<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN INTERNATIONAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6331 13-2592361
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
70 PINE STREET
NEW YORK, NEW YORK 10270
(212) 770-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
FLORENCE A. DAVIS
VICE PRESIDENT AND GENERAL COUNSEL
AMERICAN INTERNATIONAL GROUP, INC.
70 PINE STREET
NEW YORK, NEW YORK 10270
(212) 770-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
NEIL T. ANDERSON, ESQ. CRAIG M. WASSERMAN, ESQ.
SULLIVAN & CROMWELL WACHTELL, LIPTON, ROSEN & KATZ
125 BROAD STREET 51 WEST 52ND STREET
NEW YORK, NY 10004 NEW YORK, NY 10019
(212) 558-4000 (212) 403-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective and all
other conditions to the merger (the "Merger") of SunAmerica Inc. ("SunAmerica")
with and into the Registrant pursuant to the Agreement and Plan of Merger
described in the enclosed Joint 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. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED(1) BE REGISTERED(2) PER SHARE PRICE(3) REGISTRATION FEE(4)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $2.50 per
share.......................... 206,249,985 N.A. $14,157,071,301.80 $4,176,336.04
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement relates to the common stock, par value $2.50 per
share (the "AIG Common Stock"), of the Registrant estimated to be issuable
to holders of common stock, par value $1.00 per share (the "SunAmerica
Common Stock"), of SunAmerica in connection with the Merger.
(2) The number of shares to be registered pursuant to this Registration
Statement is based on the maximum number of shares of AIG Common Stock
estimated to be issuable to shareholders of SunAmerica upon the consummation
of the Merger, based on a total number of outstanding shares of SunAmerica
Common Stock of 241,228,052, which represents that number of shares of
SunAmerica Common Stock expected to be outstanding immediately prior to the
Effective Time (including shares issuable upon redemption and conversion of
certain securities of SunAmerica and exercises pursuant to incentive plans
of SunAmerica), multiplied by the exchange ratio of 0.855 of a share of AIG
Common Stock for each share of SunAmerica Common Stock.
(3) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act and solely
for the purpose of calculating the registration fee, the proposed maximum
offering price is equal to the market value of the SunAmerica Common Stock
to be cancelled in the Merger and is based upon $58.6875, the average of the
high and low sale prices per share of SunAmerica Common Stock on the New
York Stock Exchange Composite Tape on October 6, 1998.
(4) Calculated by multiplying .000295 by the proposed maximum aggregate offering
price. $2,986,067.66 of such amount is offset pursuant to Rule 457 by fees
previously paid in connection with the Schedule 14A filed jointly by the
Registrant and SunAmerica on September 18, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN INTERNATIONAL GROUP, INC. SUNAMERICA INC.
JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of American International Group, Inc. and SunAmerica
Inc. have agreed to a merger in which AIG will acquire SunAmerica. This proposed
merger will join AIG with SunAmerica, a leading participant in asset
accumulation products for both the retirement and pre-retirement markets, and
will allow AIG to introduce SunAmerica's retirement products into domestic and
international markets where the demand for private retirement products is
growing rapidly.
In the merger, SunAmerica will merge with and into AIG, with AIG being the
surviving corporation. Before the merger, each share of SunAmerica class B stock
will be converted into one share of SunAmerica common stock. Holders of
SunAmerica common stock (including holders who will receive shares of SunAmerica
common stock upon conversion of their shares of SunAmerica class B stock) will
receive 0.855 of a share of AIG common stock in exchange for each share of
SunAmerica common stock.
We estimate that approximately 206,249,985 shares of AIG common stock will be
issued, or issuable upon the exercise of options we expect to be outstanding, to
SunAmerica shareholders upon completion of the merger. These shares will
represent approximately 16.3% of the outstanding shares of common stock of AIG
after the merger on a diluted basis. Likewise, the shares of AIG common stock
held by AIG shareholders before the merger will represent approximately 83.7% of
the outstanding shares of AIG common stock after the merger on a diluted basis.
AIG shareholders will continue to own their existing shares after the merger.
We cannot complete the merger unless we obtain the necessary government
approvals and unless the shareholders of both our companies approve it. Each of
us will hold a special meeting of our shareholders to consider and vote on this
merger proposal. This document describes those meetings and the merger. YOUR
VOTE IS VERY IMPORTANT. Whether or not you plan to attend your shareholder
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us. If you date and mail your proxy card without indicating how
you want to vote, your proxy will be counted as a vote "FOR" the merger. If you
do not return your card, or if you do not instruct your broker how to vote any
shares held for you in "street name", the effect will be the same as a vote
against the merger.
The dates, times and places of the special meetings are as follows:
<TABLE>
<S> <C>
FOR AIG SHAREHOLDERS: FOR SUNAMERICA SHAREHOLDERS:
72 Wall Street Park Hyatt at Century City
Eighth Floor The Grand Salon
New York, New York 2151 Avenue of the Stars
November 18, 1998, 3:00 P.M., local time Los Angeles, California
November 18, 1998, 11:30 A.M., local time
</TABLE>
This Joint Proxy Statement/Prospectus gives you detailed information about the
merger we are proposing, and it includes our merger agreement as Appendix A. You
can also obtain information about our companies from publicly available
documents we have each filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
WE ENTHUSIASTICALLY SUPPORT THIS COMBINATION OF OUR COMPANIES AND JOIN WITH THE
OTHER MEMBERS OF OUR BOARDS OF DIRECTORS IN RECOMMENDING THAT YOU VOTE IN FAVOR
OF THE MERGER.
<TABLE>
<S> <C>
[/s/ M.R. GREENBERG] [/s/ ELI BROAD]
M. R. GREENBERG ELI BROAD
CHAIRMAN AND CHIEF EXECUTIVE OFFICER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AMERICAN INTERNATIONAL GROUP, INC. SUNAMERICA INC.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
JOINT PROXY STATEMENT/PROSPECTUS DATED OCTOBER 7, 1998
AND FIRST MAILED TO SHAREHOLDERS ON OR ABOUT OCTOBER 13, 1998
<PAGE> 3
[AIG LOGO]
AMERICAN INTERNATIONAL GROUP, INC.
70 PINE STREET, NEW YORK, N.Y. 10270
------------------------
NOTICE OF SPECIAL MEETING OF COMMON SHAREHOLDERS
TO BE HELD ON NOVEMBER 18, 1998
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of American
International Group, Inc., a Delaware corporation ("AIG"), will be held on
November 18, 1998, at 3:00 P.M., local time, at the offices of AIG at 72 Wall
Street, Eighth Floor, New York, New York, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of August 19, 1998 (the "Merger
Agreement"), between SunAmerica Inc., a Maryland corporation
("SunAmerica"), and AIG, pursuant to which SunAmerica will be merged with
and into AIG (the "Merger") upon the terms and subject to the conditions
set forth in the Merger Agreement, as more fully described in the attached
Joint Proxy Statement/Prospectus. A copy of the Merger Agreement is set
forth as Appendix A to the attached Joint Proxy Statement/Prospectus.
2. To transact such other business as may properly be brought before
the Special Meeting, or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 9, 1998
as the record date for determining the shareholders entitled to vote at the
Special Meeting and any adjournments or postponements thereof. Accordingly, only
shareholders of record on such date are entitled to notice of, and to vote at,
the Special Meeting and any adjournments or postponements thereof.
The affirmative vote of the holders of a majority of the outstanding shares
of AIG common stock is necessary to approve and adopt the Merger Agreement and
the Merger. An abstention from voting or a broker non-vote will have the same
effect as a vote against approval and adoption of the Merger Agreement and the
Merger. Holders of AIG common stock are not entitled to dissenters' rights with
respect to the proposals to be voted on at the Special Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER, DECLARED THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND
DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, AIG AND ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
ITS SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE MERGER.
By Order of the Board of Directors
/s/ Kathleen E. Shannon
Kathleen E. Shannon
Secretary
October 7, 1998
New York, New York
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. ACCORDINGLY, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE SHARES REGISTERED IN YOUR NAME (AND, IF
YOU HAVE A PROPER POWER OF ATTORNEY, REGISTERED IN A NOMINEE'S NAME) IN PERSON
IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
[SunAmerica LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF COMMON AND CLASS B SHAREHOLDERS
TO BE HELD ON NOVEMBER 18, 1998
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of common and class B
shareholders of SunAmerica Inc., a Maryland corporation ("SunAmerica"), will be
held on November 18, 1998, at 11:30 A.M., local time, in the Grand Salon of the
Park Hyatt at Century City, 2151 Avenue of the Stars, Los Angeles, California,
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of August 19, 1998 (the "Merger
Agreement"), between SunAmerica and American International Group, Inc., a
Delaware corporation ("AIG"), pursuant to which SunAmerica will be merged
with and into AIG (the "Merger") upon the terms and subject to the
conditions set forth in the Merger Agreement, as more fully described in
the attached Joint Proxy Statement/Prospectus. A copy of the Merger
Agreement is set forth as Appendix A to the attached Joint Proxy
Statement/Prospectus.
2. To transact such other business as may properly be brought before
the Special Meeting, or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on October 9, 1998
as the record date for determining the common and class B shareholders entitled
to vote at the Special Meeting and any adjournments or postponements thereof.
Accordingly, only common and class B shareholders of record on such date are
entitled to vote at the Special Meeting and any adjournments or postponements
thereof.
The affirmative vote of the holders of two-thirds of the outstanding shares
of SunAmerica common stock and the holders of two-thirds of the outstanding
shares of SunAmerica class B stock, each voting separately as a class, is
necessary to approve and adopt the Merger Agreement and the Merger. An
abstention from voting or a broker non-vote will have the same effect as a vote
against approval and adoption of the Merger Agreement and the Merger. Holders of
SunAmerica common stock and class B stock are not entitled to appraisal rights
with respect to any of the proposals to be voted on at the Special Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER, DECLARED THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND
DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, SUNAMERICA
AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT COMMON AND CLASS B SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE MERGER.
By Order of the Board of Directors
/s/ Susan L. Harris
Susan L. Harris
Senior Vice President and Secretary
October 7, 1998
Los Angeles, California
GIVEN THE SIGNIFICANT PROPORTION OF VOTES REQUIRED TO APPROVE THE MERGER,
IT IS PARTICULARLY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON. ACCORDINGLY, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE SHARES REGISTERED IN YOUR NAME
(AND, IF YOU HAVE A PROPER POWER OF ATTORNEY, REGISTERED IN A NOMINEE'S NAME) IN
PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 5
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus contains certain forward-looking
statements with respect to the financial condition, results of operations and
business of each of AIG and SunAmerica. These statements may be made directly in
this document referring to AIG or SunAmerica, or may be "incorporated by
reference" to other documents filed with the Securities and Exchange Commission
by SunAmerica and may include statements for the period following the
consummation of the merger. You can find many of these statements by looking for
words such as "believes", "expects", "anticipates", "estimates" or similar
expressions in this Joint Proxy Statement/Prospectus or, in the case of
SunAmerica, incorporated herein.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Factors that may cause actual results to differ from those
contemplated by the forward-looking statements include, among others, the
following possibilities:
- Competitive pressures in the insurance, banking, broker-dealer,
investment banking or financial services industries may increase
significantly.
- Changes in the interest rate environment may reduce profit margins.
- General economic or business conditions, both domestic and foreign, may
be less favorable than expected, resulting in, among other things, lower
than expected revenues.
- Costs or difficulties related to the integration of the businesses of AIG
and SunAmerica may be greater than expected.
- Legislative or regulatory changes may adversely affect the businesses in
which AIG and SunAmerica are engaged.
- The rate of customer bankruptcies may increase.
- Necessary technological changes (including changes to address "Year 2000"
data systems issues) may be more difficult or expensive to make than
anticipated.
- Adverse changes may occur in the securities markets.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. SunAmerica's shareholders and AIG shareholders are
cautioned not to place undue reliance on such statements, which speak only as of
the date of this Joint Proxy Statement/Prospectus or, in the case of SunAmerica
documents incorporated by reference, the date of such document.
All subsequent written and oral forward-looking statements attributable to
AIG or SunAmerica or any person acting on their behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this
section. Neither AIG nor SunAmerica undertakes any obligation to release
publicly any revisions to such forward-looking statements to reflect events or
circumstances after the date of this Joint Proxy Statement/Prospectus or to
reflect the occurrence of unanticipated events.
i
<PAGE> 6
REFERENCES TO ADDITIONAL INFORMATION
This Joint Proxy Statement/Prospectus incorporates important business and
financial information about AIG and SunAmerica from documents that are not
included in or delivered with this document. This information is available to
you without charge upon your written or oral request. You can obtain documents
incorporated by reference in this Joint Proxy Statement/Prospectus (other than
certain exhibits to those documents) by requesting them in writing or by
telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
AMERICAN INTERNATIONAL GROUP, INC. SUNAMERICA INC.
