) Each Non-Electing Share (as defined in subparagraph (c)(vii)) and
each Share for which a Cash Election has been received shall be
converted into the right to receive the Cash Consideration in the
Merger;
(B) The Exchange Agent will distribute a fraction of a share of
Purchaser Common Stock equal to the Exchange Ratio with respect to a
number of such Shares equal to 75% of the outstanding Shares;
(C) Shares covered by a Stock Election and not fully converted into
the right to receive Purchaser Common Stock as set forth in clause (B)
above shall be converted in the Merger into the right to receive the
Cash Consideration multiplied by the number of such Shares; and
(D) The distributions of Purchaser Common Stock and of Cash
Consideration contemplated by the preceding clauses (B) and (C) shall
be made on a pro rata basis among all Shares as to which Stock
Elections have been made.
(iv) If Cash Elections are received for a number of Shares that is in the
aggregate 50% or less of the outstanding Shares, each Share covered by a
Cash Election shall be converted in the Merger into the right to receive
the Cash Consideration.
(v) If Cash Elections are received for a number of Shares that is in the
aggregate more than 50% of the outstanding Shares, then:
(A) Each Non-Electing Share and each Share for which a Stock Election
has been received shall be converted in the Merger into a fraction of a
share of Purchaser Common Stock equal to the Exchange Ratio;
(B) The Exchange Agent will distribute Cash Consideration with
respect to a number of such Shares equal to 50% of the number of
outstanding Shares;
(C) Each Share covered by a Cash Election and not fully converted
into the right to receive the Cash Consideration as set forth in clause
(B) above shall be converted in the Merger into the right to receive a
number of shares of Purchaser Common Stock equal to the Exchange Ratio;
and
(D) The distributions of Cash Consideration and of Purchaser Common
Stock contemplated by the preceding clauses (B) and (C) shall be made
on a pro rata basis among all Shares as to which Cash Elections have
been made.
(vi) If Non-Electing Shares are not converted under either subparagraph
(c)(iii) or (c)(v) above, the Exchange Agent shall distribute with respect
to such Non-Electing Shares:
(A) Cash Consideration with respect to a number of such Non-Electing
Shares, that will result in the sum of (I) the number of Shares
converted into cash pursuant to this subparagraph (c)(vi) and (II) the
number of Shares for which Cash Elections have been received being as
close as practicable to 50% of the outstanding Shares;
(B) Non-Electing Shares not converted into the right to receive the
Cash Consideration as set forth in the preceding sentence shall be
converted in the Merger into the right to receive a number of shares of
Purchaser Common Stock equal to the Exchange Ratio multiplied by the
number of such Shares; and
4
<PAGE>
(C) The distribution of Cash Consideration and of Purchaser Common
Stock contemplated by the preceding clauses (A) and (B) shall be made
on a pro rata basis among all Non-Electing Shares.
(vii) For the purposes of this paragraph (c), outstanding Shares as to
which an Election is not in effect at the Election Deadline shall be called
"Non-Electing Shares." If Purchaser and the Company shall determine that
any Election is not properly made with respect to any Shares, such Election
shall be deemed to be not in effect, and the Shares covered by such
Election shall, for purposes hereof, be deemed to be Non-Electing Shares.
(viii) If required by special counsel to the Company or special counsel
to Purchaser in order for such counsel to provide the opinions required as
conditions to the closing of the Merger, the number "50%" in subparagraphs
(c)(iv), (v) and (vi) above shall be adjusted to a number reasonably
required by such counsel, provided that after giving effect to such
adjustment the number of Shares to be converted into Purchaser Common Stock
pursuant to the Merger shall not exceed 75% of all outstanding Shares.
(d) Fractional Interests. No certificates or scrip representing fractional
shares of Purchaser Common Stock shall be issued in connection with the
Merger, and such fractional interests will not entitle the owner thereof to
any rights as a shareholder of Purchaser. In lieu of a fractional interest in
a share of Purchaser Common Stock, each holder of a Share or Shares of Company
Common Stock exchanged pursuant to subparagraph (a)(iii) above who would
otherwise have been entitled to receive a fraction of a share of Purchaser
Common Stock shall receive cash (without interest) in an amount equal to the
product of such fractional interest multiplied by the Average Purchaser Price.
(e) Intercompany Dividend. On or before the date immediately prior to the
Closing Date, subject to compliance with applicable law, the receipt of all
necessary approvals, and the satisfaction (or waiver) of all of the conditions
to the Closing that are capable of being satisfied prior to the Closing Date,
the Company shall use all reasonable efforts to cause Home Beneficial Life
Insurance Company to pay a dividend of at least $250 million to the Company,
such dividend to be paid in the form of a demand promissory note, or such
other form as to which the parties may mutually agree. If such dividend is
less than $250 million, the Per Share Amount and the Cash Consideration shall
be reduced by the "Dividend Adjustment." The Dividend Adjustment shall equal a
number of cents per share equal to 100 multiplied by the product of (a) 0.0378
multiplied by (b) the difference between $250 million and the actual amount of
the dividend paid to the Company pursuant to this paragraph (e) divided by (c)
the number of outstanding Shares. For example, based on 17,053,570 shares of
Company Common Stock outstanding as of the date of this Agreement, for each $1
million increment by which the dividend paid pursuant to this paragraph (e) is
less than $250 million, the Dividend Adjustment would result in a reduction in
the Cash Consideration and the Per Share Amount of $0.0022 per share of
Company Common Stock.
(f) Certain Definitions. Whenever used in this Plan of Merger, the following
terms shall have the respective meanings given to them below:
"Closing Date" shall mean the sixth business day after the later of the
date of notice by the Company to Purchaser and Sub and the date of notice
from the Purchaser and Sub to the Company that such party's or parties'
obligation to effect the Merger have been satisfied.
"Exchange Agent" shall mean a bank or trust company designated by
Purchaser (or such other person or persons as shall be reasonably
acceptable to Purchaser and the Company) to act as exchange agent.
"Purchaser Subsidiary" shall mean each subsidiary of Purchaser.
6. Termination and Abandonment. Prior to the Effective Time, this Plan of
Merger shall terminate and be abandoned upon a termination of the Agreement,
notwithstanding approval of this Plan of Merger by the shareholders of the
Company and Sub.
5
<PAGE>
7. Amendment. At any time before the Effective Time, this Plan of Merger may
be amended, provided that (i) any such amendment is approved by the Boards of
Directors of the Company, Purchaser and Sub; and (ii) no such amendment made
subsequent to the submission of this Plan of Merger to the shareholders of the
Company and Sub shall have any of the effects specified in Section 13.1-718.I
of the VSCA or the applicable provision, if any, in the MGBC without the
approval of the shareholders affected thereby.
6
<PAGE>
EXHIBIT B
FORM OF AFFILIATE AGREEMENT
, 1997
American General Corporation
2929 Allen Parkway
Houston, TX 77019-2155
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of Home Beneficial Corporation,
a Virginia corporation (the "Company"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act").
Pursuant to the terms of the Agreement and Plan of Merger, dated as of
December 22, 1996, and amended as of January 22, 1997 and as of March 3, 1997
(as so amended, the "Agreement"), by and among the Company, American General
Corporation, a Texas corporation ("Parent"), and AGC Life Insurance Company, a
Missouri corporation and a wholly owned subsidiary of Parent ("Sub"), the
Company will be merged with and into Sub (the "Merger").
As a result of the Merger, the undersigned may receive shares of common
stock, par value $.50 per share, of Parent (the "Parent Stock") in exchange
for shares of Class A Common Stock (Voting), par value $0.3125 per share, of
the Company and/or shares of Class B Common Stock (Non-Voting), par value
$0.3125 per share, of the Company.
The undersigned represents, warrants, and agrees to Parent that in the event
the undersigned receives any Parent Stock as a result of the Merger:
A. The undersigned shall not make any sale, transfer, or other
disposition of such Parent Stock in violation of the Act or the Rules and
Regulations.
B. The undersigned has carefully read this letter and the Agreement and
discussed the requirements of such documents and other applicable
limitations upon the undersigned's ability to sell, transfer, or otherwise
dispose of the Parent Stock, to the extent the undersigned has considered
necessary, with counsel for the undersigned or counsel for the Company.
C. The undersigned has been advised that the issuance of the Parent Stock
to the undersigned pursuant to the Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However,
the undersigned has also been advised that, because at the time the Merger
was submitted for a vote of the stockholders of the Company the undersigned
may be deemed to have been an "affiliate" of the Company and the
distribution by the undersigned of the Parent Stock has not been registered
under the Act, the undersigned may not sell, transfer or otherwise dispose
of the Parent Stock issued to the undersigned in the Merger unless (i) such
sale, transfer, or other disposition has been registered under the Act,
(ii) such sale, transfer, or other disposition is made in conformity with
the provisions of Rule 145 promulgated by the Commission under the Act, or
(iii) in the opinion of counsel reasonably acceptable to Parent, or a "no
action" letter obtained by the undersigned from the staff of the
Commission, such sale, transfer, or other disposition is otherwise exempt
from registration under the Act.
D. The undersigned understands that Parent is under no obligation to
register the sale, transfer, or other disposition of the Parent Stock by
the undersigned or on behalf of the undersigned under the Act or to take
any other action necessary in order to make compliance with an exemption
from such registration available.
E. The undersigned also understands that stop transfer instructions will
be given to Parent's transfer agent with respect to the Parent Stock and
that there will be placed on the certificates for the Parent Stock issued
to the undersigned, or any substitutions therefor, a legend stating in
substance:
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT, DATED , 1997, BETWEEN THE
REGISTERED HOLDER HEREOF AND AMERICAN GENERAL CORPORATION, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF AMERICAN GENERAL
CORPORATION."
F. The undersigned also understands that unless the transfer by the
undersigned of its Parent Stock has been registered under the Act or is a
sale made in conformity with the provisions of Rule 145, Parent reserves
the right to put the following legend on the certificates issued to the
transferee of the undersigned:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED
SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER
NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
It is understood and agreed that the legends set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or the
Agreement.
Execution of this letter should not be considered an admission on the part
of the undersigned that the undersigned is an "affiliate" of the Company as
described in the first paragraph of this letter or as a waiver of any rights
the undersigned may have to object to any claim that the undersigned is such
an affiliate on or after the date of this letter.
Very truly yours,
Accepted this day of , 1997
By: _________________________________
Name:
Title:
2
<PAGE>
EXHIBIT C
FORM OF TAX REPRESENTATION LETTER
, 1997
Home Beneficial Corporation
3901 West Broad Street
Richmond, Virginia 23230
American General Corporation
2929 Allen Parkway
Houston, Texas 77019-2155
Ladies and Gentlemen:
I am the owner of shares of Class A Common Stock, par value $0.3125 per
share and shares of Class B Common Stock, par value $0.3125 per share of
Home Beneficial Corporation (the "Company").
I am furnishing the representations and undertaking set forth below in
connection with the proposed merger (the "Merger") of the Company with and
into AGC Life Insurance Company (the "Sub"), a wholly owned subsidiary of
American General Corporation (the "Purchaser"), pursuant to the Agreement and
Plan of Merger by and among the Purchaser, Sub and the Company, dated as of
December 22, 1996, and as amended as of January 22, 1997 and as of March 3,
1997 (as so amended, the "Merger Agreement"). I am familiar with the terms and
conditions of the Merger Agreement. I understand that (i) each of you will
rely on the representations set forth below in furnishing representation
letters that Debevoise & Plimpton and Skadden, Arps, Slate, Meagher & Flom LLP
will rely on in delivering their opinions regarding the federal income tax
consequences of the Merger, as required under the Merger Agreement, and (ii)
the representations and undertaking recited herein will survive the Merger. I
hereby commit to inform each of you if, for any reason, any of the
representations set forth herein cease to be true before the effective time of
the Merger.
Except as set forth on Annex A hereto, I have not sold, exchanged or
otherwise disposed (including, without limitation, any option, pledge, short
sale or other arrangement which would substantially eliminate my risk of loss
and opportunity for gain) of any or all of my shares of common stock of the
Company since December , 1996. I will inform the Company on the deadline
for electing to receive cash or shares of Purchaser if I sell, exchange or
otherwise dispose of any or all of my shares of common stock of the Company
between the date hereof and the date of such notice. I will also inform the
Company if I sell, exchange or otherwise dispose of any or all of my shares
between the date of such notice and the closing date of the Merger.
I have no plan, intention or arrangement to sell, exchange or otherwise
dispose (including, without limitation, any option, pledge, short sale or
other arrangement which would substantially eliminate my risk of loss and
opportunity for gain) of any or all of the shares of Purchaser that I receive
in the Merger. While I retain the right to so sell, exchange or otherwise
dispose of any or all such shares following the Merger, any decision to do so
will be based on my investment needs and the market conditions at the time of
such disposition and will not be related to the Merger.
Sincerely yours,
<PAGE>
ANNEX B
- --------------------------------------------------------------------------------
[LETTERHEAD OF GOLDMAN SACHS APPEARS HERE]
- --------------------------------------------------------------------------------
PERSONAL AND CONFIDENTIAL
March , 1997
Board of Directors
Home Beneficial Corporation
3901 West Broad Street
Richmond, VA 23230
Re: Registration Statement of American General relating to shares of common
stock, par value $0.50 per share, of American General
Ladies and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Voting and Non-Voting Common Stock, par value $0.3125 per
share (the "Shares"), of Home Beneficial Corporation (the "Company") of the
Consideration (as defined below) to be received for the Shares pursuant to the
Agreement and Plan of Merger dated as of December 22, 1996, as amended, by and
among American General Corporation ("American General"), AGC Life Insurance
Company, a wholly-owned subsidiary of American General ("Sub"), and the Company
(the "Agreement"). Pursuant to the Agreement, the Company will be merged with
and into Sub (the "Merger"), and each outstanding Share will be converted into
a number of shares (the "Stock Consideration") of Common Stock, par value $0.50
per share, of American General ("Purchaser Common Stock") calculated by
dividing (x) $39.00 by (y) the average of the high and low sales prices,
regular way, per share of Purchaser Common Stock as reported in The Wall Street
Journal during the ten consecutive New York Stock Exchange ("NYSE") trading
days (each a "Trading Day") ending on (and including) the fifth Trading Day
prior to the effective time of the Merger (the "Trading Average"); provided,
however, that if the Trading Average is less than $35.00, then the Average
Purchaser Price (as defined in the Agreement) shall be $35.00. Holders of
Shares may elect, with respect to all or a portion of their Shares, to convert
such Shares into the right to receive $39.00 per Share in cash (the "Cash
Consideration"), subject to certain procedures and limitations contained in the
Agreement, as to which procedures and limitations we are expressing no opinion.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We have also provided certain investment banking services to
American General from time to time, including having acted as lead underwriter
in connection with several public and private offerings of securities in recent
years, including a private placement of 7.57% Capital Securities issued by an
affiliate of
B-1
<PAGE>
American General on November 29, 1996 and a public offering of 6.00%
Convertible Monthly Income Preferred Securities issued by an affiliate of
American General on May 24, 1995, and may provide investment banking services
to American General in the future. Goldman, Sachs & Co. is a full-service
securities firm and in the normal course of its trading activities, the Firm
accumulated a long position of 3,989 shares of Purchaser Common Stock.
In connection with this opinion, we have reviewed, among other things, the
Registration Statement on Form S-4 of American General dated March 18, 1997;
the Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K
of the Company for the five years ended December 31, 1996 and of American
General for the five years ended December 31, 1995; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and of American
General; a Current Report on Form 8-K of American General dated February 21,
1997; annual statutory statements for the two years ended December 31, 1995,
for the Company's insurance subsidiary and for certain of American General's
insurance subsidiaries; certain other communications from the Company and
American General to their respective stockholders; the actuarial appraisal as
of June 30, 1996, of the Home Beneficial Life Insurance Company prepared by a
nationally recognized actuarial firm (the "Appraisal"), and certain internal
financial analyses for the Company prepared by its management. We also have
held discussions with members of the senior management of the Company and
American General regarding the past and current business operations, financial
condition and future prospects of their respective companies. In addition, we
have reviewed the reported price and trading activity for the Shares and for
the Purchaser Common Stock, compared certain financial and stock market
information for the Company and for American General with similar information
for certain other companies the securities of which are publicly traded,
reviewed the financial terms of certain recent business combinations and
performed such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. As you are aware, American General did not make
available to us its projections of expected future performance. Accordingly,
we note that our review of such information for purposes of rendering our
opinion was limited to discussions with management of American General of
analysts' estimates for 1997. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or
American General or any of their respective subsidiaries and, except for the
Appraisal referred to in the third paragraph of this opinion, we have not been
furnished with any such evaluation or appraisal. We are aware that the Company
received, prior to entering into the Agreement, an indication of interest from
another party expressing willingness, subject to due diligence and other
contingencies, to pay a possible purchase price in excess of the
Consideration. We further understand that in evaluating such indication of
interest the Board of Directors of the Company took into consideration, among
other things, various material uncertainties relating to the likelihood of the
Company and such other party reaching an agreement in a timely fashion at the
high end of the range of prices discussed with such party. Our advisory
services and the opinion expressed herein are provided for the information and
assistance of the Board of Directors of the Company in connection with its
consideration of the transaction contemplated by the Agreement and such
opinion does not constitute a recommendation as to how any holder of Shares
should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Consideration to be received by the holders of Shares pursuant to the
Agreement is fair to holders of Shares receiving such Consideration.
Very truly yours,
B-2
<PAGE>
ANNEX C
ARTICLE 15 OF THE VIRGINIA STOCK CORPORATION ACT
DISSENTERS' RIGHTS
(S) 13.1-729. DEFINITIONS. In this article:
"Corporation" means the issuer of the shares held by a dissenter before the
corporate action, except that (i) with respect to a merger, "corporation"
means the surviving domestic or foreign corporation or limited liability
company by merger of that issuer, and (ii) with respect to a share exchange,
"corporation" means the acquiring corporation by share exchange, rather than
the issuer, if the plan of share exchange places the responsibility for
dissenters' rights on the acquiring corporation.
"Dissenter" means a shareholder who is entitled to dissent from corporate
action under (S) 13.1-730 and who exercises that right when and in the manner
required by (S)(S) 13.1-732 through 13.1-739.
"Fair value," with respect to a dissenter's shares, means the value of the
shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
"Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
"Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent
of the rights granted by a nominee certificate on file with a corporation.
"Beneficial shareholder" means the person who is a beneficial owner of
shares held by a nominee as the record shareholder.
"Shareholder" means the record shareholder or the beneficial shareholder.
(Last amended 1992, c. 575.)
(S) 13.1-730. RIGHT TO DISSENT. A. A Shareholder is entitled to dissent
from, and obtain payment of the fair value of his shares in the event of, any
of the following corporate actions:
1. Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by (S) 13.1-718 or
the articles of incorporation and the shareholder is entitled to vote on
the merger or (ii) if the corporation is a subsidiary that is merged with
its parent under (S)13.1-719;
2. Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan;
3. Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation if the shareholder was entitled to vote on
the sale or exchange or if the sale or exchange was in furtherance of a
dissolution on which the shareholder was entitled to vote, provided that
such dissenter's rights shall not apply in the case of (i) a sale or
exchange pursuant to court order, or (ii) a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within one year after the date of sale;
4. Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares under
this article may not challenge the corporate action creating his entitlement
unless the action is unlawful or fraudulent with respect to the shareholder or
the corporation.
<PAGE>
C. Notwithstanding any other provision of this article, with respect to a
plan of merger or share exchange or a sale or exchange of property there shall
be no right of dissent in favor of holders of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at the meeting at which the plan of merger or
share exchange or the sale or exchange of property is to be acted on, were (i)
listed on a national securities exchange or on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) or (ii) held by at
least 2,000 record shareholders, unless in either case:
1. The articles of incorporation of the corporation issuing such shares
provide otherwise;
2. In the case of a plan of merger or share exchange, the holders of the
class or series are required under the plan of merger or share exchange to
accept such shares anything except:
a. Cash;
b. Shares or membership interests, or shares or membership interests
and cash in lieu of fractional shares (i) of the surviving or acquiring
corporation or limited liability company or (ii) of any other
corporation or limited liability company which, at the record date
fixed to determine the shareholders entitled to receive notice of and
to vote at the meeting at which the plan of merger or share exchange is
to be acted on, were either listed subject to notice of issuance on a
national securities exchange or held of record by at least 2,000 record
shareholders or members; or
c. A combination of cash and shares or membership interests as set
forth in subdivisions 2a and 2b of this subsection; or
3. The transaction to be voted on is an "affiliated transaction" and is
not approved by a majority of "disinterested directors" as such terms are
defined in (S) 13.1-725.
D. The right of a dissenting shareholder to obtain payment of the fair value
of his shares shall terminate upon the occurrence of any one of the following
events:
1. The proposed corporate action is abandoned or rescinded;
2. A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
3. His demand for payment is withdrawn with the written consent of the
corporation. (Last amended 1996, c. 246.)
(S) 13.1-731. DISSENT BY NOMINEES AND BENEFICIAL OWNERS. A. A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing
of the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered
in the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held
on his behalf only if:
1. He submits to the corporation the record shareholder's written consent
to the dissent not later than the time the beneficial shareholder asserts
dissenters' rights; and
2. He does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote. (Last amended
1985, c. 522.)
(S) 13.1-732. NOTICE OF DISSENTERS' RIGHTS. A. If proposed corporate action
creating dissenters' rights under (S) 13.1-730 is submitted to a vote at a
shareholders' meeting, the meeting notice shall state that shareholders are or
may be entitled to assert dissenters' rights under this article and be
accompanied by a copy of this article.
B. If corporate action creating dissenters' rights under (S) 13.1-730 is
taken without a vote of shareholders, the corporation, during the ten-day
period after the effectuation of such corporate action, shall notify in
writing all record shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in (S) 13.1-
734. (Last amended 1985, c. 522.)
C-2
<PAGE>
(S) 13.1-733. NOTICE OF INTENT TO DEMAND PAYMENT. A. If proposed corporate
action creating dissenters' rights under (S) 13.1-730 is submitted to a vote
at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights (i) shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action
is effectuated and (ii) shall not vote such shares in favor of the proposed
action.
B. A shareholder who does not satisfy the requirements of subsection A of
this section is not entitled to payment for his shares under this article.
(Last amended 1985, c. 522.)
(S) 13.1-734. DISSENTERS' NOTICE. A. If proposed corporate action creating
dissenters' rights under (S) 13.1-730 is authorized at a shareholders'
meeting, the corporation, during the ten-day period after the effectuation of
such corporate action, shall deliver a dissenters' notice in writing to all
shareholders who satisfied the requirements of (S) 13.1-733.
B. The dissenters' notice shall:
1. State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
2. Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
3. Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before or after that date;
4. Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the
date of delivery of the dissenters' notice; and
5. Be accompanied by a copy of this article. (Last amended 1985, c. 522.)
(S) 13.1-735. DUTY TO DEMAND PAYMENT. A. A shareholder sent a dissenters'
notice described in (S) 13.1-734 shall demand payment, certify that he
acquired beneficial ownership of the shares before or after the date required
to be set forth in the dissenters' notice pursuant to subdivision 3 of
subsection B of (S) 13.1-734, and, in the case of certificated shares, deposit
his certificates in accordance with the terms of the notice.
B. The shareholder who deposits his shares pursuant to subsection A of this
section retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporate
action.
C. A shareholder who does not demand payment and deposits his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this article. (Last amended
1985, c. 522.)
(S) 13.1-736. SHARE RESTRICTIONS. A. The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment
is received.
B. The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder except to the extent that
these rights are canceled or modified by the taking of the proposed corporate
action. (Last amended 1985, c. 522.)
(S) 13.1-737. PAYMENT. A. Except as provided in (S) 13.1-738, within thirty
days after the receipt of a payment demand made pursuant to (S)13.1-735, the
corporation shall pay the dissenter the amount the corporation estimates to be
the fair value of his shares, plus accrued interest. The obligation of the
corporation under this paragraph may be enforced (i) by the circuit court in
the city or county where the corporation's principal office
C-3
<PAGE>
is located, or, if none in this Commonwealth, where its registered office is
located or (ii) at the election of any dissenter residing or having its
principal office in the Commonwealth, by the circuit court in the city or
county where the dissenter resides or has its principal office. The court
shall dispose of the complaint on an expedited basis.
B. The payment shall be accompanied by:
1. The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen months before the effective date of the corporate
action creating dissenters' rights, an income statement for that year, a
statement of changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
2. An explanation of how the corporation estimated the fair value of the
shares and of how the interest was calculated;
3. A statement of the dissenters' right to demand payment under (S) 13.1-
739; and
4. A copy of this article. (Last amended 1985, c. 522.)
(S) 13.1-738. AFTER-ACQUIRED SHARES. A. A corporation may elect to withhold
payment required by (S) 13.1-737 from a dissenter unless he was the beneficial
owner of the shares on the date of the first publication by news media or the
first announcement to shareholders generally, whichever is earlier, of the
terms of the proposed corporate action, as set forth in the dissenters'
notice.
B. To the extent the corporation elects to withhold payment under subsection
A of this section, after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall offer
to pay this amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares and of how the
interest was calculated, and a statement of the dissenter's right to demand
payment under (S) 13.1-739. (Last amended 1985, c. 522.)
(S) 13.1-739. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER. A. A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of interest due, and
demand payment of his estimate (less any payment under (S) 13.1-737), or
reject the corporation's offer under (S) 13.1-738 and demand payment of the
fair value of his shares and interest due, if the dissenter believes that the
amount paid under (S) 13.1-737 or offered under (S) 13.1-738 is less than the
fair value of his shares or that the interest due is incorrectly calculated.
B. A dissenter waives his right to demand payment under this section unless
he notifies the corporation of his demand in writing under subsection A of
this section within thirty days after the corporation made or offered payment
for his shares. (Last amended 1985, c. 522.)
(S) 13.1-740. COURT ACTION. A. If a demand for payment under (S) 13.1-739
remains unsettled, the corporation shall commence a proceeding within sixty
days after receiving the payment demand and petition the circuit court in the
city or county described in subsection B of this section to determine the fair
value of the shares and accrued interest. If the corporation does not commence
the proceeding within the sixty-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
B. The corporation shall commence the proceeding in the city or county where
its principal office is located, or, if none in this Commonwealth, where its
registered office is located. If the corporation is a foreign corporation
without a registered office in this Commonwealth, it shall commence the
proceeding in the city or county in this Commonwealth where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.
C. The corporation shall make all dissenters, whether or not residents of
this Commonwealth, whose demands remain unsettled parties to the proceeding as
in an action against their shares and all parties shall be
C-4
<PAGE>
served with a copy of the petition. Nonresidents may be served by registered
or certified mail or by publication as provided by law.
D. The corporation may join as a party to the proceeding any shareholder who
claims to be a dissenter but who has not, in the opinion of the corporation,
complied with the provisions of this article. If the court determines that
such shareholder has not complied with the provisions of this article, he
shall be dismissed as a party.
E. The jurisdiction of the court in which the proceeding is commenced under
subsection B of this section is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend a decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
F. Each dissenter made a party to the proceeding is entitled to judgment (i)
for the amount, if any, by which the court finds fair value of his shares,
plus interest, exceeds the amount paid by the corporation or (ii) for the fair
value, plus accrued interest, of his after-acquired shares for which the
corporation elected to withhold payment under (S) 13.1-738. (Last amended
1985, c. 522.)
(S) 13.1-741. COURT COSTS AND COUNSEL FEES. A. The court in an appraisal
proceeding commenced under (S) 13.1-740 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters did not act in good faith in demanding payment under (S)
13.1-739.
B. The court may also assess the reasonable fees and expenses of experts,
excluding those of counsel, for the respective parties, in amounts the court
finds equitable:
1. Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of (S)(S) 13.1-732 through 13.1-739; or
2. Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed did not act in good faith with respect to the rights provided
by this article.
C. If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
D. In a proceeding commenced under subsection A of (S) 13.1-737 the court
shall assess the costs against the corporation, except that the court may
asses costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court
finds that such parties did not act in good faith in instituting the
proceeding. (Last amended 1985, c. 522.)
C-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 2.02-1 of the Texas Business Corporation Act contains detailed
provisions with respect to indemnification of directors and officers of a
Texas corporation against reasonable expenses actually incurred in connection
with certain legal proceedings.
Article VI of the American General Bylaws sets forth certain rights of the
Registrant's officers and directors to indemnification. The American General
Bylaws, as in effect on the date hereof, are incorporated by reference herein
as Exhibit 4(b).
The American General Restated Articles of Incorporation provide that, with
certain specified exceptions, a director of the Registrant will not be liable
to the corporation for monetary damages for an act or omission in the
director's capacity as a director. Reference is made to the American General
Restated Articles of Incorporation filed as Exhibit 4(a) hereto.
The Registrant has placed in effect insurance coverage which purports (a) to
insure it against certain costs of indemnification which may be incurred by it
pursuant to the aforementioned bylaw provisions or otherwise, and (b) to
insure the officers and directors of the Registrant and of its specified
subsidiaries against certain liabilities incurred by them in the discharge of
their functions as officers and directors except for liabilities arising from
their own malfeasance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*2 Agreement and Plan of Merger by and among the Registrant, AGC Life
Insurance Company and Home Beneficial Corporation, dated as of
December 22, 1996 and amended as of January 22, 1997 and March 3,
1997 (included as Annex A to the Proxy Statement/Prospectus in Part I
of this Registration Statement).