70 Pine Street 1 SunAmerica Center
New York, New York 10270 Century City
(212) 770-7074 Los Angeles, California 90067-6022
Attention: Director of Investor Relations (310) 772-6235
E-mail: [email protected]
Attention: Vice President, Investor Relations
</TABLE>
If you would like to request documents, please do so by November 9, 1998 in
order to receive them before the AIG special meeting or the SunAmerica special
meeting, as applicable.
See "Where You Can Find More Information" (page 79).
ii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... i
REFERENCES TO ADDITIONAL INFORMATION........................ ii
QUESTIONS AND ANSWERS ABOUT THE AIG/SUNAMERICA MERGER....... 1
SUMMARY..................................................... 3
The Companies............................................. 3
The Special Meetings...................................... 3
Record Date; Vote Required................................ 3
Recommendations to Shareholders........................... 4
The Merger................................................ 4
The Merger Agreement...................................... 7
Related Agreements and Transactions....................... 8
Comparison of Rights of SunAmerica Shareholders and AIG
Shareholders........................................... 8
Comparative Per Share Market Price Information............ 9
Listing of AIG Common Stock............................... 9
MARKET PRICE AND DIVIDEND INFORMATION....................... 10
Dividend Information...................................... 10
Recent Closing Prices..................................... 11
Number of Shareholders.................................... 11
SELECTED CONSOLIDATED FINANCIAL DATA........................ 12
COMPARATIVE PER SHARE DATA.................................. 14
THE AIG SPECIAL MEETING..................................... 15
General; Dates, Times and Places.......................... 15
Purpose of the AIG Special Meeting........................ 15
Revocation of Proxies..................................... 15
Record Date; Vote Required................................ 15
Quorum.................................................... 16
Expenses of Solicitation.................................. 16
Recommendation of AIG Board............................... 16
Miscellaneous............................................. 17
THE SUNAMERICA SPECIAL MEETING.............................. 18
General; Dates, Times and Places.......................... 18
Purpose of the SunAmerica Special Meeting................. 18
Revocation of Proxies..................................... 18
Record Date; Vote Required................................ 18
Quorum.................................................... 19
Expenses of Solicitation.................................. 20
Recommendation of SunAmerica Board........................ 20
Miscellaneous............................................. 20
</TABLE>
iii
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE MERGER.................................................. 21
General................................................... 21
Background of the Merger.................................. 22
AIG Reasons for the Merger; Recommendation of the AIG
Board.................................................. 23
SunAmerica Reasons for the Merger; Recommendation of the
SunAmerica Board....................................... 24
Opinion of AIG's Financial Advisor........................ 25
Opinions of SunAmerica's Financial Advisors............... 29
Certain Federal Income Tax Consequences of the Merger..... 34
Required Regulatory Filings and Approvals................. 35
Resale of AIG Common Stock................................ 37
Management and Operations Following the Merger............ 38
Interests of Certain Persons in the Merger................ 38
Absence of Appraisal Rights............................... 40
Accounting Treatment...................................... 40
Public Trading Markets.................................... 40
THE MERGER AGREEMENT........................................ 41
General; Merger Consideration............................. 41
Terms of the Merger....................................... 41
Closing; Effective Time................................... 42
Exchange of Certificates.................................. 42
Distributions with Respect to Unexchanged Shares;
Transfers.............................................. 42
Treatment of SunAmerica Series E Preferred Shares,
SunAmerica Depositary Shares and SunAmerica Security
Units.................................................. 43
Corporate Governance...................................... 43
Conditions of the Merger.................................. 43
Certain Covenants......................................... 45
Representations and Warranties............................ 50
Termination............................................... 51
Expenses and Termination Fees............................. 51
Amendment and Waiver; Right to Revise Form of Merger...... 52
RELATED AGREEMENTS AND TRANSACTIONS......................... 53
Voting Agreement.......................................... 53
INFORMATION REGARDING AIG................................... 54
INFORMATION REGARDING SUNAMERICA............................ 55
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF AIG AND
SUNAMERICA................................................ 56
DESCRIPTION OF AIG CAPITAL STOCK............................ 67
General................................................... 67
AIG Common Stock.......................................... 67
AIG Preferred Stock....................................... 67
</TABLE>
iv
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPARISON OF RIGHTS OF SUNAMERICA SHAREHOLDERS AND AIG
SHAREHOLDERS.............................................. 68
Authorized Stock.......................................... 68
Election and Size of Board of Directors................... 68
Standards of Conduct for Directors........................ 69
Limitation of Liability of Directors and Officers......... 69
Indemnification of Directors and Officers................. 70
Removal of Directors...................................... 71
Vacancies on the Board of Directors....................... 71
Action By Written Consent................................. 72
Amendments to Charter..................................... 72
Amendments to By-Laws..................................... 72
Special Meetings of Shareholders.......................... 72
Vote on Extraordinary Corporate Transactions.............. 73
Inspection of Documents................................... 73
Dividends and Other Distributions......................... 73
Appraisal Rights of Dissenting Shareholders............... 74
Preemptive Rights......................................... 75
Special Redemption Provisions............................. 75
Absence of Rights Plan.................................... 76
State Antitakeover Statutes............................... 76
Transactions with Interested Directors.................... 78
LEGAL MATTERS............................................... 78
EXPERTS..................................................... 78
FUTURE SHAREHOLDER PROPOSALS................................ 79
WHERE YOU CAN FIND MORE INFORMATION......................... 79
</TABLE>
<TABLE>
<S> <C> <C>
APPENDIX A -- Agreement and Plan of Merger between SunAmerica Inc. and
American International Group, Inc., dated as of August 19,
1998
APPENDIX B -- Voting Agreement between Eli Broad and American
International Group, Inc., dated as of August 19, 1998
APPENDIX C -- Fairness Opinion of Morgan Stanley & Co. Incorporated, dated
August 19, 1998
APPENDIX D -- Fairness Opinion of Goldman, Sachs & Co., dated August 19,
1998
APPENDIX E -- Fairness Opinion of Wasserstein Perella & Co., Inc., dated
August 19, 1998
</TABLE>
v
<PAGE> 10
INDEX OF SELECTED DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1940 Act........................................ 36
1997 ESPP....................................... 48
20th Century.................................... 54
Acquisition Proposal............................ 47
Advisers Act.................................... 36
Advisory Clients................................ 36
Advisory Entities............................... 36
Affiliate Letter................................ 37
Aggregate Equity Consideration.................. 32
AICCO........................................... 54
AIG............................................. 10
AIG Board....................................... 10
AIG By-Laws..................................... 16
AIG Certificate................................. 16
AIG Common Stock................................ 10
AIG Historical Stock Prices..................... 32
AIG Preferred Stock............................. 67
AIG Record Date................................. 15
AIG Requisite Vote.............................. 15
AIG Shareholders................................ 15
AIG Special Meeting............................. 15
AIGFP........................................... 54
AIGTG........................................... 54
Antitrust Division.............................. 35
Articles of Merger.............................. 21
CIBC Act........................................ 36
Closing......................................... 42
Closing Date.................................... 42
Code............................................ 23
Commission...................................... 12
Comparable Asset Accumulators................... 26
Comparable Asset Managers....................... 26
Comparable Life and Annuity Companies........... 26
Comparable Public Companies..................... 26
Delaware Certificate of Merger.................. 21
Department...................................... 21
DGCL............................................ 16
Effective Time.................................. 21
EPS............................................. 33
ERISA........................................... 50
Exchange Act.................................... 16
Exchange Agent.................................. 42
Exchange Fund................................... 42
Exchange Ratio.................................. 21
Excluded Shares................................. 21
FAS 115......................................... 26
FDIC............................................ 36
Form A.......................................... 35
Form E.......................................... 36
Fowler Agreement................................ 38
FTC............................................. 35
Fund Clients.................................... 36
GICs............................................ 55
Goldman Sachs................................... 22
Goldman Sachs Engagement Letter................. 29
Goldman Sachs Opinion........................... 29
Governmental Consents........................... 44
Governmental Entity............................. 44
HSR Act......................................... 35
IBES............................................ 27
ILFC............................................ 54
Incentive Payments.............................. 38
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Contracts............................ 36
Joint Proxy Statement/Prospectus................ 15
Krat Agreement.................................. 38
LTIP............................................ 39
LTM............................................. 32
MacKenzie....................................... 16
Merger.......................................... 15
Merger Agreement................................ 15
Merger Consideration............................ 21
MGCL............................................ 19
MGCL Interested Stockholder..................... 76
Morgan Stanley.................................. 22
Morgan Stanley Opinion.......................... 25
Morrow.......................................... 20
NASD............................................ 37
New Shares...................................... 53
NYSE............................................ 10
Order........................................... 44
Precedent Transactions.......................... 27
Registration Statement.......................... 44
Representatives................................. 47
S&P 500......................................... 26
Securities Act.................................. 37
Selected Accumulation Companies................. 32
Selected Financial Services Industry
Transactions.................................. 32
Selected Life and Accumulation Industry
Transactions.................................. 32
Selected Other Financial Companies.............. 33
Shares.......................................... 53
SICO............................................ 15
Starr Entities.................................. 16
Starr........................................... 15
Starr Foundation................................ 15
SunAmerica...................................... 10
SunAmerica Award................................ 39
SunAmerica Board................................ 18
SunAmerica Broker-Dealers....................... 36
SunAmerica By-Laws.............................. 19
SunAmerica Certificates......................... 42
SunAmerica Charter.............................. 19
SunAmerica Class B Stock........................ 18
SunAmerica Common Stock......................... 10
SunAmerica Depositary Shares.................... 43
SunAmerica Historical Stock Prices.............. 32
SunAmerica Nontransferable Class B Stock........ 18
SunAmerica Option............................... 39
SunAmerica Record Date.......................... 18
SunAmerica Reports.............................. 46
SunAmerica Requisite Vote....................... 18
SunAmerica Security Units....................... 29
SunAmerica Series E Preferred Shares............ 68
SunAmerica Series E Preferred Stock............. 68
SunAmerica Shareholders......................... 18
SunAmerica Special Meeting...................... 18
SunAmerica Stock Plans.......................... 39
Surviving Corporation........................... 41
TRH............................................. 54
U.S. GAAP....................................... 26
Voting Agreement................................ 19
Wasserstein Perella............................. 22
Wasserstein Perella Opinion..................... 30
Wintrob Agreement............................... 38
</TABLE>
vi
<PAGE> 11
QUESTIONS AND ANSWERS ABOUT THE AIG/SUNAMERICA MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: AIG is the leading U.S.-based international insurance organization and among
the largest underwriters of commercial and industrial coverages in the United
States. SunAmerica is a leading participant in the retirement savings market,
with the fifth largest retail securities sales force in the United States.
The merger will join SunAmerica's wide array of products for the asset
accumulation market with AIG's extensive global network to establish AIG as a
leading provider of retirement savings products in both the domestic and
international markets. To review the reasons for the merger in greater
detail, see pages 23 through 25.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this Joint Proxy Statement/Prospectus, just
indicate on your proxy card how you want to vote, and sign and mail it in the
enclosed prepaid return envelope marked "Proxy" as soon as possible, so that
your shares may be represented and voted at the appropriate special meeting,
as indicated below:
AIG SPECIAL MEETING:
November 18, 1998
3:00 P.M., local time
72 Wall Street
Eighth Floor
New York, New York
SUNAMERICA SPECIAL MEETING:
November 18, 1998
11:30 A.M., local time
Park Hyatt at Century City
The Grand Salon
2151 Avenue of the Stars
Los Angeles, California
YOUR VOTE IS VERY IMPORTANT.
Holders of a majority of the outstanding shares of AIG common stock must
approve the merger, and therefore it is important that AIG shareholders
return their signed proxy cards. Since holders of two-thirds of the
outstanding shares of SunAmerica common stock and holders of two-thirds of
the outstanding shares of SunAmerica class B stock, each voting separately as
a class, must approve the merger, it is especially important that SunAmerica
shareholders return their signed proxy cards.
The AIG board of directors and the SunAmerica board of directors each
unanimously recommends voting "FOR" the proposed merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. Without instructions, your
shares will not be voted on the proposed merger, which will have the same
effect as voting against the proposed merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. There are three ways in which you may revoke your proxy and change your
vote. First, you may send a written notice to the party to whom you submitted
your proxy stating that you would like to revoke your proxy. Second, you may
complete and submit a new proxy card. Third, you may attend the AIG special
meeting or the SunAmerica special meeting, as applicable, and vote in person.