3(a) Restated Articles of Incorporation of the Registrant (including
Statement of Resolution Establishing Series of Shares of Series A
Junior Participating Preferred Stock) (incorporated by reference to
Exhibit 4.1 to Registration Statement No. 33-33115 filed by the
Registrant).
3(b) Amended and Restated Bylaws of the Registrant (incorporated by
reference to Exhibit 3.2 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993).
4(a) Specimen Stock Certificate for American General Common Stock
(incorporated by reference to Exhibit 4 to Form 8-B filed by the
Registrant on June 26, 1980).
4(b) Rights Agreement dated as of July 27, 1989, as amended by the First
Amendment thereto dated as of October 26, 1992, by and between the
Registrant and First Chicago Trust Company of New York, as Rights
Agent (incorporated by reference to Exhibit 4 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1989,
and to Exhibit 19 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1992, respectively).
*5 Opinion and Consent of Susan A. Jacobs, Associate General Counsel of
American General, with respect to the legality of securities to be
issued in the Merger.
*8(a) Form of Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom
LLP, with respect to the consequences of the Merger contained in the
Proxy Statement/Prospectus.
*8(b) Form of Opinion and Consent of Debevoise & Plimpton, with respect to
the consequences of the Merger contained in the Proxy
Statement/Prospectus.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*12 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock Dividends.
*23(a) Consent of Susan A. Jacobs, Associate General Counsel of American
General (contained in her opinion in Exhibit 5).
*23(b) Consent of Skadden, Arps, Slate, Meagher & Flom LLP (contained in
their opinion on the tax consequences of the Merger contained in the
Proxy Statement/Prospectus in Exhibit 8(a)).
*23(c) Consent of Debevoise & Plimpton (contained in their opinion on the
tax consequences of the Merger contained in the Proxy
Statement/Prospectus in Exhibit 8(b)).
*23(d) Consents of Ernst & Young LLP.
*23(e) Consent of Goldman, Sachs & Co.
*24 Powers of Attorney: Robert M. Devlin, J. Evans Attwell, Brady F.
Carruth, W. Lipscomb Davis, Jr., James S. D'Agostino, Jr., Harold S.
Hook, Larry D. Horner, Richard J.V. Johnson, Jon P. Newton, Robert E.
Smittcamp and Anne W. Tatlock.
*99(a) Forms of Proxy of Home Beneficial Corporation (relating to the
special meeting of shareholders of Home Beneficial Corporation
described in the Proxy Statement/Prospectus in Part I of this
Registration Statement).
*99(b) Form of Election/Letter of Transmittal.
*99(c) Form of Notice of Guaranteed Delivery.
*99(d) Form of Letter to Clients.
*99(e) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and other Nominees.
</TABLE>
- --------
* Filed Herewith
** To Be Filed By Amendment
(b) Financial Statement Schedules
Not Applicable.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus (i) that is filed pursuant to the immediately
preceding paragraph or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the
Registration Statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 20 above or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(8) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when it
became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON,
STATE OF TEXAS, ON MARCH 18, 1997.
AMERICAN GENERAL CORPORATION
By: /s/ Robert M. Devlin
-----------------------------------
Robert M. Devlin
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert M. Devlin President, Chief Executive March 18, 1997
- ------------------------------------ Officer and Director
(Robert M. Devlin) (Principal Executive
Officer)
/s/ Carl J. Santillo Senior Vice President-- March 18, 1997
- ------------------------------------ Finance (Principal Financial
(Carl J. Santillo) Officer)
/s/ Pamela J. Penny Vice President and March 18, 1997
- ------------------------------------ Controller (Principal
(Pamela J. Penny) Accounting Officer)
J. Evans Attwell* Director March 18, 1997
- ------------------------------------
(J. Evans Attwell)
Brady F. Carruth* Director March 18, 1997
- ------------------------------------
(Brady F. Carruth)
James S. D'Agostino, Jr.* Director March 18, 1997
- ------------------------------------
(James S. D'Agostino, Jr.)
W. Lipscomb Davis, Jr.* Director March 18, 1997
- ------------------------------------
(W. Lipscomb Davis, Jr.)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Harold S. Hook* Director March 18, 1997
- ------------------------------------
(Harold S. Hook)
Larry D. Horner* Director March 18, 1997
- ------------------------------------
(Larry D. Horner)
Richard J.V. Johnson* Director March 18, 1997
- ------------------------------------
(Richard J.V. Johnson)
/s/ Jon P. Newton Director March 18, 1997
- ------------------------------------
(Jon P. Newton)
Robert E. Smittcamp* Director March 18, 1997
- ------------------------------------
(Robert E. Smittcamp)
Anne M. Tatlock* Director March 18, 1997
- ------------------------------------
(Anne M. Tatlock)
*By: /s/ Jon P. Newton March 18, 1997
--------------------------------
Jon P. Newton
(Attorney-in-fact)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
*2 Agreement and Plan of Merger by and among the Registrant,
AGC Life Insurance Company and Home Beneficial Corporation,
dated as of December 22, 1996 and amended as of January 22,
1997 and March 3, 1997 (included as Annex A to the Proxy
Statement/Prospectus in Part I of this Registration
Statement).
3(a) Restated Articles of Incorporation of the Registrant
(including Statement of Resolution Establishing Series of
Shares of Series A Junior Participating Preferred Stock)
(incorporated by reference to Exhibit 4.1 to Registration
Statement No. 33-33115 filed by the Registrant).
3(b) Amended and Restated Bylaws of the Registrant (incorporated
by reference to Exhibit 3.2 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993).
4(a) Specimen Stock Certificate for American General Common Stock
(incorporated by reference to Exhibit 4 to Form 8-B filed by
the Registrant on June 26, 1980).
4(b) Rights Agreement dated as of July 27, 1989, as amended by
the First Amendment thereto dated as of October 26, 1992, by
and between the Registrant and First Chicago Trust Company
of New York, as Rights Agent (incorporated by reference to
Exhibit 4 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1989, and to Exhibit 19 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992, respectively).
*5 Opinion and Consent of Susan A. Jacobs, Associate General
Counsel of American General, with respect to the legality of
securities to be issued in the Merger.
*8(a) Form of Opinion and Consent of Skadden, Arps, Slate, Meagher
& Flom LLP, with respect to the consequences of the Merger
contained in the Proxy Statement/Prospectus.
*8(b) Form of Opinion and Consent of Debevoise & Plimpton, with
respect to the consequences of the Merger contained in the
Proxy Statement/Prospectus.
*12 Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
*23(a) Consent of Susan A. Jacobs, Associate General Counsel of
American General (contained in her opinion in Exhibit 5).
*23(b) Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(contained in their opinion on the tax consequences of the
Merger contained in the Proxy Statement/Prospectus in
Exhibit 8(a)).
*23(c) Consent of Debevoise & Plimpton (contained in their opinion
on the tax consequences of the Merger contained in the Proxy
Statement/Prospectus in Exhibit 8(b)).
*23(d) Consents of Ernst & Young LLP.
*23(e) Consent of Goldman, Sachs & Co.
*24 Powers of Attorney: Robert M. Devlin, J. Evans Attwell,
Brady F. Carruth, W. Lipscomb Davis, Jr., James S.
D'Agostino, Jr., Harold S. Hook, Larry D. Horner, Richard
J.V. Johnson, Jon P. Newton, Robert E. Smittcamp and Anne W.
Tatlock.
*99(a) Forms of Proxy of Home Beneficial Corporation (relating to
the special meeting of shareholders of Home Beneficial
Corporation described in the Proxy Statement/Prospectus in
Part I of this Registration Statement).
*99(b) Form of Election/Letter of Transmittal.
*99(c) Form of Notice of Guaranteed Delivery.
*99(d) Form of Letter to Clients.
*99(e) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
</TABLE>
- --------
* Filed Herewith
** To Be Filed By Amendment
<PAGE>
Exhibit 5
American General Corporation
2929 Allen Parkway
Houston, Texas 77019
March 18, 1997
I have acted as counsel to American General Corporation, a Texas
corporation (the "Company") in connection with the acquisition by the Company of
Home Beneficial Corporation ("Home Beneficial") pursuant to the Agreement and
Plan of Merger (the "Merger Agreement") dated as of December 22, 1996, amended
as of January 22, 1997 and March 3, 1997, among the Company, AGC Life Insurance
Company and Home Beneficial. The Company has prepared a Registration Statement
on Form S-4 (the "Registration Statement") to be filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933, as amended (the "Act"), which Registration Statement relates to the
proposed issuance by the Company of certain shares of the Company's Common
Stock, par value $.50 per share (the "Shares") (together with the attached
Preferred Share Purchase Rights, "Common Stock"), pursuant to the Merger
Agreement.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Act.
In connection with rendering this opinion, I have examined and am familiar
with originals or copies, certified or otherwise identified to my satisfaction,
of such documents as I have deemed necessary or appropriate as a basis for the
opinion set forth herein, including, without limitation, (i) the Registration
Statement, including the Proxy Statement/Prospectus; (ii) the Restated Articles
of Incorporation of the Company; (iii) the Amended and Restated Bylaws of the
Company; (iv) the Rights Agreement dated as of July 27, 1989, as amended by the
First Amendment thereto dated as of October 26, 1992, by and between the Company
and First Chicago Trust Company of New York, as Rights Agent; (v) the Merger
Agreement; (vi) resolutions of the Board of Directors of the Company relating to
the transactions contemplated by the Regis-
<PAGE>
American General Corporation
Page 2
March 18, 1997
tration Statement; (vii) a specimen certificate evidencing the Common Stock; and
(viii) such other certificates, instruments and documents as I considered
necessary or appropriate for the purposes of this opinion.
As to any facts material to the opinions expressed herein which I have not
independently established or verified, I have relied upon statements and
representations of certain public officials, officers and other representatives
of the Company, and others.
For purposes of this opinion, I have assumed that prior to the issuance of
any of the Shares (i) the Registration Statement, as finally amended (including
all necessary post-effective amendments), will be effective; (ii) the Merger
Agreement will be approved by the Home Beneficial stockholders; (iii) the
Articles of Merger, which will give effect to the Merger, will be properly filed
with the Virginia State Corporation Commission and the Secretary of State of the
State of Missouri; (iv) the transactions contemplated by the Merger Agreement
will be consummated; and (v) the certificates representing the Shares will be
manually signed by an authorized officer of the transfer agent for the Common
Stock and will be registered by the registrar for the Common Stock and will
conform to the specimen thereof examined by me.
I am admitted to the bar in the State of Texas, and I do not express any
opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing and the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the opinion
that when the conditions to the Merger set forth in the Merger Agreement have
been satisfied and the Merger has been effected in accordance therewith, the
Shares issued in exchange for shares of capital stock of Home Beneficial
pursuant to the Merger will be validly issued, fully paid and non-assessable.
2
<PAGE>
American General Corporation
Page 3
March 18, 1997
I hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. I also consent to the reference to my
name under the caption "Legal Matters" in the Proxy Statement/Prospectus forming
a part of the Registration Statement. In giving this consent, I do not thereby
admit that I am included in the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
/s/ SUSAN A. JACOBS
Susan A. Jacobs
Associate General Counsel
3
<PAGE>
Exhibit 8(A)
[Skadden, Arps, Slate, Meagher & Flom LLP letterhead]
March __, 1997
American General Corporation
2929 Allen Parkway
Houston, TX 77019
Dear Ladies and Gentlemen:
We are acting as special counsel to American General Corporation, a
Texas corporation ("AGC"), in connection with filing with the United States
Securities and Exchange Commission (the "Commission") of the Proxy Statement and
Prospectus (the Proxy Statement/Prospectus") relating to the proposed merger
(the "Merger") of Home Beneficial Corporation, a Virginia Corporation ("Home
Beneficial"), with and into AGC Life Insurance Company, a Missouri Corporation
and wholly owned subsidiary of AGC ("AGC Life"), pursuant to the Agreement and
Plan of Merger dated as of December 22, 1996 and amended as of January 22, 1997
and March 3, 1997, among AGC, AGC Life and Home Beneficial.
We hereby confirm, in all material respects, the opinions set forth in
the Proxy Statement/Prospectus under the heading "THE PROPOSED MERGER -- Certain
Federal Income Tax Consequences of the Merger" (the "Tax Summary") and that,
subject to the limitations and assumptions set forth therein, the Tax Summary is
a fair and accurate summary of the matters addressed therein, based upon current
law.
This opinion is limited to federal law of the United States and
administrative rulings of the Internal Revenue Service as in effect on the date
hereof. We have no obligation to advise you or any other person of changes in
law or in the administrative rulings of the Internal Revenue Service that occur
after the date hereof.
<PAGE>
American General Corporation
March ___, 1997
Page 2
This opinion is furnished to you solely for your benefit in connection
with the filing of the Proxy Statement/Prospectus and, except as set forth
below, is not to be used, circulated, quoted or otherwise referred to for any
purpose without our prior written consent. We consent to the use of our name in
the Tax Summary and to the filing of this opinion with the Commission as an
exhibit to the Proxy Statement/Prospectus. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Commission promulgated thereunder.
Very truly yours,
<PAGE>
Exhibit 8(B)
March 18, 1997
Home Beneficial Corporation
3901 West Broad Street
Richmond, Virginia 23261
To Those Concerned:
We are acting as your special counsel in connection with the filing with
the Securities and Exchange Commission of your Notice of Special Meeting of
Shareholders and Proxy Statement (the "Proxy Statement") relating to the
proposed merger (the "Merger") of Home Beneficial Corporation, a Virginia
corporation ("Home Beneficial"), with and into AGC Life Insurance Company ("AGC
Life"), a Missouri corporation and wholly owned subsidiary of American General
Corporation, a Texas corporation ("American General"), pursuant to the Agreement
and Plan of Merger, dated as of December 22, 1996, and amended as of January 22,
1997 and as of March 3, 1997, by and among Home Beneficial, AGC Life and
American General.
<PAGE>
Home Beneficial 2 March 18, 1997
Corporation
We hereby confirm our opinion as set forth in the Proxy Statement under the
heading "THE PROPOSED MERGER -- Certain Federal Income Tax Consequences of the
Merger."
This opinion is limited to the federal law of the United States and
administrative rulings of the Internal Revenue Service as in effect on the date
hereof. We have no obligation to advise you or any other person of changes in
law or in the administrative rulings of the Internal Revenue Service that occur
after the date hereof.