Simply attending the special meeting, however, will not revoke your proxy. If
you have instructed a broker to vote your shares, you must follow directions
received from your broker to change your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, AIG will send SunAmerica shareholders
written instructions for exchanging their share certificates. AIG
shareholders will keep their existing share certificates.
Q: WHAT WILL HOLDERS OF SUNAMERICA COMMON STOCK AND HOLDERS OF SUNAMERICA CLASS
B STOCK RECEIVE IN THE MERGER?
A: Before the completion of the merger, each share of SunAmerica class B stock
will be converted into one share of SunAmerica common stock. Holders of
shares of SunAmerica common stock (including those holders who will receive
shares of SunAmerica common stock upon conversion of their shares of
SunAmerica class B stock) will receive 0.855 of a share of AIG common stock
in exchange for each share of SunAmerica common stock. AIG will not
1
<PAGE> 12
issue fractional shares of AIG common stock. Instead, cash will be paid with
respect to fractional shares. For example, a holder of 100 shares of
SunAmerica common stock would receive 85 shares of AIG common stock, plus a
cash payment equal to the value of 0.50 of a share of AIG common stock.
Q: WHAT IS THE "EXCHANGE RATIO?"
A: The exchange ratio is the fraction of a share of AIG common stock into which
each share of SunAmerica common stock will be converted upon completion of
the merger. The exchange ratio will equal 0.855.
Please note that because the exchange ratio is fixed and the market price of
the shares of AIG common stock that SunAmerica shareholders will receive may
fluctuate, SunAmerica shareholders cannot be sure of the market value of the
shares of AIG common stock they will receive.
Q: WHAT WILL HOLDERS OF AIG COMMON STOCK RECEIVE IN THE MERGER?
A: Holders of AIG common stock will retain the shares of AIG common stock that
they currently own and such shares will remain unchanged. However, as a
result of the merger, they will own shares of a larger, more diversified
company, as more fully described in this Joint Proxy Statement/Prospectus.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working towards completing the merger as quickly as possible. In
addition to the approvals of the holders of AIG common stock, SunAmerica
common stock and SunAmerica class B stock, we must also obtain certain
insurance and other regulatory approvals that are expected to be obtained
following the special meetings. We expect to receive all of these approvals
in late 1998 or early 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: We expect that for United States federal income tax purposes, your exchange
of shares of SunAmerica common stock for shares of AIG common stock generally
will not cause you to recognize any gain or loss. You will, however,
recognize income or gain in connection with any cash received instead of
fractional shares of AIG common stock. Your holding period for the AIG common
stock received in the merger, which determines how any gain or loss should be
treated for federal income tax purposes upon future sales of AIG common
stock, generally will include the holding period for the common stock
exchanged in the merger. For a more complete description of federal income
tax considerations, see page 34.
Q: WILL THE COMPOSITION OF THE AIG BOARD OF DIRECTORS CHANGE AS A RESULT OF THE
MERGER?
A: Yes. At the time the merger is completed, the AIG board of directors will
elect two individuals designated by SunAmerica to the AIG board of directors.
AIG and SunAmerica expect that the two designees will be Eli Broad, Chairman
and Chief Executive Officer of SunAmerica, and Jay S. Wintrob, Vice Chairman
of SunAmerica.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETINGS?
A: We do not expect to ask you to vote on any matter other than the merger at
either special meeting.
Q: WILL THE RIGHTS OF SUNAMERICA SHAREHOLDERS CHANGE AS A RESULT OF THE MERGER?
A: Yes. Currently, SunAmerica shareholder rights are governed by Maryland law
and SunAmerica's Restated Charter and By-Laws, whereas AIG shareholder rights
are governed by Delaware law and AIG's Restated Certificate of Incorporation
and By-Laws. After the merger, SunAmerica shareholders will become
shareholders of AIG, and therefore their rights will be governed by Delaware
law and AIG's Restated Certificate of Incorporation and By-Laws. For a
summary of certain differences between the rights of SunAmerica shareholders
and the rights of AIG shareholders, see page 68.
Q: WHOM SHOULD SHAREHOLDERS CALL WITH QUESTIONS AND TO OBTAIN ADDITIONAL COPIES
OF THE JOINT PROXY STATEMENT/PROSPECTUS?
A: AIG shareholders should call MacKenzie Partners, Inc. at 1-800-322-2885.
SunAmerica shareholders should call Morrow & Co. at 1-800-566-9061.
2
<PAGE> 13
SUMMARY
This brief summary highlights selected information from this Joint Proxy
Statement/Prospectus. It does not contain all of the information that is
important to you. We urge you to read carefully the entire Joint Proxy
Statement/Prospectus and the other documents to which this document refers to
understand fully the merger. See "Where You Can Find More Information" (page
79). Each item in this summary includes a page reference directing you to a more
complete description of that item.
THE COMPANIES
- ----------------
AMERICAN INTERNATIONAL GROUP, INC. (PAGE 54)
70 Pine Street
New York, New York 10270
(212) 770-7000
AIG is a holding company with a market capitalization, as of September 30, 1998,
of approximately $82.3 billion. Through its subsidiaries, AIG is primarily
engaged in a broad range of insurance and insurance-related activities and
financial services in the United States and abroad. AIG's primary activities
include both general and life insurance operations.
AIG's general insurance subsidiaries are multiple line companies writing
substantially all lines of property and casualty insurance. One or more of these
companies is licensed to write substantially all of these lines in all states of
the United States and in more than 100 foreign countries.
AIG's life insurance subsidiaries offer a wide range of traditional insurance
and financial and investment products. One or more of these subsidiaries is
licensed to write life insurance in all states in the United States and in more
than 70 foreign countries.
SUNAMERICA INC. (PAGE 55)
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
(310) 772-6000
SunAmerica is a financial services company specializing in retirement savings
and investment products and services with a market capitalization of
approximately $13.2 billion as of September 30, 1998. The SunAmerica life
companies collectively rank among the largest issuers of fixed and variable
annuities and guaranteed investment contracts in the nation. SunAmerica achieves
broad-based distribution through six of SunAmerica's wholly-owned
broker-dealers, known as the SunAmerica Financial Network, as well as an
extensive network of independent NASD broker-dealers, full service securities
firms, insurance agents and major financial institutions. Complementing these
businesses are SunAmerica's asset management operations and its trust company
which provides administrative and custodial services to qualified retirement
plans.
THE SPECIAL MEETINGS
- -----------------------
AIG SHAREHOLDERS. (PAGE 15)
The AIG special meeting will be held on November 18, 1998 at 3:00 P.M., local
time, at the offices of AIG at 72 Wall Street, Eighth Floor, New York, New York.
At the AIG special meeting, you will be asked to:
1. approve and adopt the merger agreement and the merger of SunAmerica with and
into AIG; and
2. act on other matters that may be brought before the AIG special meeting.
SUNAMERICA SHAREHOLDERS. (PAGE 18)
The SunAmerica special meeting will be held on November 18, 1998 at 11:30 A.M.,
local time, in the Grand Salon of the Park Hyatt at Century City, 2151 Avenue of
the Stars, Los Angeles, California. At the SunAmerica special meeting, you will
be asked to:
1. approve and adopt the merger agreement and the merger of SunAmerica with and
into AIG; and
2. act on other matters that may be brought before the SunAmerica special
meeting.
RECORD DATE; VOTE REQUIRED
- ------------------------------
AIG SHAREHOLDERS. (PAGE 15)
You may vote at the AIG special meeting if you owned AIG common stock at the
close of business on October 9, 1998. On September 30, 1998, there were
1,049,959,401 shares of AIG common stock outstanding and entitled to vote. To
approve and adopt the merger agreement and the merger, the holders of a majority
of the shares of AIG common stock outstanding on October 9, 1998 must vote in
3
<PAGE> 14
favor of doing so. You can cast one vote for each share of AIG common stock that
you owned on October 9, 1998.
SUNAMERICA SHAREHOLDERS. (PAGE 18)
You may vote at the SunAmerica special meeting if you owned SunAmerica common
stock or SunAmerica class B stock at the close of business on October 9, 1998.
On September 30, 1998, there were 179,580,522 shares of SunAmerica common stock
and 16,272,702 shares of SunAmerica class B stock outstanding and entitled to
vote. To approve and adopt the merger agreement and the merger, the holders of
two-thirds of the shares of SunAmerica common stock outstanding on October 9,
1998 and holders of two-thirds of SunAmerica class B stock outstanding on
October 9, 1998, each voting separately as a class, must vote in favor of doing
so. You may cast one vote for each share of SunAmerica common stock and ten
votes for each share of SunAmerica class B stock that you owned on October 9,
1998. Since Eli Broad, Chairman and Chief Executive Officer of SunAmerica, who
owns approximately 82% of the outstanding shares of SunAmerica class B stock,
has agreed in a voting agreement to vote his SunAmerica class B stock to approve
the merger, the required two-thirds approval of the SunAmerica class B stock is
assured.
RECOMMENDATIONS TO SHAREHOLDERS
- -------------------------------------
AIG SHAREHOLDERS. (PAGE 16)
The AIG board of directors believes that the merger is fair to AIG and to you as
an AIG shareholder and in your best interests, and unanimously recommends that
you vote "FOR" the proposal to approve and adopt the merger agreement and the
merger.
SUNAMERICA SHAREHOLDERS. (PAGE 20)
The SunAmerica board of directors believes that the merger is fair to SunAmerica
and to you as a SunAmerica shareholder and in your best interests, and
unanimously recommends that you vote "FOR" the proposal to approve and adopt the
merger agreement and the merger.
THE MERGER
- ------------
GENERAL (PAGE 21)
We propose a merger in which SunAmerica will merge with and into AIG, with AIG
being the surviving corporation. AIG will continue as a Delaware corporation and
will retain its Restated Certificate of Incorporation and By-Laws. After the
merger, SunAmerica will no longer exist; however, AIG intends to continue to
operate SunAmerica's business separately from AIG's other operations at
SunAmerica's Los Angeles headquarters under the SunAmerica name.
WHAT YOU WILL RECEIVE
SUNAMERICA SHAREHOLDERS. (PAGE 21)
As a result of the merger, you will receive 0.855 of a share of AIG common stock
for each share of SunAmerica common stock that you own on the date of the
merger. This number is referred to as the "exchange ratio". No fractional shares
of AIG common stock will be issued. Instead, you will receive a check in payment
of any fractional shares based on the market value of AIG common stock as of the
date the merger is completed.
Because each share of SunAmerica class B stock will be converted into one share
of SunAmerica common stock before the merger, holders of shares of SunAmerica
class B stock will hold shares of SunAmerica common stock at the time of the
merger and will receive 0.855 of a share of AIG common stock for each share of
SunAmerica common stock which they hold as a result of the conversion.
Because the merger consideration is based on a fixed exchange ratio, the number
of shares of AIG common stock that holders of common stock will receive for each
share of SunAmerica common stock will not change even if the market prices of
AIG common stock and SunAmerica common stock change before the merger is
completed. Accordingly, the market value of AIG common stock to be received by
SunAmerica shareholders in the merger may be less or more than the current
market value of the comparable number of shares of AIG common stock.
YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATES UNTIL INSTRUCTED TO DO SO AFTER
THE MERGER IS COMPLETED.
AIG SHAREHOLDERS. (PAGE 21)
As an AIG shareholder, each of your shares of AIG common stock will remain
issued and outstanding as a share of AIG common stock. However, you will own
shares of a larger, more diversified company, as more fully described in this
Joint Proxy Statement/Prospectus.
4
<PAGE> 15
YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATES BECAUSE YOU WILL NOT EXCHANGE
YOUR STOCK CERTIFICATES IN CONNECTION WITH THE MERGER.
OWNERSHIP OF AIG FOLLOWING THE MERGER
(PAGE 21)
We estimate that approximately 206,249,985 shares of AIG common stock will be
issued, or issuable upon the exercise of options we expect to be outstanding, to
SunAmerica shareholders upon completion of the merger. These shares will
represent approximately 16.3% of the outstanding shares of AIG common stock
after the merger on a diluted basis. Likewise, the shares of AIG common stock
held by AIG shareholders before the merger will represent approximately 83.7% of
the outstanding shares of AIG common stock after the merger on a diluted basis.
AIG shareholders will continue to own their existing shares after the merger.
REASONS FOR THE MERGER
AIG. (PAGE 23)
The AIG Board determined to recommend approval and adoption of the merger
agreement and the merger based on a number of factors, including the following:
1. the AIG board of directors' review of the business, operations, financial
condition, earnings and prospects of both AIG and SunAmerica;
2. current domestic and foreign industry, economic and market conditions;
3. the consistency of the merger with AIG's long-term business strategy;
4. potential synergies in connection with the merger;
5. the complementary nature of AIG's and SunAmerica's businesses;
6. the structure of the merger and the terms of the merger agreement and the
voting agreement, including the fact that the merger is intended to be a
"tax-free" reorganization for federal income tax purposes and to qualify for
"pooling of interests" accounting treatment; and
7. the analyses, presentation and opinion of AIG's financial advisor, Morgan
Stanley & Co. Incorporated.
SUNAMERICA. (PAGE 24)
The SunAmerica board of directors determined to recommend approval and adoption
of the merger agreement and the merger based on a number of factors, including
the following:
1. the SunAmerica board of directors' review of the business, operations,
financial condition, earnings and prospects of both SunAmerica and AIG;
2. the anticipated benefits of the merger for SunAmerica's core retirement
savings products and investment services businesses;
3. the combined company's expected strong credit position in the domestic and
international markets;
4. the anticipated financial impact of the proposed transaction on the combined
company's future financial performance and on the SunAmerica shareholders;
5. the premium represented by the exchange ratio as of the last trading day
prior to the date on which the SunAmerica board of directors approved the
merger;
6. the structure of the merger and the terms of the merger agreement and the
voting agreement, including the fact that the merger is intended to be a
"tax-free" reorganization for federal income tax purposes and to qualify for
"pooling of interests" accounting treatment;
7. the fact that SunAmerica is expected to be operated separately within the AIG
corporate group;
8. the complementary nature of AIG's and SunAmerica's businesses;
9. the analyses, presentations and opinions of SunAmerica's financial advisors,
Goldman, Sachs & Co. and Wasserstein Perella & Co., Inc.; and
10. the opportunity for SunAmerica shareholders to participate in a larger, more
diversified financial products and services company.
OPINIONS OF FINANCIAL ADVISORS
AIG. (PAGE 25)
Morgan Stanley & Co. Incorporated, which has served as AIG's financial advisor
in connection with the merger, has delivered its written opinion dated August
19, 1998 to the AIG board of directors that as of such date the exchange ratio
pursuant to the merger agreement is fair from a financial point of view to AIG.
A copy of the opinion delivered by Morgan Stanley is attached to this document
as
5
<PAGE> 16
Appendix C. You should read the opinion in its entirety to understand the
assumptions made, matters considered and limitations on the review undertaken by
Morgan Stanley in providing this opinion.
SUNAMERICA. (PAGE 29)
Each of Goldman, Sachs & Co. and Wasserstein Perella & Co., Inc. has served as
SunAmerica's financial advisor in connection with the merger and each has
delivered its written opinion dated August 19, 1998 to the SunAmerica board of
directors that as of such date the exchange ratio in the merger is fair from a
financial point of view to the holders of SunAmerica common stock. A copy of the
opinion delivered by Goldman Sachs is attached to this document as Appendix D
and a copy of the opinion delivered by Wasserstein Perella is attached to this
document as Appendix E. You should read these opinions in their entirety to
understand the assumptions made, matters considered and limitations on the
review undertaken by each of Goldman Sachs and Wasserstein Perella in providing
its opinion.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
(PAGE 34)
SunAmerica shareholders generally will not recognize taxable gain or loss for
United States federal income tax purposes upon the exchange of SunAmerica common
stock for AIG common stock, except with respect to any cash received instead of
fractional shares of AIG common stock. The holding period for the AIG common
stock received by SunAmerica shareholders in the merger, which determines how
any gain or loss should be treated for federal income tax purposes upon future
sales of AIG common stock, generally will include the holding period for the
common stock exchanged in the merger.
We have conditioned the merger on our receipt of legal opinions that the federal
income tax treatment will be as we have described in this document.
This tax treatment may not apply to certain SunAmerica shareholders and may
depend on your specific situation and on variables not within our control. You
should consult your own tax advisor for a full understanding of the tax
consequences of the merger to you.
REGULATORY APPROVALS REQUIRED FOR THE MERGER (PAGE 35)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, required
us to furnish certain information and materials to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and requires that a
specified waiting period has expired or been terminated before the merger can be
completed. Even after the waiting period expires or terminates, the Antitrust
Division of the Department of Justice and the Federal Trade Commission will have
the authority to challenge the merger on antitrust grounds before or after the
merger is completed.
The merger is also subject to the receipt of certain approvals from various
state and foreign insurance regulatory authorities and the expiration of
specified waiting periods. In August and September 1998, AIG made all such
applicable filings.
Because SunAmerica owns three premium finance companies, AIG is required to
obtain approvals or make prior notice filings under the applicable change of
control laws in certain states. By the end of October 1998, AIG expects to have
made all such applicable filings.
In addition, because one of SunAmerica's subsidiaries is a trust company
chartered by the State of Colorado and insured by the Federal Deposit Insurance
Corporation, AIG is required to obtain approval from both the Federal Deposit
Insurance Corporation and the Banking Board of the State of Colorado to acquire
the trust company.
The merger is conditioned on the receipt of approvals and consents from certain
of SunAmerica's fund and advisory clients representing at least 80% of the total
assets which are subject to investment contracts with SunAmerica's fund and
advisory clients.
We cannot predict whether we will obtain the required regulatory and other
approvals within the time frame contemplated by the merger agreement or on
conditions that would not be detrimental to AIG.
APPRAISAL RIGHTS FOR DISSENTING SHAREHOLDERS (PAGE 74)
Applicable law does not provide appraisal rights to dissenting shareholders in
the merger.
6
<PAGE> 17
THE MERGER AGREEMENT
- -------------------------
The merger agreement is attached to this document as Appendix A. Please read the
merger agreement in its entirety. It is the legal document that governs the
merger.
EFFECTIVE TIME (PAGE 42)
The merger will occur shortly after all of the conditions to the completion of
the merger have been satisfied. It is currently anticipated that the merger will
occur in late 1998 or early 1999.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 43)
The completion of the merger depends on a number of conditions being satisfied,
including the following:
1. approval of the merger by both AIG shareholders and SunAmerica shareholders;
2. approval by the New York Stock Exchange for the listing of the shares of AIG
common stock to be issued in the merger;
3. approval of the merger by certain federal and state regulatory authorities
and the expiration of applicable waiting periods;
4. the absence of any injunction or legal restraint blocking the merger, or of
any proceeding by a government body trying to block the merger;
5. receipt by each of AIG and SunAmerica of legal opinions that the United
States federal income tax treatment of AIG, SunAmerica and the holders of
SunAmerica common stock will be as we have described in this document;
6. receipt by each of AIG and SunAmerica of letters from our respective
independent accountants that the merger will qualify for "pooling of
interests" accounting treatment;
7. receipt by each of AIG and SunAmerica of an affiliate letter from each person
identified as an affiliate of the other; and
8. receipt of approvals and consents from certain fund and advisory clients of
SunAmerica relating to investment contracts with SunAmerica's fund and
advisory clients.
If the law permits, either of AIG or SunAmerica could choose to waive a
condition to its obligation to complete the merger even though that condition
has not been satisfied. We cannot be certain when (or if) the conditions to the
merger will be satisfied or waived, or that the merger will be completed.
SUNAMERICA STOCK OPTIONS (PAGE 39)
When we complete the merger, each unexercised stock option to buy SunAmerica
common stock outstanding under SunAmerica's stock option plans will become an
option to purchase AIG common stock. The number of shares of AIG common stock
subject to each new option, as well as the exercise price of each new option,
will be adjusted to reflect the applicable terms of the merger.
ACCOUNTING TREATMENT (PAGE 40)
We expect the merger to qualify as a "pooling of interests", which means that we
will treat our companies as if they had always been combined for accounting and
financial reporting purposes.
TERMINATION OF THE MERGER AGREEMENT (PAGE 51)
We may agree in writing to terminate the merger agreement at any time without
completing the merger, even after the shareholders of both our companies have
approved it.
In addition, either of us may decide, without the consent of the other, to
terminate the merger agreement if:
1. the merger has not been completed by June 30, 1999;
2. the SunAmerica shareholders or the AIG shareholders fail to approve the
merger;
3. either SunAmerica or AIG breaches its representations, warranties or
obligations under the merger agreement in a manner that would be reasonably
likely to have a material adverse effect on the financial condition,
operations, properties, business or results of operations of either
SunAmerica or AIG or would have the effect of blocking or materially delaying
the merger, and the breach cannot be cured;
4. an event has occurred or a circumstance exists which has a material adverse
effect on the financial condition, operations, properties, business or
results of operations of either SunAmerica or AIG or has the effect of
blocking or materially delaying the merger; or
7
<PAGE> 18
5. any legal restriction permanently restraining, enjoining or otherwise
prohibiting completion of the merger has become final and non-appealable.
In addition, AIG may terminate the merger agreement if the SunAmerica board of
directors withdraws or adversely modifies its approval or recommendation of the
merger agreement or fails to reconfirm the recommendation.
TERMINATION FEES (PAGE 51)
SunAmerica has agreed to pay AIG a fee of $500 million if the merger agreement
is terminated under circumstances in which another person approaches SunAmerica
and proposes a merger or similar transaction and a merger or similar transaction
thereafter occurs. AIG has agreed to pay SunAmerica a fee of $500 million if the
merger agreement is terminated because the AIG shareholders fail to approve the
merger.
AMENDMENT AND WAIVER (PAGE 52)
We may agree to amend the merger agreement, including changing the structure of
the merger before its completion. After SunAmerica's shareholders or AIG's
shareholders adopt the merger agreement, however, the agreement cannot be
amended in any way that requires further shareholder approval under applicable
law without first obtaining that approval. Also, each of us may waive our right
to require the other party to adhere to the terms and conditions of the merger
agreement, to the extent legally permissible.
RELATED AGREEMENTS AND TRANSACTIONS (PAGE 53)
- ----------------------------------------------------
VOTING AGREEMENT (PAGE 53)
To induce AIG to enter into the merger agreement, Eli Broad, Chairman and Chief
Executive Officer of SunAmerica, entered into a voting agreement with AIG. Mr.
Broad has agreed to vote all of his shares of SunAmerica common stock and
SunAmerica class B stock "FOR" the approval and adoption of the merger agreement
and the merger at the SunAmerica special meeting. In addition, the voting
agreement provides that Mr. Broad will convert each share of SunAmerica class B
stock held by him into one share of SunAmerica common stock immediately before
the merger.
The voting agreement is attached to this document as Appendix B. Please read the
voting agreement in its entirety.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 38)
Some of SunAmerica's directors and executive officers have interests in the
merger that are different from, or in addition to, your interests as SunAmerica
shareholders. These interests exist because of certain rights the officers and
directors of SunAmerica have pursuant to the terms of certain benefit and
compensation plans maintained by SunAmerica and also, in the case of the
officers, pursuant to the terms of certain employment agreements with
SunAmerica. These employment agreements may provide certain officers with
severance benefits if their employment is terminated under specified
circumstances following the merger. Some of these plans will provide for the
accelerated vesting of or lapse of restrictions with respect to certain
stock-based rights.
At the time the merger is completed, the AIG board of directors will elect two
individuals designated by SunAmerica to the AIG board of directors. AIG and
SunAmerica expect that the two SunAmerica designees will be Mr. Broad and Jay S.
Wintrob, Vice Chairman of SunAmerica. Also, following the merger, AIG will
indemnify the officers and directors of SunAmerica for certain events occurring
before the merger.
The members of SunAmerica's board of directors knew about these additional
interests, and considered them, when they approved the merger agreement.
COMPARISON OF RIGHTS OF SUNAMERICA SHAREHOLDERS AND AIG SHAREHOLDERS (PAGE 68)
The rights of SunAmerica's shareholders are currently governed by Maryland law
and SunAmerica's Restated Charter and By-Laws whereas the rights of AIG
shareholders are governed by Delaware law and AIG's Restated Certificate of
Incorporation and By-Laws. Upon the completion of the merger, SunAmerica
shareholders will become shareholders of AIG, and therefore their rights will be
governed by Delaware law and by AIG's Restated Certificate of Incorporation and
By-Laws. As a result of these different governing laws and organizational
documents, SunAmerica shareholders will have
8
<PAGE> 19
different rights as holders of AIG common stock than they currently have as
holders of SunAmerica common stock or SunAmerica class B stock.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 10)
Shares of AIG common stock and SunAmerica common stock are listed on the New
York Stock Exchange. AIG is listed under the symbol "AIG", and SunAmerica is
listed under the symbol "SAI". On August 19, 1998, the last trading day before
we announced the merger, AIG common stock closed at $94 5/8 per share, and
SunAmerica common stock closed at $64 1/4 per share. On October 6, 1998, AIG
common stock closed at $71 1/16 per share and SunAmerica common stock closed at
$57 5/8 per share. SunAmerica class B stock is not publicly traded.