We are delivering this opinion to you, and without our prior written
consent, no other persons are entitled to rely on this opinion. We hereby
consent to the filing of this opinion as an exhibit to the Proxy Statement and
to the use of our name under the heading "THE PROPOSED MERGER -- Certain Federal
Income Tax Consequences of the Merger" in the Proxy Statement. In giving such
consent, we do not thereby concede that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended or the Rules and Regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
<PAGE>
Exhibit 12
AMERICAN GENERAL CORPORATION
EXHIBIT 12 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
For the Years Ended December 31,
In millions, except ratios 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated operations:
Income before income tax expense and net dividends on
preferred securities of subsidiaries $ 964 $ 850 $ 802
Fixed charges deducted from income
Interest expense 621 671 526
Implicit interest in rents 19 18 16
------ ------ ------
Total fixed charges deducted from income 640 689 542
------ ------ ------
Earnings available for fixed charges $1,604 $1,539 $1,344
====== ====== ======
Fixed charges per above $ 640 $ 689 $ 542
Capitalized interest 12 17 18
------ ------ ------
Total fixed charges 652 706 560
Dividends on preferred stock and securities 68 30 -
------ ------ ------
Combined fixed charges and preferred stock
dividends $ 720 $ 736 $ 560
====== ====== ======
Ratio of earnings to fixed charges 2.5 2.2 2.4
====== ====== ======
Ratio of earnings to combined fixed charges and
preferred stock dividends 2.2 2.1 2.4
====== ====== ======
Consolidated operations, corporate fixed charges and
preferred stock dividends only:
Income before income tax expense and net dividends on
preferred securities of subsidiaries $ 964 $ 850 $ 802
Corporate fixed charges deducted from
income - corporate interest expense 139 165 120
------ ------ ------
Earnings available for fixed charges $1,103 $1,015 $ 922
====== ====== ======
Total corporate fixed charges per above $ 139 $ 165 $ 120
Capitalized interest related to real estate operations 11 16 18
------ ------ ------
Total corporate fixed charges 150 181 138
Dividends on preferred stock and securities 68 30 -
------ ------ ------
Combined corporate fixed charges and preferred
stock dividends $ 218 $ 211 $ 138
====== ====== ======
Ratio of earnings to corporate fixed charges 7.3 5.6 6.7
====== ====== ======
Ratio of earnings to combined corporate fixed
charges and preferred stock dividends 5.1 4.8 6.7
====== ====== ======
American General Finance, Inc.:
Income before income tax expense $ 54 $ 116 $ 392
Fixed charges deducted from income
Interest expense 493 518 416
Implicit interest in rents 12 13 11
------ ------ ------
Total fixed charges deducted from income 505 531 427
------ ------ ------
Earnings available for fixed charges $ 559 $ 647 $ 819
====== ====== ======
Ratio of earnings to fixed charges 1.1 1.2 1.9
====== ====== ======
</TABLE>
35
<PAGE>
Exhibit 23(D)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-4 and related Proxy Statement/Prospectus of
American General Corporation for the registration of shares of its common stock
to be issued pursuant to the Merger Agreement among American General
Corporation, AGC Life Insurance Company, and Home Beneficial Corporation and to
the incorporation by reference therein of our report dated February 12, 1996,
with respect to the consolidated financial statements of American General
Corporation incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1995, and our report dated March 20, 1996 with respect
to the related financial statement schedules included therein, and our report
dated February 14, 1997, with respect to the consolidated financial statements
of American General Corporation included in its Current Report on Form 8-K,
dated February 21, 1997, all filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Houston, Texas
March 12, 1997
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the Proxy
Statement of Home Beneficial Corporation that is made part of the Registration
Statement (Form S-4) and Prospectus of American General Corporation for the
registration of its common stock and Series A Junior Participating Preferred
Stock Purchase Rights to be issued pursuant to the Agreement and Plan of Merger
by and among American General Corporation, AGC Life Insurance Company and Home
Beneficial Corporation and to the incorporation by reference therein of our
report dated February 7, 1997, with respect to the consolidated financial
statements and schedules of Home Beneficial Corporation included in its Annual
Report on Form 10-K, as amended, for the year ended December 31, 1996, filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Richmond, Virginia
March 17, 1997
<PAGE>
Exhibit 23(E)
[LETTERHEAD OF GOLDMAN SACHS APPEARS HERE]
PERSONAL AND CONFIDENTIAL
- -------------------------
March 18, 1997
Board of Directors
Home Beneficial Corporation
3901 West Broad Street
Richmond, VA 23230
Re: Registration Statement of American General relating to shares of common
stock, par value $0.50 per share, of American General
Ladies and Gentlemen:
Attached is our opinion letter dated March __, 1997, with respect to the
fairness to the holders of the outstanding shares of Voting and Non-Voting
Common Stock, par value $0.3125 per share (the "Shares"), of Home Beneficial
Corporation (the "Company") of the Consideration (as defined below) to be
received for the Shares pursuant to the Agreement and Plan of Merger dated as
of December 22, 1996, as amended, by and among American General Corporation
("American General"), AGC Life Insurance Company, a wholly-owned subsidiary of
American General ("Sub"), and the Company (the "Agreement"). Pursuant to the
Agreement, the Company will be merged with and into Sub, and each outstanding
Share will be converted into a number of shares (the "Stock Consideration") of
Common Stock, par value $0.50 per share, of American General ("Purchaser Common
Stock") calculated by dividing (x) $39.00 by (y) the average of the high and
low sales prices, regular way, per share of Purchaser Common Stock as reported
in The Wall Street Journal during the ten consecutive New York Stock Exchange
trading days (each a "Trading Day") ending on (and including) the fifth Trading
Day prior to the effective time of the Merger (the "Trading Average"); provided,
however, that if the Trading Average is less than $35.00, then the Average
Purchaser Price (as defined in the Agreement) shall be $35.00. Holders of Shares
may elect, with respect to all or a portion of their Shares, to convert such
Shares into the right to receive $39.00 per Share in cash (the "Cash
Consideration"), subject to certain procedures and limitations contained in the
Agreement, as to which procedures and limitations we are expressing no opinion.
The Stock Consideration and Cash Consideration are hereinafter collectively
referred to as the "Consideration."
The foregoing opinion letter is provided for the information and assistance
of the Board of Directors in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to in whole or in part in any registration statement, proxy
statement or any other document, except in accordance with our prior written
consent. We understand that the Company has determined to include our opinion
in the above-referenced Registration Statement.
1
<PAGE>
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "SUMMARY OF PROXY STATEMENT/PROSPECTUS--The Proposed
Merger--Opinion of Home Beneficial's Financial Advisor" and "THE PROPOSED
MERGER--Opinion of Home Beneficial's Financial Advisor" and to the inclusion of
the foregoing opinion in the Proxy Statement/Prospectus included in the above-
mentioned Registration Statement. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
Goldman, Sachs & Co.
- ----------------------
(GOLDMAN, SACHS & CO.)
2
<PAGE>
[LETTERHEAD OF GOLMAN SACHS APPEARS HERE]
PERSONAL AND CONFIDENTIAL
March __, 1997
Board of Directors
Home Beneficial Corporation
3901 West Broad Street
Richmond, VA 23230
Re: Registration Statement of American General relating to shares of common
stock, par value $0.50 per share, of American General
Ladies and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Voting and Non-Voting Common Stock, par value $0.3125 per
share (the "Shares"), of Home Beneficial Corporation (the "Company") of the
Consideration (as defined below) to be received for the Shares pursuant to the
Agreement and Plan of Merger dated as of December 22, 1996, as amended, by and
among American General Corporation ("American General"), AGC Life Insurance
Company, a wholly-owned subsidiary of American General ("Sub"), and the Company
(the "Agreement"). Pursuant to the Agreement, the Company will be merged with
and into Sub (the "Merger"), and each outstanding Share will be converted into
a number of shares (the "Stock Consideration") of Common Stock, par value $0.50
per share, of American General ("Purchaser Common Stock") calculated by dividing
(x) $39.00 by (y) the average of the high and low sales prices, regular way, per
share of Purchaser Common Stock as reported in The Wall Street Journal during
the ten consecutive New York Stock Exchange ("NYSE") trading days (each a
"Trading Day") ending on (and including) the fifth Trading Day prior to the
effective time of the Merger (the "Trading Average"); provided, however, that if
the Trading Average is less than $35.00, then the Average Purchaser Price (as
defined in the Agreement) shall be $35.00. Holders of Shares may elect, with
respect to all or a portion of their Shares, to convert such Shares into the
right to receive $39.00 per Share in cash (the "Cash Consideration"), subject to
certain procedures and limitations contained in the Agreement, as to which
procedures and limitations we are expressing no opinion. The Stock Consideration
and Cash Consideration are hereinafter collectively referred to as the
"Consideration."
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We have also provided certain investment banking services to
American General from time to time, including having acted as lead underwriter
in connection with several public and private offerings of securities in recent
years, including a private placement of 7.57% Capital Securities issued by an
affiliate of American General on November 29, 1996 and a public offering of
6.00% Convertible Monthly Income
B-3
<PAGE>
Preferred Securities issued by an affiliate of American General on May 24,
1995, and may provide investment banking services to American General in the
future. Goldman, Sachs & Co. is a full-service securities firm and in the
normal course of its trading activities, the Firm accumulated a long position
of 3,989 shares of Purchaser Common Stock.
In connection with this opinion, we have reviewed, among other things, the
Registration Statement on Form S-4 of American General dated March 18, 1997;
the Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K
of the Company for the five years ended December 31, 1996 and of American
General for the five years ended December 31, 1995; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and of American
General; a Current Report on Form 8-K of American General dated February 21,
1997; annual statutory statements for the two years ended December 31, 1995, for
the Company's insurance subsidiary and for certain of American General's
insurance subsidiaries; certain other communications from the Company and
American General to their respective stockholders; the actuarial appraisal as
of June 30, 1996, of the Home Beneficial Life Insurance Company prepared by a
nationally recognized actuarial firm (the "Appraisal"), and certain internal
financial analyses for the Company prepared by its management. We also have
held discussions with members of the senior management of the Company and
American General regarding the past and current business operations, financial
condition and future prospects of their respective companies. In addition, we
have reviewed the reported price and trading activity for the Shares and for
the Purchaser Common Stock, compared certain financial and stock market
information for the Company and for American General with similar information
for certain other companies the securities of which are publicly traded,
reviewed the financial terms of certain recent business combinations and
performed such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. As you are aware, American General did not make
available to us its projections of expected future performance. Accordingly, we
note that our review of such information for purposes of rendering our opinion
was limited to discussions with management of American General of analysts'
estimates for 1997. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or American General or
any of their respective subsidiaries and, except for the Appraisal referred to
in the third paragraph of this opinion, we have not been furnished with any
such evaluation or appraisal. We are aware that the Company received, prior to
entering into the Agreement, an indication of interest from another party
expressing willingness, subject to due diligence and other contingencies, to
pay a possible purchase price in excess of the Consideration. We further
understand that in evaluating such indication of interest the Board of
Directors of the Company took into consideration, among other things, various
material uncertainties relating to the likelihood of the Company and such other
party reaching an agreement in a timely fashion at the high end of the range of
prices discussed with such party. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board
of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to how any holder of Shares should vote with respect to
such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair to holders of Shares receiving such Consideration.
Very truly yours,
B-4
<PAGE>
Exhibit 24
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ J. Evans Attwell
-----------------------------------
J. Evans Attwell
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Brady F. Carruth
-------------------------------------
Brady F. Carruth
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ James S. D'Agostino, Jr.
--------------------------------------
James S. D'Agostino, Jr.
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ W. Lipscomb Davis, Jr.
-------------------------------------
W. Lipscomb Davis, Jr.
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Robert M. Devlin
--------------------------------------
Robert M. Devlin
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Harold S. Hook
--------------------------------------
Harold S. Hook
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Larry D. Horner
--------------------------------------
Larry D. Horner
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Richard J.V. Johnson
---------------------------------------
Richard J.V. Johnson
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Jon P. Newton
-------------------------------------
Jon P. Newton
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Robert E. Smittcamp
-----------------------------------------
Robert E. Smittcamp
<PAGE>
Purpose. The purpose of this limited power of attorney is to authorize certain
officers of the Company to execute, on behalf of the undersigned
person, the Company's Registration Statement on
Form S-4 in connection with the acquisition of all of the outstanding capital
stock of Home Beneficial Corporation, with such amendments thereto as may be
necessary or appropriate, together with any and all exhibits and other related
documents, and to file the Form S-4 and any such amendments with the SEC.
LIMITED POWER OF ATTORNEY
WHEREAS, AMERICAN GENERAL CORPORATION, a Texas corporation (the
"Company"), will file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, its Registration
Statement on Form S-4, with such amendments thereto as may be necessary or
appropriate, together with any and all exhibits and other documents related
thereto;
NOW, THEREFORE, the undersigned in his/her capacity as a director or
officer or both, as the case may be, of the Company, does hereby appoint JON P.
NEWTON and CARL J. SANTILLO, and each of them, severally, his/her true and
lawful attorney or attorneys-in-fact with or without the other and with full
power of substitution and resubstitution, to execute in his/her name, place, and
stead, in his/her capacity as a director or officer or both, as the case may be,
of the Company, the Form S-4 and any and all amendments thereto as said
attorneys-in-fact or either of them shall deem necessary or appropriate,
together with all instruments necessary or incidental in connection therewith,
and to file the same or cause the same to be filed with the Commission. Each of
said attorneys-in-fact shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable in connection with the Form S-4, as fully and
for all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of said attorneys-in-fact
and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
sixth day of February, 1997.
/s/ Anne M. Tatlock
---------------------------------------
Anne M. Tatlock
<PAGE>
Exhibit 99(a)
HOME BENEFICIAL CORPORATION
3901 West Broad Street
Richmond, Virginia 23230
CLASS A COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of the Special
Meeting of Shareholders of Home Beneficial Corporation, a Virginia corporation
(the "Corporation"), to be held on April , 1997, at 10:00 a.m., local time
("Special Meeting") at the principal executive offices of the Corporation, 3901
West Broad Street, Richmond Virginia 23230, and the Proxy Statement in
connection therewith and (2) appoints R.W. Wiltshire and J.M. Wiltshire, Jr. as
Proxies, each with the power to act alone and appoint his substitute, and
hereby authorizes them to represent the undersigned and to vote, as designated
below, all the shares of Class A Common Stock (Voting), par value $0.3125 per
share, of the Corporation, which the undersigned would be entitled to vote at
the Special Meeting or any adjournment thereof, upon the matter referred to
below, and upon any and all other matters which properly may be brought before
such meeting.
<PAGE>
1. To vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of December 22, 1996, and amended as of January 22, 1997
and as of March 3, 1997, by and among Home Beneficial Corporation, American
General Corporation and AGC Life Insurance Company, and the transactions
contemplated thereby.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon any other
matter that may properly come before the meeting.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
CAST "FOR" ITEM 1. This Proxy may be revoked at any time prior to its exercise.
Date:________________, 1997 ___________________________________________
Signature
___________________________________________
Signature (if held jointly)
When shares are held by joint tenants,
both should sign. When signing as
attorney, administrator, executor,
guardian or trustee, please add your title
as such. If a corporation, please sign in
full corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
<PAGE>
HOME BENEFICIAL CORPORATION
3901 West Broad Street
Richmond, Virginia 23230
CLASS B COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of the Special
Meeting of Shareholders of Home Beneficial Corporation, a Virginia corporation
(the "Corporation"), to be held on April , 1997, at 10:00 a.m., local time,
("Special Meeting") at the principal executive offices of the Corporation, 3901
West Broad Street, Richmond, Virginia 23230, and the Proxy Statement in
connection therewith and (2) appoints R.W. Wiltshire and J.M. Wiltshire, Jr. as
Proxies, each with the power to act alone and appoint his substitute, and
hereby authorizes them to represent the undersigned and to vote, as designated
below, all the shares of Class B Common Stock (Non-Voting), par value $0.3125
per share, of the Corporation, which the undersigned would be entitled to vote
at the Special Meeting or any adjournment thereof, upon the matter referred to
below.
<PAGE>
1. To vote upon a proposal to approve and adopt the Agreement and Plan of
Merger, dated as of December 22, 1996, and amended as of January 22, 1997
and as of March 3, 1997, by and among Home Beneficial Corporation, American
General Corporation and AGC Life Insurance Company, and the transactions
contemplated thereby.
[_] FOR [_] AGAINST [_] ABSTAIN
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
CAST "FOR" ITEM 1. This Proxy may be revoked at any time prior to its exercise.
Date: _______________, 1997 ___________________________________________
Signature
___________________________________________
Signature (if held jointly)
When shares are held by joint tenants,
both should sign. When signing as
attorney, administrator, executor,
guardian or trustee, please add your title
as such. If a corporation, please sign in
full corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
<PAGE>
Exhibit 99(b)
FORM OF ELECTION/LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES FOR SHARES OF COMMON STOCK OF
HOME BENEFICIAL CORPORATION
WHEN SUBMITTED PURSUANT TO AN ELECTION IN CONNECTION WITH THE PROPOSED MERGER
OF HOME BENEFICIAL CORPORATION WITH AND INTO AGC LIFE INSURANCE COMPANY,
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN GENERAL CORPORATION
This Form of Election/Letter of Transmittal is to be completed by
stockholders of Home Beneficial Corporation ("Home Beneficial") if stock
certificates for shares (the "Share Certificates") of Home Beneficial Class A
Common Stock (Voting), par value $.3125 per share ("Home Beneficial Voting
Common Stock"), or Home Beneficial Class B Common Stock (Non-Voting), par
value $.3125 per share ("Home Beneficial Non-Voting Common Stock" and,
together with the Home Beneficial Voting Common Stock, the "Home Beneficial
Common Stock" or "Shares"), are to be forwarded herewith or if delivery of
Shares is to be made by book-entry transfer to the account of First Chicago
Trust Company of New York (the "Exchange Agent") at The Depository Trust
Company or the Philadelphia Depository Trust Company (each, a "Book-Entry
Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities")
pursuant to book-entry transfer procedures, and, together with all other
required documents, are to be delivered to the Exchange Agent by 5:00 p.m.,
New York City time, on April , 1997, unless extended, in order to effect an
Election (as defined herein) in connection with the proposed merger (the
"Merger") of Home Beneficial with and into AGC Life Insurance Company ("AGC
Life"), a wholly owned subsidiary of American General Corporation ("American
General").
The Exchange Agent for the Merger is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand: By Overnight Courier: By Mail:
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York Company
of New York Tenders & Exchanges of New York
Tenders & Exchanges Suite 4680-HBE Tenders & Exchanges
c/o The Depository Trust 14 Wall Street, 8th Floor Suite 4660
Company New York, NY 10005 P.O. Box 2569
55 Water Street, DTC TAD Jersey City, NJ 07303-
Vietnam Veterans Memorial 2569
Plaza
New York, NY 10041
---------------
DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS FORM OF ELECTION/LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE
THE FORM W-9 PROVIDED WITH THIS FORM OF ELECTION/LETTER OF TRANSMITTAL.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS FORM
OF ELECTION/LETTER OF TRANSMITTAL IS COMPLETED.
THE DEADLINE FOR SUBMITTING THIS FORM OF ELECTION/LETTER OF TRANSMITTAL TO THE
EXCHANGE AGENT, TOGETHER WITH YOUR SHARE CERTIFICATES (OR GUARANTEES OF
DELIVERY OF SHARE CERTIFICATES), IS 5:00 P.M., NEW YORK CITY TIME, ON APRIL
, UNLESS EXTENDED.
Home Beneficial stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other
documents required hereby to the Exchange Agent prior to 5:00 p.m., New York
City time, on April , 1997, unless extended (the "Election Deadline"), and
who wish to make an Election (as defined herein) must do so pursuant to the
procedures for lost Share Certificates described in Instruction C7 or the
guaranteed delivery procedure described in Instruction A2.
<PAGE>
REGISTERED HOLDERS OF HOME BENEFICIAL COMMON STOCK MAY ELECT TO RECEIVE
STOCK CONSIDERATION (AS DEFINED HEREIN) AND/OR CASH CONSIDERATION (AS DEFINED
HEREIN) WITH RESPECT TO ALL OR ANY PORTION OF THE SHARES HELD BY SUCH HOLDERS.
[_] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
EXCHANGE AGENT'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Electing Institution: ______________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[_] The Depository Trust Company [_] Philadelphia Depository Trust Company
Account Number_________________ Transaction Code Number____________________
[_] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY INCLUDED WITH THIS FORM OF ELECTION/LETTER OF TRANSMITTAL AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution that Guaranteed Delivery: _____________________
If Shares are to be delivered by Book-Entry Transfer, check box of Book-
Entry Transfer Facility:
[_] The Depository Trust Company [_] Philadelphia Depository Trust Company
Account Number_________________ Transaction Code Number____________________
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
---------------
List below the Share Certificates to which this Form of Election/Letter of
Transmittal relates. If the space provided below is inadequate, the
information shown in the space below with respect to the Share Certificates
and the type of election should be listed on a separate signed schedule
affixed hereto. STOCKHOLDERS WHO WISH TO OBTAIN INFORMATION REGARDING THE
EXCHANGE RATIO PRIOR TO MAKING AN ELECTION SHOULD CALL THE EXCHANGE AGENT AT
(201) 324-0137 OR CORPORATE INVESTOR COMMUNICATIONS, INC., THE INFORMATION
AGENT FOR THE MERGER, AT (800) 932-8478.
TYPE OF ELECTION (SEE INSTRUCTIONS B1, B2, B3 AND B4)
- -------------------------------------------------------------------------------
SHARES SUBMITTED (ATTACH SEPARATE SIGNED LIST IF NECESSARY)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH STOCK
ELECTION ELECTION
TOTAL (AS (AS
NUMBER DEFINED DEFINED
CLASS OF OF SHARES BELOW) BELOW)
HOME SHARE REPRESENTED (NUMBER (NUMBER
NAME(S) AND ADDRESS(ES) OF REGISTERED BENEFICIAL CERTIFICATE BY SHARE OF OF
HOLDER(S) COMMON STOCK NUMBER(1) CERTIFICATE SHARES) SHARES)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
TOTAL
SHARES
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Stockholders who hold Home Beneficial Common Stock in book-entry form,
should list their account number.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET
FORTH IN THIS FORM OF ELECTION/LETTER OF TRANSMITTAL CAREFULLY.
Ladies and Gentlemen:
In connection with the proposed Merger of Home Beneficial with and into AGC
Life, a wholly owned subsidiary of American General, the undersigned hereby
submits the Share Certificates evidencing the Shares listed above, or hereby
transfers ownership of such Share Certificates on the account books maintained
by a Book-Entry Transfer Facility, and elects, subject to the proration and
other limitations set forth below and as more fully described in the Agreement
and Plan of Merger, dated as of December 22, 1996, and amended as of January
22, 1997 and as of March 3, 1997 (as so amended, the "Merger Agreement"),
attached as Annex A to the Proxy Statement/Prospectus (as defined below), to
have each share of Home Beneficial Common Stock represented by such Share
Certificates converted into the right to receive any of the following: (i) a
fraction (the "Exchange Ratio") of a duly authorized, validly issued, fully
paid and nonassessable share of common stock, par value $.50 per share, of
American General (the "American General Common Stock"), together with the
attached preferred share purchase rights (the "Stock Consideration"),
calculated by dividing (x) $39.00 by (y) the "Average Purchaser Price,"
defined as the average of the high and low sales prices, regular way, of
American General Common Stock as reported in The Wall Street Journal during
the ten consecutive New York Stock Exchange trading days (each, a "Trading
Day") ending on (and including) the fifth Trading Day prior to the effective
time of the Merger (the "Trading Average"); provided, however, that if the
Trading Average is less than $35.00, then the Average Purchaser Price shall be
$35.00; and/or (ii) $39.00 in cash, without any interest thereon (the "Cash
Consideration" and, together with the Stock Consideration, the "Merger
Consideration"). No fractional shares of American General Common Stock will be
issued in the Merger. Home Beneficial stockholders will be entitled to receive
cash in lieu of such fractional shares. It is understood that the following
election is subject to (a) the terms, conditions and limitations set forth in
the Proxy Statement/Prospectus, dated March , 1997, relating to the Merger
(the "Proxy Statement/Prospectus"), receipt of which is hereby acknowledged by
the undersigned, (b) the terms, conditions and limitations set forth in the
Merger Agreement and (c) the instructions herein. American General's
acceptance of Shares delivered pursuant to this Form of Election/Letter of
Transmittal will constitute a binding agreement between the undersigned and
American General upon the terms and subject to the conditions of (a), (b) and
(c) listed above.
There can be no assurance that each holder of Home Beneficial Common Stock
will receive the Merger Consideration in such amounts as each such stockholder
elects to receive in the Merger. As a result of the allocation procedures
described in the Merger Agreement, if more than 50% of the shares of Home
Beneficial Common Stock elect to receive Cash Consideration (each such
election, a "Cash Election") or more than 75% of the shares of Home Beneficial
Common Stock elect to receive Stock Consideration (each such election, a
"Stock Election," and any request pursuant to this Form of Election/Letter of
Transmittal for Cash Consideration or Stock Consideration, an "Election"), a
Home Beneficial shareholder may receive Cash Consideration and/or Stock
Consideration in amounts that differ from the amounts such shareholder has
elected with respect to its shares of Home Beneficial Common Stock.
Shareholders who do not return a properly completed and validly executed Form
of Election/Letter of Transmittal prior to the Election Deadline or who make
no election will receive (i) Cash Consideration, to the extent Cash Elections
do not exceed 50% of the outstanding shares of Home Beneficial Common Stock,
(ii) Cash Consideration, to the extent Stock Elections exceed 75% of the
outstanding shares of Home Beneficial Common Stock or (iii) Stock
Consideration, to the extent Cash Elections exceed 50% of the outstanding
shares of Home Beneficial Common Stock, subject to the allocation rules set
forth in the Merger Agreement and as described in the Proxy
Statement/Prospectus. None of American General, Home Beneficial, the Home
Beneficial Board of Directors or the American General Board of Directors makes
any recommendation as to whether holders of Home Beneficial Common Stock
should elect to receive the Stock Consideration and/or the Cash Consideration
in the Merger. Each stockholder must make his or her own decision with respect
to any such Election.
The undersigned authorizes and instructs you, as Exchange Agent, to deliver
the Share Certificates listed above and to receive on behalf of the
undersigned, in exchange for the Shares represented thereby, any check for the
cash or any certificate for the shares of American General Common Stock
issuable in the Merger.
<PAGE>
The undersigned represents and warrants that the undersigned has full power
and authority to surrender the Share Certificate(s) surrendered herewith or
covered by a guarantee of delivery, free and clear of any liens, claims,
charges or encumbrances whatsoever. The undersigned understands and
acknowledges that the method of delivery of the Share Certificate(s) and all
other required documents is at the option and risk of the undersigned and that
the risk of loss and title to such Share Certificate(s) shall pass only after
the Exchange Agent has actually received the Share Certificate(s). All
questions as to the election revocation, change and form of any Election and
surrender of Share Certificates hereunder shall be determined by the Exchange
Agent in its reasonable discretion, and such determination shall be binding
and conclusive. The undersigned, upon request, shall execute and deliver all
additional documents deemed by the Exchange Agent or American General to be
necessary or desirable to complete the sale, assignment, transfer,
cancellation and retirement of the Shares delivered herewith. No authority
hereby conferred or agreed to be conferred hereby shall be affected by, and
all such authority shall survive, the death or incapacity of the undersigned.
All obligations of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
The undersigned understands that the purpose of the election procedure is to
permit holders of Shares to express their preferences for the type of
consideration they wish to receive in the Merger, and understands that the
aggregate Cash Consideration cannot exceed 50% of the value of the outstanding
shares of Home Beneficial Common Stock and the aggregate Stock Consideration
cannot exceed 75% of the value of the outstanding shares of Home Beneficial
Common Stock. Subject to the proration and other limitations described below
and as more fully described in Article III of the Merger Agreement, the
Exchange Agent will honor the Stock Elections and/or Cash Elections made by
holders of Shares when it issues shares of American General Common Stock and
the Cash Consideration after the Effective Time (as defined in the Merger
Agreement).
The undersigned understands that in lieu of any fractional share of American
General Common Stock, American General will pay to each former stockholder of
Home Beneficial who otherwise would be entitled to receive a fractional share
of American General Common Stock an amount in cash determined by multiplying
(i) the Average Purchaser Price by (ii) the fractional interest in a share of
American General Common Stock to which such holder would otherwise be
entitled.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," the undersigned understands and agrees that the Exchange Agent
will issue any check and register any certificate for shares of American
General Common Stock in the name of the registered holder(s) of the Shares
appearing above under "Type of Election." Similarly, unless otherwise
indicated in the box entitled "Special Delivery Instructions," the undersigned
understands and agrees that the Exchange Agent will mail any check and any
certificate for shares of American General Common Stock to the registered
holder(s) of the Shares at the address(es) of the registered holder(s)
appearing above under "Type of Election." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, the undersigned understands and agrees that the Exchange Agent will
issue any check and any certificate for shares of American General Common
Stock in the name(s) of, and mail such check and such certificate to, the
person(s) so indicated.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS A1, C2, C3 AND (SEE INSTRUCTIONS A1 AND C3)
C4) To be completed ONLY if the check
To be completed ONLY if the check or the certificates for shares of
is to be made payable to, or the American General Common Stock are
certificates for shares of American to be mailed to someone other than
General Common Stock are to be the undersigned or to the
registered in, the name of someone undersigned at an address other
other than the undersigned. than that shown under "Type of
Election."