Based on the exchange ratio in the merger, which is 0.855 of a share of AIG
common stock for each share of SunAmerica common stock, the market value of the
consideration that SunAmerica shareholders would receive for each share of
SunAmerica common stock would be $80.90 based on AIG's closing common stock
price on August 19, 1998, and $60.76 based on AIG's closing common stock price
on October 6, 1998.
The market price of both AIG and SunAmerica common stock will fluctuate prior to
the merger. No assurance can be given as to the future prices or markets for AIG
common stock or SunAmerica common stock. You should obtain current stock price
quotations for both AIG and SunAmerica common stock.
LISTING OF AIG COMMON STOCK (PAGE 50)
- ---------------------------------------------
AIG has agreed to list the shares of AIG common stock to be issued in connection
with the merger on the New York Stock Exchange.
9
<PAGE> 20
MARKET PRICE AND DIVIDEND INFORMATION
The common stock, par value $2.50 per share (the "AIG Common Stock"), of
American International Group, Inc., a Delaware corporation ("AIG"), is listed on
the New York Stock Exchange, Inc. ("NYSE") under the symbol "AIG". The common
stock, par value $1.00 per share (the "SunAmerica Common Stock"), of SunAmerica
Inc., a Maryland corporation ("SunAmerica"), is listed on the NYSE under the
symbol "SAI". The SunAmerica Class B Stock (as defined under the caption "The
SunAmerica Special Meeting -- General; Dates, Times and Places") is not publicly
traded. The table below sets forth, for the calendar quarters indicated, the
high and low closing sales prices per share of AIG Common Stock and SunAmerica
Common Stock, as reported on the NYSE Composite Tape, and the dividends per
share declared on AIG Common Stock and SunAmerica Common Stock. All prices are
as reported by the National Quotation Bureau, Incorporated, as adjusted for
applicable stock splits.
<TABLE>
<CAPTION>
AIG SUNAMERICA
COMMON STOCK(A) COMMON STOCK(B)
---------------------------- ----------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995:
First Quarter................ $ 31 15/16 $28 11/16 $0.034 $ 9 11/16 $ 8 $0.033
Second Quarter............... 35 3/16 30 5/8 0.034 11 15/16 9 1/2 0.033
Third Quarter................ 38 7/16 31 13/16 0.038 14 11 1/4 0.033
Fourth Quarter............... 42 3/16 36 11/16 0.038 16 7/16 13 3/4 0.050
1996:
First Quarter................ 45 11/16 39 11/16 0.038 18 13/16 15 1/16 0.050
Second Quarter............... 43 13/16 39 3/16 0.038 19 9/16 15 1/4 0.050
Third Quarter................ 44 13/16 40 1/16 0.045 24 3/16 17 15/16 0.050
Fourth Quarter............... 51 3/16 45 1/8 0.045 30 7/16 24 3/16 0.067
1997:
First Quarter................ 56 7/8 47 13/16 0.045 33 5/16 25 1/16 0.067
Second Quarter............... 66 13/16 50 11/16 0.045 33 15/16 25 5/16 0.067
Third Quarter................ 71 62 15/16 0.050 40 5/16 33 0.067
Fourth Quarter............... 74 5/8 65 5/16 0.050 44 3/4 34 1/2 0.100
1998:
First Quarter................ 86 1/4 67 0.050 50 37 5/8 0.100
Second Quarter............... 97 5/16 81 13/16 0.050 57 9/16 46 11/16 0.100
Third Quarter................ 101 15/16 76 1/4 0.056 75 56 1/16 0.150
Fourth Quarter (through
October 6, 1998)........... 75 3/8 71 1/16 0.056(c) 60 3/8 57 9/16 nil
</TABLE>
- ---------------
(a) All AIG Common Stock information has been adjusted to reflect three stock
splits, each effected as a stock dividend, paid on July 28, 1995, July 25,
1997 and July 31, 1998, respectively.
(b) All SunAmerica Common Stock information has been adjusted to reflect three
stock splits, each effected as a stock dividend, paid on November 10, 1995,
August 30, 1996 and August 29, 1997.
(c) Declared September 16, 1998, payable December 18, 1998 to shareholders of
record on December 4, 1998.
DIVIDEND INFORMATION
Following the Merger (as defined under the caption "The AIG Special
Meeting -- Purpose of the AIG Special Meeting"), subject to the dividend
preferences of any AIG Preferred Stock (as defined under the caption
"Description of AIG Capital Stock -- General") which may be outstanding (none of
which is currently outstanding), the holders of AIG Common Stock will be
entitled to receive such dividends as may be declared by the Board of Directors
of AIG (the "AIG Board") from funds legally available therefor. Certain
restrictions apply under applicable insurance laws to the payment of dividends
to AIG by its insurance subsidiaries.
10
<PAGE> 21
RECENT CLOSING PRICES
The following table sets forth the closing sales prices per share of AIG
Common Stock and SunAmerica Common Stock on the NYSE on August 19, 1998, the
last trading day before announcement of the execution of the Merger Agreement
(as defined under the caption "The AIG Special Meeting -- Purpose of the AIG
Special Meeting") and on October 6, 1998, the last trading day prior to the date
of this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AIG SUNAMERICA
COMMON STOCK COMMON STOCK
------------ ------------
<S> <C> <C>
August 19, 1998......................... $ 94 5/8 $ 64 1/4
October 6, 1998......................... $ 71 1/16 $ 57 5/8
</TABLE>
BECAUSE THE MARKET PRICE OF AIG COMMON STOCK IS SUBJECT TO FLUCTUATION, THE
MARKET VALUE OF THE SHARES OF AIG COMMON STOCK THAT SUNAMERICA SHAREHOLDERS (AS
DEFINED UNDER THE CAPTION "THE SUNAMERICA SPECIAL MEETING -- GENERAL; DATES,
TIMES AND PLACES") WILL RECEIVE IN THE MERGER MAY INCREASE OR DECREASE FOLLOWING
THE MERGER. SUNAMERICA SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR AIG COMMON STOCK AND SUNAMERICA COMMON STOCK. NO ASSURANCE CAN BE
GIVEN AS TO THE FUTURE PRICES OR MARKETS FOR AIG COMMON STOCK OR SUNAMERICA
COMMON STOCK.
NUMBER OF SHAREHOLDERS
As of September 30, 1998, there were approximately 2,200 shareholders of
record who held shares of SunAmerica Common Stock and approximately 8
shareholders of record who held shares of SunAmerica Class B Stock, as shown on
the records of SunAmerica's transfer agents for such shares.
As of September 30, 1998, there were approximately 21,500 shareholders of
record who held shares of AIG Common Stock, as shown on the records of AIG's
transfer agents for such shares.
11
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
The selected consolidated financial data of AIG as of and for the years
ended December 31, 1997, 1996 and 1995 has been derived from consolidated
financial statements of AIG which have been audited by PricewaterhouseCoopers
LLP, independent auditors, and incorporated by reference into this Joint Proxy
Statement/Prospectus. The balance sheet data for 1995 and the selected
consolidated financial data of AIG as of and for the years ended December 31,
1994 and 1993 have been derived from audited consolidated financial statements
previously filed with the Securities and Exchange Commission (the "Commission"),
but not incorporated by reference herein. The selected consolidated financial
data as of and for the six months ended June 30, 1998 and 1997, has been derived
from unaudited consolidated financial statements filed with the Commission and
incorporated by reference herein and include all adjustments (consisting of
normal recurring accruals) which AIG considers necessary for a fair presentation
of the consolidated financial position, results of operations and cash flows.
Operating results for the six months ended June 30, 1998, are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1998. Certain accounts in the selected consolidated financial data
for periods ended prior to January 1, 1998, have been conformed to the 1998
presentation. This information is qualified in its entirety by, and should be
read in conjunction with, the consolidated financial statements, the notes
thereto, and "Management's Discussion and Analysis of Results of Operations and
Financial Condition" for AIG incorporated by reference in this Joint Proxy
Statement/Prospectus.
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues(a)........................... $15,831,929 $14,947,357 $30,602,300 $27,942,567 $25,614,004 $22,121,931 $19,830,549
General insurance:
Net premiums written................ 6,998,633 6,856,889 13,407,529 12,691,679 11,893,022 10,865,753 10,025,903
Net premiums earned................. 6,620,113 6,208,092 12,421,040 11,854,815 11,405,731 10,286,831 9,566,640
Adjusted underwriting profit........ 280,875 253,293 490,168 449,784 416,637 200,484 68,735
Net investment income............... 1,002,749 902,951 1,853,523 1,690,798 1,547,572 1,436,254 1,342,383
Realized capital gains.............. 96,356 78,599 128,175 64,985 68,077 51,360 60,719
Operating income.................... 1,379,980 1,234,843 2,471,866 2,205,567 2,032,286 1,688,098 1,471,837
Life insurance:
Premium income...................... 4,982,427 4,848,790 9,925,639 8,978,246 8,038,150 6,724,321 5,746,046
Net investment income............... 1,560,063 1,405,110 2,896,469 2,675,881 2,264,905 1,748,428 1,499,714
Realized capital gains (losses)..... (14,495) 6,249 21,186 34,798 32,703 86,706 54,576
Operating income.................... 853,844 741,319 1,571,483 1,323,758 1,090,605 952,484 781,611
Financial services operating income... 405,836 306,949 701,337 523,906 417,741 404,853 390,038
Equity in income of minority-owned
insurance operations................ 57,127 57,789 113,636 99,359 81,722 56,005 39,589
Other realized capital losses......... (3,095) (10,136) (30,846) (11,792) (28,946) (51,213) (8,197)
Income before income taxes and
cumulative effect of accounting
changes............................. 2,590,500 2,266,671 4,698,898 4,013,222 3,465,883 2,951,979 2,601,081
Income taxes.......................... 761,957 659,241 1,366,563 1,115,965 955,500 776,464 683,003
Income before cumulative effect of
accounting changes.................. 1,828,543 1,607,430 3,332,335 2,897,257 2,510,383 2,175,515 1,918,078
Cumulative effect of accounting
changes, net of tax:
Minority-owned insurance
operations........................ -- -- -- -- -- -- 20,695
Net income............................ 1,828,543 1,607,430 3,332,335 2,897,257 2,510,383 2,175,515 1,938,773
Earnings per common share(b):
Income before cumulative effect of
accounting changes -- diluted..... 1.73 1.52 3.15 2.72 2.35 2.03 1.78
Cumulative effect of accounting
changes, net of tax:
Minority-owned insurance
operations -- diluted........... -- -- -- -- -- -- 0.02
Net income -- diluted............... 1.73 1.52 3.15 2.72 2.35 2.03 1.80
Cash dividend per common share........ .10 .09 .19 .17 .14 .13 .11
Total assets.......................... 176,103,221 156,235,280 163,970,687 148,431,002 134,136,398 114,346,117 101,014,848
Long-term debt(c)..................... 19,641,575 19,287,886 17,813,908 17,506,359 14,452,851 12,613,907 10,955,963
Capital funds (shareholders'
equity)............................. 25,729,459 23,023,110 24,001,127 22,044,224 19,827,103 16,421,661 15,224,195
</TABLE>
- ---------------
(a) Represents the sum of general net premiums earned, life premium income, net
investment income, financial services commissions, transaction and other
fees, equity in income of minority-owned insurance operations and realized
capital gains (losses). In 1997, agency operations were insignificant and
were presented as a component of general insurance. Agency operations for
the years prior to 1997 have been reclassified to conform to the 1997
presentation.
(b) Per share amounts for all periods presented reflect the adoption of
Statement of Financial Accounting Standards No. 128 "Earnings per share".
Per share information also reflects common stock splits in the form of 50
percent dividends paid July 31, 1998, July 25, 1997 and July 28, 1995.
(c) Including commercial paper and excluding that portion of long-term debt
maturing in less than one year.
12
<PAGE> 23
SUNAMERICA INC.
The selected consolidated financial data of SunAmerica as of and for the
fiscal years ended September 30, 1997, 1996 and 1995 has been derived from
consolidated financial statements of SunAmerica which have been audited by
PricewaterhouseCoopers LLP, independent auditors, and incorporated by reference
into this Joint Proxy Statement/Prospectus. The balance sheet data for 1995 and
the selected consolidated financial data of SunAmerica as of and for the years
ended September 30, 1994 and 1993 have been derived from audited consolidated
financial statements previously filed with the Commission, but not incorporated
by reference herein. The selected consolidated financial data as of and for the
nine months ended June 30, 1998 and 1997, has been derived from unaudited
consolidated financial statements filed with the Commission and incorporated by
reference herein and include all adjustments (consisting of normal recurring
accruals) which SunAmerica considers necessary for a fair presentation of the
consolidated financial position, results of operations and cash flows. Operating
results for the nine months ended June 30, 1998, are not necessarily indicative
of the results that may be expected for the entire year ending September 30,
1998. Certain accounts in the selected consolidated financial data for periods
ended prior to October 1, 1997, have been conformed to the 1998 presentation.
This information is qualified in its entirety by, and should be read in
conjunction with, the consolidated financial statements, the notes thereto, and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" for SunAmerica incorporated by reference in this Joint Proxy
Statement/Prospectus.
SUNAMERICA INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE 30, YEARS ENDED SEPTEMBER 30,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net investment income....... $ 617,528 $ 481,433 $ 679,377 $ 492,756 $ 365,555 $ 294,454 $ 263,791
Net realized investment
gains (losses)............ 11,224 (30,882) (29,203) (30,314) (33,012) (21,124) (21,287)
Fee income.................. 333,359 225,373 317,703 248,411 198,604 171,085 148,646
General and administrative
expenses.................. (235,979) (191,708) (265,738) (210,650) (165,434) (135,161) (153,923)
Amortization of deferred
acquisition costs......... (174,482) (112,493) (165,089) (108,176) (86,107) (69,253) (53,216)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Pretax income............... 551,650 371,723 537,050 392,027 279,606 240,001 184,011
Income tax expense.......... (149,200) (110,200) (158,000) (117,600) (85,400) (74,700) (57,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT
OF
CHANGE IN ACCOUNTING FOR
INCOME TAXES................ 402,450 261,523 379,050 274,427 194,206 165,301 127,011
Cumulative effects of change
in accounting for income
taxes..................... -- -- -- -- -- (33,500) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET INCOME...................... $ 402,450 $ 261,523 $ 379,050 $ 274,427 $ 194,206 $ 131,801 $ 127,011
=========== =========== =========== =========== =========== =========== ===========
EARNINGS PER SHARE:
Income before cumulative
effect of change in
accounting for income
taxes..................... $ 1.82 $ 1.27 $ 1.81 $ 1.32 $ 0.96 $ 0.80 $ 0.61
Cumulative effect of change
in accounting for income
taxes..................... -- -- -- -- -- (0.18) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income.................. $ 1.82 $ 1.27 $ 1.81 $ 1.32 $ 0.96 $ 0.62 $ 0.61
=========== =========== =========== =========== =========== =========== ===========
CASH DIVIDENDS PER SHARE PAID TO
COMMON SHAREHOLDERS:
Nontransferable Class B
Stock..................... $ 0.2700 $ 0.1800 $ 0.2400 $ 0.1800 $ 0.1200 $ 0.0800 $ 0.0560
=========== =========== =========== =========== =========== =========== ===========
Common Stock................ $ 0.3000 $ 0.2001 $ 0.2668 $ 0.2000 $ 0.1333 $ 0.0889 $ 0.0623
=========== =========== =========== =========== =========== =========== ===========
FINANCIAL POSITION:
Investments................. $25,807,698 $23,284,625 $24,408,178 $16,199,784 $10,808,959 $ 9,280,390 $10,364,952
Variable annuity assets..... 12,238,751 8,377,439 9,514,675 6,380,458 5,263,006 4,513,093 4,194,970
Deferred acquisition
costs..................... 1,138,161 1,213,353 1,118,582 782,300 526,415 581,874 475,917
Other assets................ 690,209 568,531 595,451 364,279 245,787 280,868 231,582
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total assets............ $39,874,819 $33,443,948 $35,636,886 $23,726,821 $16,844,167 $14,656,225 $15,267,421
=========== =========== =========== =========== =========== =========== ===========
Reserves for fixed annuity
contracts................. $13,235,627 $14,750,327 $14,445,126 $ 9,654,674 $ 4,862,250 $ 4,519,623 $ 4,934,871
Reserves for guaranteed
investment
contracts................. 7,862,295 5,355,677 5,553,292 4,169,028 3,607,192 2,783,522 2,216,104
Variable annuity
liabilities............... 12,238,751 8,377,439 9,514,675 6,380,458 5,263,006 4,513,093 4,194,970
Trust deposits.............. 422,290 417,835 427,433 436,048 426,595 442,320 378,986
Other payables and accrued
liabilities............... 969,462 948,488 1,097,418 489,672 747,733 860,763 1,828,153
Long-term notes and
debentures................ 1,236,374 1,004,585 1,136,072 573,335 524,835 472,835 380,560
Other senior indebtedness... -- -- -- -- -- 28,662 127,151
Deferred income taxes....... 448,459 299,082 383,764 125,417 146,847 74,319 96,599
Preferred securities of
grantor trusts............ 495,000 495,000 495,000 237,631 52,631 -- --
Shareholders' equity........ 2,966,561 1,795,515 2,584,106 1,660,558 1,213,078 961,088 1,110,027
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity.. $39,874,819 $33,443,948 $35,636,886 $23,726,821 $16,844,167 $14,656,225 $15,267,421
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
13
<PAGE> 24
COMPARATIVE PER SHARE DATA
The following table sets forth certain information regarding earnings,
dividend and book value per share for each of SunAmerica Common Stock and AIG
Common Stock on an historical basis and historical equivalent basis. The
information set forth below should be read in conjunction with the historical
consolidated financial statements of SunAmerica and AIG, including the notes
thereto, incorporated by reference or appearing elsewhere in this Joint Proxy
Statement/Prospectus. See "Where You Can Find More Information".
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31, MARCH 31,
------------------------- ------------------------ -------------------------
1998 1997 1997 1996 1995 1998 1997
---- ---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUNAMERICA HISTORICAL(a)
Earnings per share -- diluted...... n/a n/a n/a n/a n/a $ 1.16 $ 0.81
Cash dividends declared per common
share............................ n/a n/a n/a n/a n/a 0.20 0.13
Book value per share (unaudited)... n/a n/a n/a n/a n/a 13.71 n/a
AIG HISTORICAL(b)
Earnings per share -- diluted...... $ 1.73 $ 1.52 $ 3.15 $ 2.72 $ 2.35 n/a n/a
Cash dividends declared per
share............................ 0.10 0.09 0.19 0.17 0.14 n/a n/a
Book value per share (unaudited)... 24.50 n/a 22.87 n/a n/a n/a n/a
HISTORICAL AIG PRO FORMA EQUIVALENT
FOR
SUNAMERICA SHAREHOLDERS
(UNAUDITED)(c)
Earnings per share -- diluted...... $ 1.68 $ 1.44 $ 3.01 $ 2.57 $ 2.20 n/a n/a
Cash dividends declared per
share............................ 0.09 0.08 0.16 0.15 0.12 n/a n/a
Book value per share............... 23.04 n/a 21.70 n/a n/a n/a n/a
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
SUNAMERICA HISTORICAL(a)
Earnings per share -- diluted...... $ 1.81 $ 1.32 $ 0.96
Cash dividends declared per common
share............................ 0.27 0.20 0.13
Book value per share (unaudited)... 12.40 n/a n/a
AIG HISTORICAL(b)
Earnings per share -- diluted...... n/a n/a n/a
Cash dividends declared per
share............................ n/a n/a n/a
Book value per share (unaudited)... n/a n/a n/a
HISTORICAL AIG PRO FORMA EQUIVALENT
FOR
SUNAMERICA SHAREHOLDERS
(UNAUDITED)(c)
Earnings per share -- diluted...... n/a n/a n/a
Cash dividends declared per
share............................ n/a n/a n/a
Book value per share............... n/a n/a n/a
</TABLE>
- ---------------
(a) All SunAmerica information has been adjusted to reflect three stock splits,
each effected as a stock dividend, paid November 10, 1995, August 30, 1996
and August 29, 1997.
(b) All AIG information has been adjusted to reflect the stock splits in the
form of 50 percent common stock dividends paid July 25, 1997 and July 31,
1998.
(c) Represents pro forma AIG historical information after applying the exchange
ratio of 0.855 of a share of AIG Common Stock for each share of SunAmerica
Common Stock.
14
<PAGE> 25
THE AIG SPECIAL MEETING
GENERAL; DATES, TIMES AND PLACES
This Proxy Statement/Prospectus of AIG and Proxy Statement of SunAmerica
(the "Joint Proxy Statement/Prospectus") is first being mailed to the holders of
AIG Common Stock ("AIG Shareholders"), on or about October 13, 1998, and is
accompanied by the notice of the Special Meeting of AIG Common Shareholders (the
"AIG Special Meeting") and a form of proxy that is solicited by the AIG Board
for use at the AIG Special Meeting to be held on November 18, 1998 at 3:00 P.M.,
local time, at the offices of AIG at 72 Wall Street, Eighth Floor, New York, New
York, and at any adjournments or postponements thereof. This Joint Proxy
Statement/Prospectus is also furnished to SunAmerica Shareholders (as defined
under the caption "The SunAmerica Special Meeting -- General; Dates, Times and
Places") as a prospectus in connection with the issuance by AIG of shares of AIG
Common Stock pursuant to the Merger Agreement.
PURPOSE OF THE AIG SPECIAL MEETING
At the AIG Special Meeting, AIG Shareholders will be asked to consider and
vote upon a proposal to approve and adopt the Agreement and Plan of Merger,
dated as of August 19, 1998 (the "Merger Agreement"), between SunAmerica and
AIG, pursuant to which SunAmerica will merge with and into AIG (the "Merger"),
and the Merger.
REVOCATION OF PROXIES
Any person who signs and mails the enclosed proxy may revoke it at any time
before it is voted by giving written notice of revocation to AIG, by mailing a
later dated proxy which is received by AIG prior to the AIG Special Meeting or
by voting in person at the AIG Special Meeting. All written notices of
revocation and other communications with respect to revocation of AIG proxies
should be addressed to American International Group, Inc., 70 Pine Street, New
York, New York 10270, Attention: Corporate Secretary.
RECORD DATE; VOTE REQUIRED
All voting rights for the AIG Special Meeting are vested exclusively in the
AIG Shareholders, with each share entitled to one vote. Only holders of shares
of AIG Common Stock of record at the close of business on October 9, 1998 (the
"AIG Record Date") are entitled to notice of and to vote at the AIG Special
Meeting. AIG Shareholders have no dissenters' rights in connection with the
Merger.
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote by the holders of at least a majority of the shares of AIG
Common Stock outstanding as of the AIG Record Date (the "AIG Requisite Vote").
Under NYSE rules, brokers and nominees are precluded from exercising their
voting discretion on the proposal to approve and adopt the Merger Agreement and
the Merger and, for this reason, absent specific instructions from the
beneficial owner of shares, are not permitted to vote such shares thereon.
Because the affirmative vote of the holders of a majority of the shares of AIG
Common Stock outstanding as of the AIG Record Date is required for approval and
adoption of the Merger Agreement and the Merger, an abstention or a broker
non-vote with respect to the proposal to approve and adopt the Merger Agreement
and the Merger will have the effect of a vote against the Merger Agreement and
the Merger. ACCORDINGLY, THE AIG BOARD URGES THE AIG SHAREHOLDERS TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE-PAID ENVELOPE.
To the knowledge of AIG, as of September 30, 1998, Starr International
Company, Inc., a private holding company organized under the laws of Panama
("SICO"), is the only person who owns in excess of 5% of AIG Common Stock. As of
September 30, 1998, SICO held 169,769,783 shares of AIG Common Stock, or
approximately 16.2% of the outstanding AIG Common Stock. The Starr Foundation, a
New York not-for-profit corporation (the "Starr Foundation"), and C.V. Starr &
Co., Inc., a private holding company incorporated under the laws of Delaware
("Starr" and together with SICO and The Starr Foundation, the
15
<PAGE> 26
"Starr Entities"), held 36,477,270 and 25,269,809 shares of AIG Common Stock, or
approximately 3.5% and 2.4%, respectively, of the outstanding AIG Common Stock
on that date. As of September 30, 1998, the directors and executive officers of
AIG as a group beneficially owned 59,663,767 shares of AIG Common Stock and as
of that date, the directors and officers of AIG, the directors and holders of
common stock of Starr and the Starr Entities owned or otherwise controlled
approximately 28.6% of the outstanding shares of AIG Common Stock. Based on the
1,049,959,401 shares of AIG Common Stock outstanding as of September 30, 1998, a
total of 524,979,701 shares of AIG Common Stock are required to be voted in
favor of the Merger Agreement and the Merger in order for the Merger Agreement
and the Merger to be approved by the holders of AIG Common Stock. Therefore, as
of September 30, 1998, the Starr Entities together with the directors and
officers of AIG, as a group beneficially owned approximately 55.6% of the
524,979,701 shares of AIG Common Stock required for approval and adoption of the
Merger Agreement and the Merger.
Additional information with respect to beneficial ownership of AIG Common
Stock and AIG by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of AIG Common Stock
and by directors and executive officers of AIG is incorporated herein by
reference to AIG's Annual Report on Form 10-K, for the fiscal year ended
December 31, 1997. See "Where You Can Find More Information".