Name: ______________________________
(PLEASE PRINT) MAIL CHECK AND/OR CERTIFICATES TO:
Address: __________________________
____________________________________ Name: ______________________________
(ZIP CODE) ____________________________________
____________________________________ (PLEASE PRINT)
(TAXPAYER IDENTIFICATION OR SOCIAL Address: ___________________________
SECURITY NUMBER) ____________________________________
(SEE ENCLOSED FORM W-9 BELOW) (ZIP CODE)
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE ENCLOSED FORM W-9 BELOW
____________________________________ Name(s): ___________________________
____________________________________
____________________________________ (PLEASE PRINT)
(SIGNATURE(S) OF OWNER(S)) Capacity (full title): _____________
Address: ___________________________
Must be signed by registered ____________________________________
owner(s) exactly as name(s) (ZIP CODE)
appear(s) on stock certificate(s) ____________________________________
or by person(s) authorized to (AREA CODE AND TELEPHONE NUMBER)
become registered holder(s) by ____________________________________
certificates and documents (TAXPAYER IDENTIFICATION OR
transmitted herewith. If signature SOCIAL SECURITY NUMBER)
is by attorney, executor,
administrator, trustee or guardian
or others acting in a fiduciary
capacity, set forth full title and
see Instruction C2.
Dated: _____________________________
GUARANTEE OF SIGNATURE(S)
If you have filled out the Special Authorized
Payment Instructions above, you Signature: _________________________
must have your signature(s) Name: ______________________________
guaranteed. (See Instructions A1 (PLEASE PRINT)
and C3.) Firm: ______________________________
Address: ___________________________
Dated: _______________________, 1997 ____________________________________
(ZIP CODE)
____________________________________
(AREA CODE AND TELEPHONE NUMBER)
(Also complete enclosed Form W-9 and return with this Form of Election/Letter
of Transmittal to Exchange Agent)
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE MERGER
A. FORM OF ELECTION/LETTER OF TRANSMITTAL
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Form of Election/Letter of Transmittal must be guaranteed
by a firm which is a recognized member of a Medallion Signature Guarantee
Program, which members include any registered national securities exchange or
a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States (each, an "Eligible
Institution"). No signature guarantee is required on this Form of
Election/Letter of Transmittal if (a) this Form of Election/Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of
Shares delivered herewith, unless such holder(s) has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the reverse hereof. If a Share Certificate is registered in
the name of a person other than the signer of this Form of Election/Letter of
Transmittal, or if checks or certificates are to be payable to the order of or
registered in the name of a person other than the registered holder(s), then
the Share Certificate must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on the Share Certificate, with the signature(s) on such
Share Certificate or stock powers guaranteed as described above. See
Instruction C2.
2. Delivery of Form of Election/Letter of Transmittal and Share
Certificates; Notice of Guaranteed Delivery. This Form of Election/Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith, if Shares are to be delivered by book-entry transfer pursuant to
book-entry transfer procedures, or if delivery of Shares is to be guaranteed.
Share Certificates evidencing all delivered Shares, or confirmation of a book-
entry transfer of such Shares, if such procedure is available, into the
Exchange Agent's account at one of the Book-Entry Transfer Facilities pursuant
to book-entry transfer procedures together with a properly completed and duly
executed Form of Election/Letter of Transmittal (or facsimile thereof) with
any required signature guarantees (or, in the case of a book-entry transfer,
an Agent's Message, as defined below) and any other documents required by this
Form of Election/Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the reverse hereof prior to the Election Deadline.
If Share Certificates are forwarded to the Exchange Agent in multiple
deliveries, a properly completed and duly executed Form of Election/Letter of
Transmittal must accompany each such delivery. Home Beneficial stockholders
whose Share Certificates are not immediately available and who cannot deliver
their Share Certificates and all other required documents to the Exchange
Agent prior to the Election Deadline or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may deliver their Shares
pursuant to the guaranteed delivery procedure. Pursuant to such procedures:
(i) any such delivery must be made by or through an Eligible Institution; (ii)
a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided herewith, must be received by the Exchange
Agent prior to the Election Deadline; and (iii) in the case of a guarantee of
Shares, the Share Certificates, in proper form for transfer, or a confirmation
of a book-entry transfer of such Shares, if such procedure is available, into
the Exchange Agent's account at one of the Book-Entry Transfer Facilities,
together with a properly completed and duly executed Form of Election/Letter
of Transmittal (or manually signed facsimile thereof) with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message), and any other documents required by this Form of Election/Letter of
Transmittal, must be received by the Exchange Agent within three Trading Days
after the date of execution of such Notice of Guaranteed Delivery. The term
"Agent's Message" means a message, transmitted by a Book-Entry Transfer
Facility to, and received by, the Exchange Agent and forming a part of a book-
entry confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility delivering the Shares, that such participant has received
and agrees to be bound by the terms of this Form of Election/Letter of
Transmittal and that American General may enforce such agreement against the
participant.
Registered holders of Shares who are nominees only may submit a separate
Form of Election/Letter of Transmittal for each beneficial owner for whom such
registered holder is a nominee; provided, however, that at the request of the
Exchange Agent, such registered holder shall certify to the satisfaction of
the Exchange Agent that such registered holder holds such Home Beneficial
Common Stock as nominee for the beneficial owner thereof. Each beneficial
owner for which a Form of Election/Letter of Transmittal is submitted will be
treated as a separate holder of Home Beneficial Common Stock.
<PAGE>
Home Beneficial stockholders who do not submit an effective Form of
Election/Letter of Transmittal or whose Forms of Election/Letters of
Transmittal and Share Certificates (or appropriate Notices of Guaranteed
Delivery), are not received prior to the Election Deadline or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis
will be deemed to have made a "Non-Election" with respect to their Shares
(each such Share, a "Non-Electing Share") and will not be entitled to make an
Election and will receive either shares of American General Common Stock
and/or Cash Consideration in the Merger according to the allocation procedures
described herein and in the Merger Agreement.
THE METHOD OF DELIVERY OF THIS FORM OF ELECTION/LETTER OF TRANSMITTAL, SHARE
CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE
STOCKHOLDER, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
3. Inadequate Space. If the space provided herein under "Type of Election"
is inadequate, the Share Certificate numbers, the number of Shares evidenced
by such Share Certificates and the number of Shares delivered should be listed
on a separate signed schedule and attached hereto.
4. Change or Revocation of Election. Any holder of Shares may at any time up
to and immediately prior to the Election Deadline revoke or change his or her
Election by written notice received by the Exchange Agent prior to the
Election Deadline accompanied by a properly completed and signed, revised Form
of Election/Letter of Transmittal or by withdrawal of his or her Share
Certificates or of the Notice of Guaranteed Delivery of such certificates,
previously deposited with the Exchange Agent. Revocations may be made by
facsimile transmission to the Exchange Agent at Fax: (201) 222-4730 or (201)
222-4721.
5. Automatic Revocations of Elections. All Elections will be revoked
automatically if the Exchange Agent is notified in writing by American General
or Home Beneficial that the Merger Agreement has been terminated, and Share
Certificates represented by Forms of Election/Letters of Transmittal will be
promptly returned without charge to the persons who have submitted this Form
of Election/Letter of Transmital upon written request to that effect from each
holder of Home Beneficial Common Stock who has submitted this Form of
Election/Letter of Transmittal.
B. ELECTION AND ALLOCATION PROCEDURES
1. Elections. By completing the appropriate box above and completing this
Form of Election/Letter of Transmittal in accordance with the instructions
herein, a Home Beneficial stockholder will be entitled to make a Stock
Election and/or a Cash Election with respect to all or any portion of the
Shares held by such holder, provided that the aggregate Cash Consideration to
be paid in the Merger cannot exceed 50% of the value of the outstanding shares
of Home Beneficial Common Stock and the aggregate Stock Consideration to be
issued in the Merger cannot exceed 75% of the value of the outstanding shares
of Home Beneficial Common Stock.
Each Home Beneficial stockholder should consult his or her own financial
advisor and tax advisor as to the specific consequences of the Merger and
Election to such stockholder.
No alternative, conditional or contingent Elections will be accepted.
2. Allocations. If Stock Elections are received for a number of Shares that
is in the aggregate 75% or less of the outstanding Shares, each Share covered
by a Stock Election (each, a "Stock Election Share") will be converted in the
Merger into a fraction of a share of American General Common Stock equal to
the Exchange Ratio. If Stock Elections are received for a number of Shares
that is in the aggregate more than 75% of the outstanding Shares immediately
prior to the Effective Time of the Merger, then the Exchange Agent will
distribute the Stock Consideration and/or the Cash Consideration in the
following manner: (i) each Non-Electing Share and each Share for which a Cash
Election (each, a "Cash Election Share") has been received will be converted
into the right to receive the Cash Consideration in the Merger; (ii) the
Exchange Agent will distribute a fraction of a share of American General
Common Stock equal to the Exchange
<PAGE>
Ratio with respect to a number of such Shares equal to 75% of the outstanding
Shares; (iii) Shares covered by a Stock Election and not fully converted into
the right to receive American General Common Stock as set forth in clause (ii)
will be converted in the Merger into the right to receive the Cash
Consideration multiplied by the number of such Shares; and (iv) the
distributions of American General Common Stock and of Cash Consideration
contemplated by the preceding clauses (ii) and (iii) will be made on a pro
rata basis among all Shares as to which Stock Elections have been made. If
Cash Elections are received for a number of Shares that is 50% or less of the
outstanding Shares, each Cash Election Share will be converted in the Merger
into the right to receive the Cash Consideration. If the aggregate Cash
Consideration to be paid would exceed 50% of the value of the outstanding
shares of Home Beneficial Common Stock, the shares for which Cash Elections
are received will be converted in the Merger into the right to receive the
Cash Consideration and/or the Stock Consideration in the following manner: (i)
each Non-Electing Share and each Stock Election Share will be converted in the
Merger into a fraction of a share of American General Common Stock equal to
the Exchange Ratio; (ii) the Exchange Agent will distribute the Cash
Consideration with respect to a number of Shares equal to 50% of the number of
outstanding Shares; (iii) each Share covered by a Cash Election and not fully
converted into the right to receive the Cash Consideration as set forth in the
immediately preceding clause (ii) will be converted in the Merger into the
right to receive a number of shares of American General Common Stock equal to
the Exchange Ratio and (iv) the distributions of Cash Consideration and of
American General Common Stock contemplated by the immediately preceding
clauses (ii) and (iii) will be made on a pro rata basis among all Shares as to
which Cash Elections have been made.
3. Allocation for Non-Electing Shares. If Non-Electing Shares are not
converted under the proration procedures described in the preceding paragraph,
the Exchange Agent will distribute with respect to such Non-Electing Shares:
(i) Cash Consideration with respect to a number of such Non-Electing Shares,
that will result in the sum of (A) the number of such Shares converted into
cash and (B) the number of Shares for which Cash Elections have been received
being as close as practicable to 50% of the outstanding Shares; (ii) Non-
Electing Shares not converted into the right to receive the Cash Consideration
as set forth in the preceding clause (i) shall be converted in the Merger into
the right to receive a number of shares of American General Common Stock equal
to the Exchange Ratio multiplied by the number of such Shares; and (iii) the
distribution of Cash Consideration and of American General Common Stock
contemplated by the preceding clauses (i) and (ii) shall be made on a pro rata
basis among all Non-Electing Shares.
Outstanding Shares as to which an Election is not in effect at the Election
Deadline shall be deemed Non-Electing Shares. If American General and Home
Beneficial shall determine that any Election is not properly made with respect
to any Shares, such Election shall be deemed to be not in effect, and the
Shares covered by such Election shall, for purposes of the Merger Agreement,
be deemed Non-Electing Shares.
4. Certain Allocation Adjustments. If required by special counsel to Home
Beneficial or special counsel to American General in order for such counsel to
provide the tax opinions required by the Merger Agreement, the "50%"
limitation on the number of Shares that may be converted to Cash Consideration
shall be adjusted to a number reasonably required by such counsel, provided
that after giving effect to such adjustment the number of Shares to be
converted into American General Common Stock pursuant to the Merger shall not
exceed 75% of all outstanding Shares.
5. Election Deadline. The Election Deadline for submitting this Form of
Election/Letter of Transmittal to the Exchange Agent is 5:00 p.m., New York
City time, on April , 1997, unless extended. American General and Home
Beneficial may jointly extend the Election Deadline to a later date so long as
such later date is no later than the date on which the Merger is consummated.
If the Election Deadline is extended, American General will announce such
extension in a news release delivered to the Dow Jones News Service.
* * *
A more complete description of the election and allocation procedures is set
forth in the Proxy Statement/Prospectus under "The Proposed Merger--Procedures
for Shareholder Elections" and in Article III of the Merger Agreement. All
Elections are subject to compliance with the election procedures provided for
in the Merger Agreement. In connection with making any Election, each Home
Beneficial stockholder should read carefully, among other matters, the
description and statement of the information contained in the Proxy
Statement/Prospectus under "The Proposed Merger--Certain Federal Income Tax
Consequences of the Merger." Stockholders who wish to be informed of the
Exchange Ratio prior to making an Election should call the Exchange Agent at
(201) 324-0137 or Corporate Investor Communications, Inc., the Information
Agent for the Merger, at (800) 932-8478.
C. RECEIPT OF MERGER CONSIDERATION, SIGNATURES, SPECIAL INSTRUCTIONS, TAXES
AND ADDITIONAL COPIES
1. Receipt of Merger Consideration. Within fifteen calendar days after the
Election Deadline, unless the Effective Time has not yet occurred, in which
case as soon as practicable thereafter, American General shall cause the
Exchange Agent to effect the allocation among the holders of Home Beneficial
Common Stock of rights to receive American General Common
<PAGE>
Stock or Cash Consideration and, as soon as practicable after the Effective
Time, checks and certificates representing shares of American General Common
Stock will be distributed to those holders who are entitled thereto and who
have surrendered their Share Certificates to the Exchange Agent for
cancellation.
2. Signatures on Form of Election/Letter of Transmittal; Stock Powers and
Endorsements. (a) If this Form of Election/Letter of Transmittal is signed by
the registered holder(s) of the Shares delivered herewith, the signature(s)
must correspond with the name(s) as written on the face of the Share
Certificates evidencing such Shares without alteration, enlargement or any
other change whatsoever.