As of the date of this Joint Proxy Statement/Prospectus, SunAmerica does
not beneficially own more than 5% of AIG Common Stock, the only class of voting
securities of AIG.
QUORUM
The Delaware General Corporation Law (the "DGCL"), the AIG Restated
Certificate of Incorporation, as amended (the "AIG Certificate"), the AIG
By-Laws (the "AIG By-Laws") and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), contain requirements governing the actions of AIG
Shareholders at the AIG Special Meeting. The AIG By-Laws provide that holders of
a majority of the outstanding shares of AIG Common Stock entitled to vote on the
AIG Record Date must be present, either in person or by proxy, at the AIG
Special Meeting to constitute a quorum. In general, abstentions and broker
non-votes will be counted as present or represented for the purposes of
determining a quorum for the AIG Special Meeting.
EXPENSES OF SOLICITATION
The expenses of the solicitation of proxies with respect to the AIG Special
Meeting will be borne by AIG. In addition to solicitation by mail, arrangements
will be made with brokers and other custodians, nominees and fiduciaries to send
proxy materials to their principals and AIG will, upon request, reimburse them
for reasonable expenses of so doing. Solicitation of proxies from some AIG
Shareholders may be made by AIG's officers, directors, consultants and employees
by telephone, facsimile, or in person after the initial solicitation. In
addition, MacKenzie Partners, Inc. ("MacKenzie") has been retained to assist AIG
in the solicitation of proxies. MacKenzie may contact AIG Shareholders by mail,
telephone, facsimile, telegraph and personal interviews and may request brokers,
dealers and other nominee shareholders to forward materials to the beneficial
owners of shares of AIG Common Stock. MacKenzie will receive reasonable and
customary compensation for its services (with such amount not to exceed
$12,500), will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
RECOMMENDATION OF AIG BOARD
THE AIG BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER,
DECLARED THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND DETERMINED
THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, AIG AND THE AIG
SHAREHOLDERS. ACCORDINGLY, THE AIG BOARD UNANIMOUSLY RECOMMENDS THAT THE AIG
SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER. See "The Merger -- AIG Reasons for the Merger; Recommendation of the AIG
Board".
16
<PAGE> 27
MISCELLANEOUS
It is not expected that any matter not referred to herein will be presented
for action at the AIG Special Meeting. If any other matters are properly brought
before the AIG Special Meeting, including without limitation a motion to adjourn
or postpone such AIG 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 Agreement and the Merger,
or soliciting additional proxies in favor of the approval of the Merger
Agreement and the Merger, the persons named on the accompanying proxy card will
vote the shares represented by such proxy upon such matters in their discretion;
provided, however, that if AIG proposes to adjourn or postpone such AIG Special
Meeting for the purpose of soliciting additional votes in favor of the Merger
Agreement and the Merger, and seeks a vote of AIG Shareholders on such proposal,
no proxy that is voted against the Merger Agreement and Merger on the proxy card
(or on which an AIG Shareholder elects to abstain on such matter) will be voted
in favor of any adjournment or postponement for the purpose of soliciting
additional proxies. Any other proxy will be deemed to have voted "FOR" such
adjournment or postponement proposal if such proposal is made. Should the AIG
Special Meeting be reconvened, all proxies will be voted in the same manner as
such proxies would have been voted when the AIG Special Meeting was originally
convened, except for proxies effectively revoked or withdrawn prior to the time
proxies are voted at such reconvened AIG Special Meeting.
AIG SHAREHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. AIG SHAREHOLDERS WILL NOT EXCHANGE THEIR STOCK CERTIFICATES IN CONNECTION
WITH THE MERGER.
17
<PAGE> 28
THE SUNAMERICA SPECIAL MEETING
GENERAL; DATES, TIMES AND PLACES
This Joint Proxy Statement/Prospectus is first being mailed to the holders
of SunAmerica Common Stock and the holders of Nontransferable Class B Stock, par
value $1.00 per share, of SunAmerica ("SunAmerica Nontransferable Class B Stock"
and, together with the Transferable Class B Stock, par value $1.00 per share, of
SunAmerica (none of which are outstanding as of the date hereof), the
"SunAmerica Class B Stock", such holders of SunAmerica Common Stock and
SunAmerica Class B Stock collectively, the "SunAmerica Shareholders"), on or
about October 13, 1998, and is accompanied by the notice of the Special Meeting
of SunAmerica Common and Class B Shareholders (the "SunAmerica Special Meeting")
and a form of proxy that is solicited by the Board of Directors of SunAmerica
(the "SunAmerica Board") for use at the SunAmerica Special Meeting to be held on
November 18, 1998 at 11:30 A.M., local time, in the Grand Salon of the Park
Hyatt at Century City, 2151 Avenue of the Stars, Los Angeles, California, and at
any adjournments or postponements thereof.
PURPOSE OF THE SUNAMERICA SPECIAL MEETING
At the SunAmerica Special Meeting, SunAmerica Shareholders will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement and
the Merger.
REVOCATION OF PROXIES
Any person who signs and mails the enclosed proxy may revoke it at any time
before it is voted by giving written notice of revocation to SunAmerica, by
mailing a later dated proxy which is received by SunAmerica prior to the
SunAmerica Special Meeting or by voting in person at the SunAmerica Special
Meeting. All written notices of revocation and other communications with respect
to revocation of SunAmerica proxies should be addressed to SunAmerica Inc., 1
SunAmerica Center, Century City, Los Angeles, California 90067-6022, Attention:
Corporate Secretary.
RECORD DATE; VOTE REQUIRED
All voting rights for the SunAmerica Special Meeting are vested exclusively
in the SunAmerica Shareholders, with holders of SunAmerica Common Stock entitled
to one vote per share and holders of SunAmerica Class B Stock entitled to ten
votes per share, each voting separately as a class. Only holders of SunAmerica
Common Stock and holders of SunAmerica Class B Stock of record at the close of
business on October 9, 1998 (the "SunAmerica Record Date") are entitled to vote
at the SunAmerica Special Meeting. Holders of SunAmerica Common Stock are not
entitled to appraisal rights in connection with the Merger. Because all
SunAmerica Class B Stock will be converted into SunAmerica Common Stock before
the Merger and therefore holders of SunAmerica Class B Stock will hold
SunAmerica Common Stock immediately prior to the Merger, as described below,
holders of SunAmerica Class B Stock will not have appraisal rights in connection
with the Merger. See "Comparison of Rights of SunAmerica Shareholders and AIG
Shareholders -- Appraisal Rights of Dissenting Shareholders".
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote by the holders of at least two-thirds of the shares of
SunAmerica Common Stock outstanding as of the SunAmerica Record Date and by the
holders of at least two-thirds of the shares of SunAmerica Class B Stock
outstanding as of the SunAmerica Record Date, each voting separately as a class
(the "SunAmerica Requisite Vote").
Under NYSE rules, brokers and nominees are precluded from exercising their
voting discretion on the proposal to approve and adopt the Merger Agreement and
the Merger and, for this reason, absent specific instructions from the
beneficial owner of shares of SunAmerica Common Stock, are not permitted to vote
such shares thereon. Because the affirmative vote of the holders of two-thirds
of the shares of SunAmerica Common Stock outstanding as of the SunAmerica Record
Date and the holders of two-thirds of the shares of SunAmerica Class B Stock
outstanding as of the SunAmerica Record Date, each voting separately as a class,
is required for approval and adoption of the Merger Agreement and the Merger, an
abstention or a broker non-vote with respect to the proposal to approve and
adopt the Merger Agreement and the Merger will have the effect of a vote against
the Merger Agreement and the Merger. ACCORDINGLY, THE SUNAMERICA BOARD URGES THE
18
<PAGE> 29
SUNAMERICA SHAREHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of September 30, 1998, directors and executive officers of SunAmerica
and their affiliates as a group beneficially owned 16,461,211 shares of
SunAmerica Common Stock, or approximately 8.60% of the shares of SunAmerica
Common Stock outstanding as of September 30, 1998 of which Eli Broad,
beneficially owned 13,015,360 shares of SunAmerica Common Stock, or
approximately 6.80% of the shares of SunAmerica Common Stock outstanding as of
September 30,1998. Based on the 179,580,522 shares of SunAmerica Common Stock
outstanding as of September 30, 1998, a total of 119,720,348 shares of
SunAmerica Common Stock are required to be voted in favor of the Merger
Agreement and the Merger in order for the Merger Agreement and the Merger to be
approved by the holders of SunAmerica Common Stock. As of September 30, 1998,
directors and executive officers of SunAmerica and their affiliates as a group
beneficially owned approximately 13.8% of the shares of SunAmerica Common Stock
required for approval and adoption of the Merger Agreement and the Merger.
As of September 30, 1998, Mr. Broad beneficially owned 13,340,591 shares of
SunAmerica Class B Stock, or approximately 82% of the shares of SunAmerica Class
B Stock outstanding as of September 30, 1998. No other director or executive
officer of SunAmerica or any of their affiliates beneficially owned any shares
of SunAmerica Class B Stock as of September 30, 1998. Based on the 16,272,702
shares of SunAmerica Class B Stock outstanding as of September 30, 1998, a total
of 10,848,468 shares of SunAmerica Class B Stock are required to be voted in
favor of the Merger Agreement and the Merger in order for the Merger Agreement
and the Merger to be approved by the holders of SunAmerica Class B Stock. Mr.
Broad has entered into a voting agreement with AIG, dated August 19, 1998 (the
"Voting Agreement"), pursuant to which Mr. Broad has agreed, among other things,
to vote all of his shares of SunAmerica Common Stock and SunAmerica Class B
Stock in favor of the proposal to approve and adopt the Merger Agreement and the
Merger. See "Related Agreements and Transactions -- Voting Agreement". Because
Mr. Broad has contractually agreed to vote all of his 13,340,591 shares of
SunAmerica Class B Stock, or approximately 82% of the shares of SunAmerica Class
B Stock outstanding as of September 30, 1998, in favor of the proposal to
approve and adopt the Merger Agreement and the Merger, the requisite approval of
the holders of SunAmerica Class B Stock is assured.
The SunAmerica Restated Charter, as amended (the "SunAmerica Charter")
provides that when the number of outstanding shares of SunAmerica Class B Stock
outstanding falls below 5% of the combined aggregate number of outstanding
shares of SunAmerica Common Stock and SunAmerica Class B Stock, the outstanding
shares of SunAmerica Class B Stock will immediately be converted into shares of
SunAmerica Common Stock. Accordingly, all of the outstanding shares of
SunAmerica Class B Stock will be converted into shares of SunAmerica Common
Stock immediately following conversion of the shares of SunAmerica Class B Stock
held by Mr. Broad pursuant to the Voting Agreement. See "Related Agreements and
Transactions -- Voting Agreement".
Additional information with respect to beneficial ownership of SunAmerica
Common Stock and SunAmerica Class B Stock by persons and entities owning more
than 5% of such SunAmerica Common Stock and SunAmerica Class B Stock and more
detailed information with respect to beneficial ownership of SunAmerica Common
Stock and SunAmerica Class B Stock by directors and executive officers of
SunAmerica is incorporated herein by reference to SunAmerica's Annual Report on
Form 10-K for the fiscal year ended September 30, 1997. See "Where You Can Find
More Information".
As of the date of this Joint Proxy Statement/Prospectus, AIG has no
interest, direct or indirect, in any securities of SunAmerica, except that AIG
has entered into the Voting Agreement (see "Related Agreements and
Transactions -- Voting Agreement"), and except that AIG is deemed to
beneficially own through certain of its subsidiaries, or due to investment
advisory relationships of certain of its subsidiaries, 6,525 shares of
SunAmerica Common Stock.
QUORUM
The Maryland General Corporation Law (the "MGCL"), the SunAmerica Charter,
the SunAmerica By-Laws (the "SunAmerica By-Laws") and the Exchange Act contain
requirements governing the actions of
19
<PAGE> 30
SunAmerica Shareholders at the SunAmerica Special Meeting. According to the MGCL
and the SunAmerica By-Laws, holders of a majority of the shares of SunAmerica
Common Stock and holders of a majority of the shares of SunAmerica Class B Stock
entitled to vote as of the SunAmerica Record Date must be present, either in
person or by proxy, at the SunAmerica Special Meeting to constitute a quorum. In
general, broker non-votes and abstentions are counted as present or represented
for the purposes of determining a quorum for the SunAmerica Special Meeting.