(b) If any Share delivered herewith is owned of record by two or more
persons, all such persons must sign this Form of Election/Letter of
Transmittal.
(c) If any of the Shares delivered herewith are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Forms of Election/Letters of Transmittal as there are different
registrations of such Shares.
(d) If this Form of Election/Letter of Transmittal is signed by the
registered holder(s) of the Shares delivered herewith, no endorsements of
Share Certificates or separate stock powers are required, unless checks are to
be payable to the order of, or certificates evidencing shares of American
General Common Stock are to be registered in the name of, a person other than
the registered holder(s), in which case, the Share Certificate(s) evidencing
the Shares delivered herewith must be endorsed or accompanied by appropriate
stock powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on such Share Certificate(s). Signatures on such Share
Certificate(s) and stock powers must be guaranteed by an Eligible Institution
(unless signed by an Eligible Institution).
(e) If this Form of Election/Letter of Transmittal is signed by a person
other than the registered holder(s) of the Shares delivered herewith, the
Share Certificate(s) evidencing the Shares delivered herewith must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name(s) of the registered holder(s) appear(s) on such Share
Certificate(s). Signatures on such Share Certificate(s) and stock powers must
be guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
(f) If this Form of Election/Letter of Transmittal or any Share Certificate
or stock power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to American General of such person's
authority so to act must be submitted.
3. Special Payment and Delivery Instructions. If any check or certificates
evidencing shares of American General Common Stock are to be payable to the
order of, or registered in the name of, a person other than the person(s)
signing this Form of Election/Letter of Transmittal or if such checks or such
certificates are to be sent to someone other than the person(s) signing this
Form of Election/Letter of Transmittal or to the person(s) signing this Form
of Election/Letter of Transmittal but at an address other than that shown in
the box entitled "Type of Election," the appropriate boxes on this Form of
Election/Letter of Transmittal must be completed.
4. Stock Transfer Taxes. American General will bear the liability for any
state stock transfer taxes applicable to the issuance and delivery of checks
and certificates in connection with the Merger, provided, however, that if any
such check or certificate is to be issued in a name other than that in which
the Share Certificates surrendered in exchange therefor are registered, it
shall be a condition of such exchange, and the issuance of any check or
certificate, that the person requesting such exchange shall either (i) pay to
the Exchange Agent the amount of any stock transfer taxes (whether imposed on
the registered holder or such person), payable on account of the transfer to
such person, or (ii) provide the Exchange Agent with satisfactory evidence of
the payment of such taxes or exemption therefrom.
EXCEPT AS PROVIDED IN THIS INSTRUCTION C4, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES EVIDENCING THE
SHARES DELIVERED HEREWITH.
<PAGE>
5. Requests for Assistance or Additional Copies. Requests for assistance or
additional copies of the Proxy Statement/Prospectus may be directed to the
Information Agent, Corporate Investor Communications, Inc., at 111 Commerce
Road, Carlstadt, New Jersey 07072-2586, or by calling (800) 932-8478.
6. Form W-9. Under the federal income tax law, a stockholder who delivers
Shares is required by law to provide the Exchange Agent (as payor) with such
stockholder's correct Taxpayer Identification Number ("TIN") on Form W-9. If
such stockholder is an individual, the TIN is such stockholder's social
security number. If the Exchange Agent is not provided with the correct TIN,
the stockholder may be subject to a $50 penalty imposed by the IRS. In
addition, payments of Cash Consideration that are made to such stockholder
with respect to Shares purchased pursuant to the Merger may be subject to
backup withholding of 31%. Certain stockholders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such individual must submit a statement,
signed under penalties of perjury, attesting to such individual's exempt
status. Forms of such statements can be obtained from the Exchange Agent. See
the instructions on the enclosed Form W-9 for additional information. If
backup withholding applies with respect to a stockholder, the Exchange Agent
is required to withhold 31% of any cash payments made to such stockholder.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service (the "IRS").
To prevent backup withholding on payments of Cash Consideration that are
made to a stockholder with respect to Shares delivered herewith, the
stockholder is required to notify the Exchange Agent of such stockholder's
correct TIN by completing the enclosed Form W-9 certifying (a) that the TIN
provided on Form W-9 is correct (or that such stockholder is awaiting a TIN)
and (b) that (i) such stockholder has not been notified by the IRS that such
stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the IRS has notified such stockholder
that such stockholder is no longer subject to backup withholding.
The stockholder is required to give the Exchange Agent the TIN of the
registered holder of the Shares tendered hereby. If the Shares are in more
than one name or are not in the name of the actual owner, consult the enclosed
Form W-9 for additional guidance on which TIN to report. If the stockholder
has not been issued a TIN and has applied for a TIN or intends to apply for a
TIN in the near future, the stockholder should check the box in Part 2,
complete Part III (the "Certification") and sign and date the Form W-9.
Notwithstanding that the Certification is completed, the Exchange Agent will
withhold 31% of all payments of Cash Consideration to such stockholder until a
properly certified TIN is provided to the Exchange Agent.
7. Mutilated, Lost, Destroyed or Stolen Share Certificates. If any Home
Beneficial stockholder's Share Certificate(s) representing Shares have been
mutilated, lost, destroyed or stolen prior to the Effective Time, such
stockholder should promptly notify First Union National Bank of North
Carolina, Shareholder Services Group, the transfer agent (the "Transfer
Agent") for Home Beneficial, at 230 South Tryon Street, Charlotte, North
Carolina 28288-1154, telephone number (800) 829-8423. The Home Beneficial
stockholder will then be instructed as to the steps that must be taken in
order to replace the Share Certificate(s). This Form of Election/Letter of
Transmittal and related documents cannot be mailed to the Exchange Agent
(other than pursuant to the guaranteed delivery procedure described in
Instruction A2) or processed until the procedures for replacing lost or
destroyed Share Certificates have been followed and such Share Certificates
have been replaced. ANY HOME BENEFICIAL STOCKHOLDER WHOSE SHARE CERTIFICATES
HAVE BEEN MUTILATED, LOST, DESTROYED OR STOLEN SHOULD ALLOW FOR SUFFICIENT
TIME TO REPLACE SUCH SHARE CERTIFICATES AND ARE URGED TO CONTACT THE TRANSFER
AGENT AS PROMPTLY AS POSSIBLE AFTER RECEIVING THIS FORM OF ELECTION/LETTER OF
TRANSMITTAL. Following the Effective Time, if any Share Certificate(s)
representing Shares have been lost, destroyed or stolen, the stockholder
should promptly notify the Exchange Agent at the address shown on the first
page of this Form of Election/Letter of Transmittal or by calling (201) 324-
0137.
<PAGE>
Exhibit 99(c)
NOTICE OF GUARANTEED DELIVERY
FOR
SHARES OF COMMON STOCK
OF
HOME BENEFICIAL CORPORATION
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS DATED MARCH , 1997 OF HOME
BENEFICIAL CORPORATION
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially equivalent hereto,
must be used to effectuate an Election (as defined in the Form of
Election/Letter of Transmittal) if certificates for shares of Class A Common
Stock (Voting), par value $.3125 per share, of Home Beneficial Corporation, a
Virginia corporation ("Home Beneficial")("Home Beneficial Voting Common
Stock"), and shares of Home Beneficial Class B Common Stock (Non-Voting), par
value $.3125 per share ("Home Beneficial Non-Voting Common Stock" and,
together with the Home Beneficial Voting Common Stock, the "Home Beneficial
Common Stock" or "Shares"), are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit certificates representing Shares covered by the accompanying Form of
Election/Letter of Transmittal (the "Form of Election/Letter of Transmittal")
to reach First Chicago Trust Company of New York (the "Exchange Agent") by
5:00 p.m., New York City time, on , 1997, unless such deadline is
extended. This Notice of Guaranteed Delivery must be delivered (the method of
delivery is at the option and risk of the stockholder) to the Exchange Agent.
See the Instructions to the Form of Election/Letter of Transmittal.
The Exchange Agent is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Hand: By Overnight Courier: By Mail:
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York Company
of New York Tenders & Exchanges of New York
Tenders & Exchanges Suite 4680-HBE Tenders & Exchanges
c/o The Depository Trust 14 Wall Street, 8th Floor Suite 4660
Company New York, NY 10005 P.O. Box 2569
55 Water Street, DTC TAD Jersey City, NJ 07303-2569
Vietnam Veterans Memorial
Plaza
New York, NY 10041
(For Eligible Institutions Only)
By Facsimile:
(201) 222-4720
or
(201) 222-4721
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(201) 222-4707
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON THE
FORM OF ELECTION/LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" (AS DEFINED UNDER THE INSTRUCTIONS THERETO), SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE FORM OF ELECTION/LETTER OF TRANSMITTAL.
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
(TO BE USED ONLY IF CERTIFICATES ARE NOT SURRENDERED WITH
THE FORM OF ELECTION/LETTER OF TRANSMITTAL)
A FORM OF ELECTION/LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND SIGNED,
MUST BE SUBMITTED ALONG WITH THIS GUARANTEE OF DELIVERY IN ORDER TO MAKE AN
EFFECTIVE ELECTION. SUBMISSION OF THIS GUARANTEE OF DELIVERY ALONE, WITHOUT A
PROPERLY COMPLETED AND SIGNED FORM OF ELECTION/LETTER OF TRANSMITTAL, DOES NOT
CONSTITUTE AN EFFECTIVE ELECTION AND WILL NOT PRESERVE THE HOLDER'S RIGHT TO
MAKE AN ELECTION.
Ladies and Gentlemen:
By execution hereof, the undersigned hereby acknowledges receipt of the
Proxy Statement/Prospectus, dated March , 1997 (the "Proxy
Statement/Prospectus") of Home Beneficial Corporation, a Virginia corporation
("Home Beneficial"), with respect to the Class A Common Stock (Voting), par
value $.3125 per share, of Home Beneficial (the "Home Beneficial Voting Common
Stock") and the Class B Common Stock (Non-Voting), par value $.3125 per share,
of Home Beneficial (the "Home Beneficial Non-Voting Common Stock" and,
together with the Home Beneficial Voting Common Stock, the "Home Beneficial
Common Stock"), and the accompanying Form of Election/Letter of Transmittal
(the "Form of Election/Letter of Transmittal"), which together constitute the
election pursuant to the Agreement and Plan of Merger, dated as of December
22, 1997, by and among American General Corporation, a Texas corporation
("American General"), AGC Life Insurance Company ("AGC Life"), and Home
Beneficial, and amended as of January 22, 1997 and as of March 3, 1997, by and
among American General, AGC Life and Home Beneficial (as so amended, the
"Merger Agreement"), to receive shares of American General common stock
("Stock Consideration") and/or Cash Consideration (as defined in the Merger
Agreement) in exchange for all of the shares (the "Shares") of Home Beneficial
Common Stock that the undersigned holds of record. Upon the terms and subject
to the conditions of the Merger (as defined in the Merger Agreement), the
undersigned record holder hereby agrees to deliver, subject to the conditions
set forth in the Form of Election/Letter of Transmittal, the number of Shares
indicated below pursuant to the guaranteed delivery procedures set forth in
the Form of Election/Letter of Transmittal.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under the Form of Election/Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives.
2
<PAGE>
PLEASE SIGN AND COMPLETE
This Notice of Guaranteed Delivery must be signed by the registered
holders(s) of Home Beneficial Common Stock exactly as their names(s) appear(s)
on the certificates representing the Shares or, if tendered by a participant
in The Depository Trust Company or the Philadelphia Depository Trust Company
(each, a "Book-Entry Transfer Facility"), exactly as such participant's name
appear(s) on a security position listing as the owner of the Shares, or by
person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If the
signature appearing below is not of the registered holders(s) of the Share
certificates, then in order to validly tender and deliver such Share
certificates, the registered holders(s) must sign a valid proxy. If the
signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer or other person acting in a fiduciary or representative
capacity, such person must set forth his or her name, address and capacity as
indicated below and submit evidence satisfactory to the Exchange Agent of such
person's authority to so act.
-------------------------------------
Class of Home Beneficial Common Stock:
-------------------------------------
(NAME(S) OF REGISTERED HOLDER(S)--
- ------------------------------------- PLEASE PRINT)
1. Cash Consideration for __ Shares
-------------------------------------
2. Stock Consideration for _ Shares (ADDRESS OF REGISTERED HOLDER(S))
- ------------------------------------- -------------------------------------
CERTIFICATE NOS. (IF AVAILABLE) (ZIP CODE)
- -------------------------------------
Check ONE box if Shares will be -------------------------------------
delivered by book-entry transfer and (AREA CODE AND TELEPHONE NO.)
provide account number:
-------------------------------------
[_]The Depository Trust Company (NAMES(S) OF AUTHORIZED SIGNATORY)
[_]Philadelphia Depository Trust Company
Account Number: _____________________ -------------------------------------
(CAPACITY)
Transaction Code Number: ____________
-------------------------------------
(ADDRESS(ES) OF AUTHORIZED
SIGNATORY)
-------------------------------------
(AREA CODE AND TELEPHONE NO.)
-------------------------------------
-------------------------------------
(SIGNATURE(S) OF RECORD HOLDER OR
AUTHORIZED SIGNATORY)
DATED:
-------------------------------
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company in the United States (an
"Eligible Institution"), hereby guarantees to deliver to the Exchange Agent
either the certificates representing the Shares to which the accompanying Form
of Election/Letter of Transmittal relates, duly endorsed in blank or otherwise
in form acceptable for transfer on the books of Home Beneficial, or a book-
entry confirmation of a transfer of such Shares, in any case together with a
properly completed and duly executed Form of Election/Letter of Transmittal,
or a manually signed facsimile thereof, with any required signature
guarantees, and any other documents required by the Proxy Statement/Prospectus
and the Form of Election/Letter of Transmittal, no later than 5:00 p.m., New
York City time, on the third New York Stock Exchange, Inc. trading day after
the Election Deadline.
---------------------------------------------------------------------------
(NAME OF FIRM)
---------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
---------------------------------------------------------------------------
(TITLE)
---------------------------------------------------------------------------
(ADDRESS)
---------------------------------------------------------------------------
(ZIP CODE)
---------------------------------------------------------------------------
(AREA CODE AND TELEPHONE NUMBER)
DATED: ____________________________________________________________________
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY.
SHARE CERTIFICATES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A
PROPERLY COMPLETED AND DULY EXECUTED FORM OF ELECTION/LETTER OF TRANSMITTAL.
<PAGE>
Exhibit 99(d)
MERGER OF
HOME BENEFICIAL CORPORATION
WITH AND INTO
AGC LIFE INSURANCE COMPANY,
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN GENERAL CORPORATION
March , 1997
To Our Clients:
Enclosed for your consideration is a copy of the Proxy Statement/Prospectus,
dated as of March , 1997 (the "Proxy Statement/Prospectus") of Home
Beneficial Corporation, a Virginia corporation ("Home Beneficial"), the
related Form of Election/Letter of Transmittal and Form W-9 in connection with
the merger (the "Merger") of Home Beneficial, with and into AGC Life Insurance
Company, a Missouri corporation ("AGC Life") and wholly owned subsidiary of
American General Corporation, a Texas corporation ("American General")
pursuant to the Merger Agreement (as defined below).
As described in the enclosed materials, in connection with the Merger, each
share of Home Beneficial Class A Common Stock (Voting), par value $.3125 per
share ("Home Beneficial Voting Common Stock"), and each share of Home
Beneficial Class B Common Stock (Non-Voting), par value $.3125 per share
("Home Beneficial Non-Voting Common Stock" and, together with the Home
Beneficial Voting Common Stock, the "Home Beneficial Common Stock" or
"Shares"), will be converted into the right to receive, at the election of the
registered holder thereof, any of the following: (i) a fraction of a duly
authorized, validly issued, fully paid and nonassessable share of common
stock, par value $.50 per share, of American General (the "American General
Common Stock"), together with the attached preferred share purchase rights
(the "Stock Consideration") calculated by dividing (x) $39.00 by (y) the
Average Purchaser Price, defined as the average of the high and low sales
prices, regular way, of American General Common Stock as reported in The Wall
Street Journal during the ten consecutive New York Stock Exchange trading days
(each, a "Trading Day") ending on (and including) the fifth Trading Day prior
to the Effective Time (as defined in the Merger Agreement) (the "Trading
Average"); provided, however, that if the Trading Average is less than $35.00,
then the Average Purchaser Price shall be $35.00; and/or (ii) $39.00 in cash,
without interest thereon (the "Cash Consideration" and, together with the
Stock Consideration, the "Merger Consideration"). Such elections are subject
to (a) the terms, conditions and limitations set forth in the Proxy
Statement/Prospectus, (b) the terms, conditions and limitations set forth in
the Agreement and Plan of Merger, dated as of December 22, 1996, by and among
American General, AGC Life and Home Beneficial, and amended as of January 22,
1997 and as of March 3, 1997 (as so amended, the "Merger Agreement"), attached
as Annex A to the Proxy Statement/Prospectus and (c) the instructions set
forth in the Form of Election/Letter of Transmittal enclosed herewith.
This material is being sent to you as the beneficial owner of Shares held by
us for your account but not registered in your name. We are the registered
holder of the Shares held by us in your account. Accordingly, you must give us
instructions using the instruction form provided below (and not using the Form
of Election/Letter of Transmittal, which is furnished for your information
only) as to whether you wish to receive, for each share of Home Beneficial
Common Stock held by us in your account, the Cash Consideration and/or the
Stock Consideration. Only we, as registered holder of your Shares, can execute
and submit a Form of Election/Letter of Transmittal on your behalf.
1
<PAGE>
There can be no assurance that each holder of Home Beneficial Common Stock
will receive the Merger Consideration in such amounts as each such stockholder
elects to receive in the Merger. As a result of the allocation procedures
described in the Merger Agreement, if more than 50% of the shares of Home
Beneficial Common Stock elect to receive Cash Consideration (each such
election, a "Cash Election") or more than 75% of the shares of Home Beneficial
Common Stock elect to receive Stock Consideration (each such election, a
"Stock Election"), a Home Beneficial shareholder may receive Cash
Consideration and/or Stock Consideration in amounts that differ from the
amounts such shareholder has elected with respect to its shares of Home
Beneficial Common Stock. Shareholders who do not return a properly completed
and validly executed Form of Election/Letter of Transmittal prior to the
Election Deadline or shareholders who make no election will receive (i) Cash
Consideration, to the extent Cash Elections do not exceed 50% of the
outstanding shares of Home Beneficial Common Stock, (ii) Cash Consideration,
to the extent Stock Elections exceed 75% of the outstanding shares of Home
Beneficial Common Stock or (iii) Stock Consideration, to the extent Cash
Elections exceed 50% of the outstanding shares of Home Beneficial Common
Stock. None of American General, Home Beneficial, the Home Beneficial Board of
Directors or the American General Board of Directors makes any recommendation
as to whether holders of Home Beneficial Common Stock should elect to receive
the Cash Consideration and/or the Stock Consideration in the Merger. Each
stockholder must make his or her own decision with respect to any such
election.
You do not have to submit any certificates for Shares. As record holder, we
will submit the certificates on your behalf.
- --------------------------------------------------------------------------------
THE DEADLINE BY WHICH WE MUST SUBMIT YOUR ELECTION TO FIRST CHICAGO
TRUST COMPANY OF NEW YORK, THE EXCHANGE AGENT, IS 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS EXTENDED. PLEASE RETURN THIS INSTRUCTION
FORM AS PROMPTLY AS PRACTICABLE SO WE MAY SUBMIT YOUR ELECTION TO THE
EXCHANGE AGENT BY SUCH ELECTION DEADLINE. IF INSTRUCTIONS ARE NOT PROVIDED
TO US IN A TIMELY FASHION, YOU WILL RECEIVE THE STOCK CONSIDERATION AND/OR
THE CASH CONSIDERATION AS APPLICABLE TO "NON-ELECTING SHARES" AS DESCRIBED
IN THE MERGER AGREEMENT AND PROXY STATEMENT/PROSPECTUS IN EXCHANGE FOR
YOUR SHARES.
- --------------------------------------------------------------------------------
WITH RESPECT TO SHARES HELD BY US IN YOUR ACCOUNT, YOU CAN ONLY MAKE AN
ELECTION USING THE INSTRUCTION FORM PROVIDED BELOW. DO NOT COMPLETE THE FORM
OF ELECTION/LETTER OF TRANSMITTAL WITH RESPECT TO SHARES HELD BY US IN YOUR
ACCOUNT AS ONLY WE, AS REGISTERED HOLDER OF YOUR SHARES, CAN EXECUTE AND
SUBMIT A FORM OF ELECTION/LETTER OF TRANSMITTAL ON YOUR BEHALF.
2
<PAGE>
INSTRUCTION FORM
WITH RESPECT TO THE
MERGER OF
HOME BENEFICIAL CORPORATION
WITH AND INTO
AGC LIFE INSURANCE COMPANY,
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN GENERAL CORPORATION
The undersigned acknowledge(s) receipt of your letter, the Proxy
Statement/Prospectus, the related Form of Election/Letter of Transmittal and
Form W-9 in connection with the Merger (as defined in your letter).
This form will instruct you that the undersigned hereby elects to receive
the Cash Consideration and/or the Stock Consideration with respect to the
number of shares beneficially owned by the undersigned as indicated below,
subject to (i) the terms, conditions and limitations set forth in the Proxy
Statement/Prospectus, (ii) the terms, conditions and limitations set forth in
the Merger Agreement and (iii) the instructions set forth in the related Form
of Election/Letter of Transmittal.
CLASS OF HOME BENEFICIAL COMMON
STOCK:
------------------------------ -------------------------------------
-------------------------------------
1. Cash Consideration for Shares. Signature(s) of Owner(s)
---
2. Stock Consideration for Shares. Name(s):
--- -----------------------------
(Please print)
-------------------------------------
Capacity (full title):
---------------
Dated:
-------------------------------
Address(es):
-------------------------
-------------------------------------
(Zip Code)
-------------------------------------
(Area Code and Telephone Number(s))
-------------------------------------
(Tax Identification or Social
Security Number(s))
3
<PAGE>
Exhibit 99(e)
MERGER OF
HOME BENEFICIAL CORPORATION
WITH AND INTO
AGC LIFE INSURANCE COMPANY,
A WHOLLY OWNED SUBSIDIARY OF
AMERICAN GENERAL CORPORATION
March , 1997
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
In connection with the proposed merger (the "Merger") of Home Beneficial
Corporation ("Home Beneficial") with and into AGC Life Insurance Company ("AGC
Life"), a wholly owned subsidiary of American General Corporation ("American
General"), pursuant to the Merger Agreement (as defined below), each share of
Home Beneficial Class A Common Stock (Voting), par value $.3125 per share
("Home Beneficial Voting Common Stock"), and each share of Home Beneficial
Class B Common Stock (Non-Voting), par value $.3125 per share ("Home
Beneficial Non-Voting Common Stock" and, together with the Home Beneficial
Voting Common Stock, the "Home Beneficial Common Stock" or "Shares"), will,
subject to certain limitations, be converted into the right to receive any of
the following: (i) a fraction of a duly authorized, validly issued, fully paid
and nonassessable share of common stock, par value $.50 per share, of American
General (the "American General Common Stock"), together with the attached
preferred share purchase rights (the "Stock Consideration") calculated by
dividing (x) $39.00 by (y) the Average Purchaser Price, defined as the average
of the high and low sales prices, regular way, of American General Common
Stock as reported in The Wall Street Journal during the ten consecutive New
York Stock Exchange trading days (each, a "Trading Day") ending on (and
including) the fifth Trading Day prior to the Effective Time (as defined in
the Merger Agreement) (the "Trading Average"); provided, however, that if the
Trading Average is less than $35.00, then the Average Purchaser Price shall be
$35.00; and/or (ii) $39.00 in cash, without interest thereon (the "Cash
Consideration").
Record holders ("Holders") of Shares are entitled to elect to receive Cash
Consideration and/or Stock Consideration in the Merger by completing the
enclosed Form of Election/Letter of Transmittal. Only record Holders of Shares
(or persons authorized by such Holders) can execute the Form of
Election/Letter of Transmittal and thus make an election as described in the
enclosed materials. Such elections are subject to (i) the terms, conditions
and limitations set forth in the Proxy Statement/Prospectus, dated March ,
1997 relating to the Merger (the "Proxy Statement/Prospectus"), (ii) the
terms, conditions and limitations set forth in the Agreement and Plan of
Merger, dated as of December 22, 1996, amended as of January 22, 1997 and as
of March 3, 1997 (as so amended, the "Merger Agreement"), attached as Annex A
to the Proxy Statement/Prospectus and (iii) the instructions set forth in the
Form of Election/Letter of Transmittal enclosed herewith.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. The Proxy Statement/Prospectus, dated March , 1997, relating to the
Merger;
2. The Form of Election/Letter of Transmittal pursuant to which a
registered Holder may elect to receive the Cash Consideration and/or the
Stock Consideration in the Merger;
1
<PAGE>
3. Form W-9;
4. A letter that may be sent to your clients for whose account you hold
Shares registered in your name or in the name of your nominees, with space
provided for obtaining clients' instructions with respect to the Form of
Election/Letter of Transmittal;
5. A Notice of Guaranteed Delivery to be used if certificates for Shares
are not immediately available or if the procedure for book-entry transfer
cannot be completed on a timely basis or time will not permit certificates
for Shares covered by the Form of Election/Letter of Transmittal to reach
First Chicago Trust Company of New York, the Exchange Agent, by the current
election deadline, 5:00 p.m., New York City time, on April , 1997 (the
"Election Deadline"); and
6. A return envelope addressed to the Exchange Agent.
WE URGE YOU TO CONTACT YOUR CLIENTS AS SOON AS POSSIBLE. THE DEADLINE FOR
RECEIPT OF FORMS OF ELECTION/LETTERS OF TRANSMITTAL BY THE EXCHANGE AGENT IS
5:00 P.M., NEW YORK CITY TIME, ON APRIL , 1997, UNLESS EXTENDED.
There can be no assurance that each holder of Home Beneficial Common Stock
will receive the Merger Consideration in such amounts as each such stockholder
elects to receive in the Merger. As a result of the allocation procedures
described in the Merger Agreement, if more than 50% of the shares of Home
Beneficial Common Stock elect to receive Cash Consideration (each such
election, a "Cash Election") or more than 75% of the shares of Home Beneficial
Common Stock elect to receive Stock Consideration (each such election, a
"Stock Election"), a Home Beneficial shareholder may receive Cash
Consideration and/or Stock Consideration in amounts that differ form the
amounts such shareholder has elected with respect to its shares of Home
Beneficial Common Stock. Shareholders who do not return a properly completed
and validly executed Form of Election/Letter of Transmittal prior to the
Election Deadline or shareholders who make no election will receive (i) Cash
Consideration, to the extent Cash Elections do not exceed 50% of the
outstanding shares of Home Beneficial Common Stock, (ii) Cash Consideration,
to the extent Stock Elections exceed 75% of the outstanding shares of Home
Beneficial Common Stock or (iii) Stock Consideration, to the extent Cash
Elections exceed 50% of the outstanding shares of Home Beneficial Common
Stock, subject to the allocation rules set forth in the Merger Agreement and
as described in the Proxy Statement/Prospectus. None of American General, Home
Beneficial, the Home Beneficial Board of Directors or the American General
Board of Directors makes any recommendation as to whether holders of Home
Beneficial Common Stock should elect to receive the Cash Consideration and/or
the Stock Consideration in the Merger. Each stockholder must make his or her
own decision with respect to any such election.
Failure of a registered holder of Home Beneficial Common Stock to complete
properly and to return the Form of Election/Letter of Transmittal together
with his or her Share certificates, or with an appropriate guarantee of
delivery of Share certificates, to First Chicago Trust Company of New York
(the "Exchange Agent") by the Election Deadline, or a registered holder of
Shares who cannot complete the procedure for delivery by book-entry transfer
on a timely basis, and who fails to comply with the election procedures
described in the Proxy Statement/Prospectus and the Form of Election/Letter of
Transmittal (including the instructions thereto) will cause such holder's
Shares to be converted in the manner described in the Merger Agreement and
Proxy Statement/Prospectus.
Registered holders of Shares whose Share certificates are not immediately
available and who cannot deliver their Share certificates and all other
required documents to the Exchange Agent prior to the Election Deadline or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis may deliver their Shares pursuant to the guaranteed delivery procedures
described in Instruction A2 to the Form of Election/Letter of Transmittal.
2
<PAGE>
Neither Home Beneficial nor American General will pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent as described in the Proxy Statement/Prospectus) in connection with
delivery of share certificates pursuant to the Merger. However, Home
Beneficial will reimburse you for reasonable customary expenses incurred in
connection with the mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients.
Requests for assistance or additional copies of the Proxy
Statement/Prospectus, the Form of Election/Letter of Transmittal or any of the
enclosed materials may be directed to the Information Agent, Corporate
Investor Communications, Inc., at (800) 932-8478.
Very truly yours,
AMERICAN GENERAL CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF AMERICAN GENERAL, HOME BENEFICIAL, THE EXCHANGE
AGENT, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE MERGER OTHER THAN THE DOCUMENTS
ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
3