EXPENSES OF SOLICITATION
The expenses of the solicitation of proxies with respect to the SunAmerica
Special Meeting will be borne by SunAmerica. In addition to solicitation by
mail, arrangements will be made with brokers and other custodians, nominees and
fiduciaries to send proxy materials to their principals and SunAmerica will,
upon request, reimburse them for reasonable expenses of so doing. Solicitation
of proxies from some SunAmerica Shareholders may be made by SunAmerica's
officers and regular employees by telephone, facsimile, or in person after the
initial solicitation. In addition, Morrow & Co. ("Morrow") has been retained to
assist SunAmerica in the solicitation of proxies. Morrow may contact SunAmerica
Shareholders by mail, telephone, facsimile, telegraph and personal interviews
and may request brokers, dealers and other nominee shareholders to forward
materials to the beneficial owners of shares of SunAmerica Common Stock and
SunAmerica Class B Stock. Morrow will receive reasonable and customary
compensation for its services (estimated at $25,000), will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws.
RECOMMENDATION OF SUNAMERICA BOARD
THE SUNAMERICA BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER, DECLARED THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND
DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, SUNAMERICA
AND THE SUNAMERICA SHAREHOLDERS. ACCORDINGLY, THE SUNAMERICA BOARD UNANIMOUSLY
RECOMMENDS THAT SUNAMERICA SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE MERGER. See "The Merger -- SunAmerica Reasons for the
Merger; Recommendation of the SunAmerica Board".
MISCELLANEOUS
It is not expected that any matter not referred to herein will be presented
for action at the SunAmerica Special Meeting. If any other matters are properly
brought before the SunAmerica Special Meeting, including without limitation a
motion to adjourn or postpone such SunAmerica 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 Agreement and
the Merger, or soliciting additional proxies in favor of the approval of the
Merger Agreement and the Merger, the persons named on the accompanying proxy
card will vote the shares represented by such proxy upon such matters in their
discretion; provided, however, that if SunAmerica proposes to adjourn or
postpone such SunAmerica Special Meeting for the purpose of soliciting
additional votes in favor of the Merger Agreement and the Merger, and seeks a
vote of SunAmerica Shareholders on such proposal, no proxy that is voted against
the Merger Agreement and Merger on the proxy card (or on which a SunAmerica
Shareholder elects to abstain on such matter) will be voted in favor of any
adjournment or postponement for the purpose of soliciting additional proxies.
Any other proxy will be deemed to have voted "FOR" such adjournment or
postponement proposal if such proposal is made. Should the SunAmerica Special
Meeting be reconvened, all proxies will be voted in the same manner as such
proxies would have been voted when the SunAmerica Special Meeting was originally
convened, except for proxies effectively revoked or withdrawn prior to the time
proxies are voted at such reconvened SunAmerica Special Meeting.
SUNAMERICA SHAREHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS. PROMPTLY AFTER THE EFFECTIVE TIME (AS DEFINED UNDER THE
CAPTION "THE MERGER -- GENERAL") OF THE MERGER, AIG WILL MAIL TO SUNAMERICA
SHAREHOLDERS A TRANSMITTAL FORM WITH INSTRUCTIONS ON HOW TO EXCHANGE THEIR STOCK
CERTIFICATES FOR CERTIFICATES OF AIG COMMON STOCK.
20
<PAGE> 31
THE MERGER
The discussion in this Joint Proxy Statement/Prospectus of the Merger and
the principal terms of the Merger Agreement and the Voting Agreement is subject
to, and qualified in its entirety by reference to, the Merger Agreement and the
Voting Agreement. A copy of the Merger Agreement is attached hereto as Appendix
A and a copy of the Voting Agreement is attached hereto as Appendix B.
GENERAL
We are furnishing this Joint Proxy Statement/Prospectus to holders of AIG
Common Stock, holders of SunAmerica Common Stock and holders of SunAmerica Class
B Stock in connection with the solicitation of proxies by the respective Boards
of Directors of AIG and SunAmerica for use at their respective special meetings
of shareholders, and at any adjournments or postponements thereof. At the AIG
Special Meeting, holders of AIG Common Stock will be asked to vote upon a
proposal to approve and adopt the Merger Agreement and the Merger. At the
SunAmerica Special Meeting, holders of SunAmerica Common Stock and holders of
SunAmerica Class B Stock will each be asked to vote, separately as a class, upon
a proposal to approve and adopt the Merger Agreement and the Merger.
The Merger Agreement provides, among other things, for a merger of
SunAmerica with and into AIG, with AIG being the surviving corporation. In the
Merger, each share of SunAmerica Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of SunAmerica Common Stock owned
by AIG or any subsidiary of AIG, or shares of SunAmerica Common Stock that are
owned by SunAmerica or any subsidiary of SunAmerica (other than certain shares
of Nontransferable Class B Stock held by a SunAmerica subsidiary) and in each
case not held on behalf of third parties (collectively, the "Excluded Shares"))
will be converted into, and become exchangeable for, 0.855 (the "Exchange
Ratio") of a share (the "Merger Consideration") of AIG Common Stock. See "The
Merger Agreement--General; Merger Consideration" and "-- Terms of the Merger".
The Merger will become effective upon the latest of (i) the time when Articles
of Merger (the "Articles of Merger") are accepted for record by the State
Department of Assessments and Taxation of Maryland (the "Department"), (ii) the
time when a Certificate of Merger (the "Delaware Certificate of Merger") has
been duly filed with the Secretary of State of Delaware as provided in DGCL
Section 251 or (iii) such later time agreed to by SunAmerica and AIG and
established under the Articles of Merger and the Delaware Certificate of Merger
but not later than 30 days after the date of the filing and acceptance for
record of the Articles of Merger by the Department (the "Effective Time"), which
is currently expected to occur after receipt of requisite regulatory approvals
if the AIG Requisite Vote and the SunAmerica Requisite Vote are obtained. See
"The Merger Agreement -- Closing; Effective Time".
In connection with the Merger, AIG entered into the Voting Agreement with
Mr. Broad pursuant to which Mr. Broad has agreed, among other things, to (i)
vote all of his shares of SunAmerica Common Stock and SunAmerica Class B Stock
in favor of the proposal to approve and adopt the Merger Agreement and the
Merger and (ii) convert immediately prior to the Effective Time each share of
SunAmerica Class B Stock held by him into one share of SunAmerica Common Stock.
See "Related Agreements and Transactions -- Voting Agreement".
Approximately 206,249,985 shares of AIG Common Stock will be issued, or
issuable upon the exercise of options expected to be outstanding, to SunAmerica
Shareholders upon consummation of the Merger. On a diluted basis, approximately
16.3% of the outstanding shares of AIG Common Stock at the Effective Time will
be held by former SunAmerica Shareholders and approximately 83.7% will be held
by AIG Shareholders who were shareholders of AIG prior to the Merger.
Because the market price of AIG Common Stock is subject to fluctuation, the
market value of the shares of AIG Common Stock that SunAmerica Shareholders will
receive in the Merger may increase or decrease following the Merger. SunAmerica
Shareholders are urged to obtain current market quotations for AIG Common Stock
and SunAmerica Common Stock. No assurance can be given as to the future prices
or markets for AIG Common Stock or SunAmerica Common Stock.
21
<PAGE> 32
BACKGROUND OF THE MERGER
In the spring of 1998, M.R. Greenberg, Chairman and Chief Executive Officer
of AIG, asked Mr. Broad if SunAmerica would be receptive to a possible strategic
combination with AIG, and Mr. Broad indicated that he was not interested in
pursuing such discussions at such time. Thereafter, in light of the continuing
trends toward consolidation in the financial services industry and Mr. Broad's
assessment of the strategic benefits that could be derived from a combination
with AIG, Mr. Broad determined that it would be desirable to explore the
possibility of a combination with AIG. On July 23, 1998, Mr. Broad met with Mr.
Greenberg to discuss the possible terms upon which such a strategic combination
might be accomplished.
In connection with their exploration of a potential strategic combination,
AIG engaged Morgan Stanley & Co. Incorporated ("Morgan Stanley") to act as its
financial advisor to assist AIG in its analysis and consideration of a potential
transaction and SunAmerica engaged Goldman, Sachs & Co. ("Goldman Sachs") and
Wasserstein Perella & Co., Inc. ("Wasserstein Perella") to act as joint
financial advisors to SunAmerica. On July 28, 1998, AIG and SunAmerica entered
into a confidentiality agreement for the purpose of exploring a possible
transaction between the two parties.
From July 28, 1998 until the date of the Merger Agreement, AIG and
SunAmerica exchanged confidential information, and conducted due diligence
meetings between senior officers and managers of AIG and SunAmerica.
At a regularly scheduled meeting of the SunAmerica Board held on July 30
and 31, 1998, Mr. Broad discussed with the SunAmerica Board the possibility of a
combination with AIG and summarized the status of discussions to date.
On August 6, 1998, Mr. Greenberg and Edward E. Matthews, AIG Vice
Chairman--Investments and Financial Services, met with Mr. Broad and Jay S.
Wintrob, Vice Chairman of SunAmerica, to discuss the basic form and certain
terms of a possible transaction. During the next several days, representatives
of AIG and SunAmerica and their respective financial advisors continued
negotiations in person and by telephone concerning the terms of a possible
transaction.
On August 12, 1998, representatives of AIG and SunAmerica agreed, subject
to completion of their reviews of each other's business, negotiation of mutually
agreeable merger transaction documentation and approvals of the AIG Board and
SunAmerica Board, that the proposed transaction would be structured as a
stock-for-stock merger with an exchange ratio of 0.855 of a share of AIG Common
Stock for each share of SunAmerica Common Stock.
On August 15, 1998, counsel to AIG delivered to counsel to SunAmerica
preliminary drafts of the Merger Agreement and the Voting Agreement. From that
date through the date of the Merger Agreement, representatives of AIG and
SunAmerica negotiated the Merger Agreement and the Voting Agreement. Throughout
this period, each of SunAmerica and AIG continued to review the results of their
ongoing respective due diligence efforts and to review the various financial and
nonfinancial strategic benefits that could be derived from the proposed
combination.
At a meeting held on August 19, 1998, Mr. Greenberg described the proposed
transaction to the AIG Board, summarized the SunAmerica business and the various
rationales for the transaction, and gave an overview of the due diligence review
concerning SunAmerica conducted over the preceding week. Morgan Stanley
presented its fairness opinion and described for the AIG Board the analyses
conducted by Morgan Stanley in reaching its conclusion. The AIG Board asked
questions of the management of AIG and Morgan Stanley. Thereafter, following
further discussion, the AIG Board unanimously approved the Merger Agreement and
the Merger, declared that the Merger Agreement and the Merger are advisable and
determined that the Merger is fair to, and in the best interests of, AIG and its
shareholders.
At a meeting held on August 19, 1998, Mr. Broad provided the SunAmerica
Board with a summary of the discussions with AIG and the various rationales and
contemplated benefits from the proposed transactions as well as an overview of
the due diligence review concerning AIG. Goldman Sachs and Wasserstein Perella
presented their respective fairness opinions and described for the SunAmerica
Board the detailed analysis conducted by each of them in reaching their
conclusions. SunAmerica's legal counsel reviewed the terms of the Merger
Agreement and the Voting Agreement and advised the SunAmerica Board with respect
to the
22
<PAGE> 33
legal standards applicable to the SunAmerica Board's consideration of the
proposed transaction. The SunAmerica Board asked questions of the management of
SunAmerica and SunAmerica's legal and financial advisors. Following further
discussion, the SunAmerica Board unanimously approved the Merger Agreement and
the Merger, declared that the Merger Agreement and the Merger are advisable and
determined that the Merger is fair to, and in the best interests of, SunAmerica
and its shareholders. Thereafter, the member of the SunAmerica Board who had
been unable to attend the meeting indicated his concurrence with the actions
taken by the SunAmerica Board.
The Merger Agreement was executed by AIG and SunAmerica, and the Voting
Agreement was executed by AIG and Mr. Broad, after the close of business on
August 19, 1998.
AIG REASONS FOR THE MERGER; RECOMMENDATION OF THE AIG BOARD
In reaching its determination to recommend approval and adoption of the
Merger Agreement and the Merger, the AIG Board consulted with AIG management, as
well as with its financial advisor, Morgan Stanley, and considered a number of
factors, including the following:
(i) The current status of AIG's business, operations, financial
condition, earnings and prospects, and current domestic and foreign
industry, economic and market conditions.
(ii) The consistency of the Merger with AIG's long-term business
strategies.
(iii) The expectation that the Merger would result in synergies for
the two companies' operations, including giving SunAmerica access to AIG's
domestic and international distribution network which would enable
SunAmerica's products to expand beyond its current market. See "Cautionary
Statement Regarding Forward-Looking Statements" and "-- Management and
Operations Following the Merger".
(iv) The business, operations, financial condition, earnings and
prospects of SunAmerica, and current industry, economic and market
conditions. In making its determination, the AIG Board took into account
the fact that senior management of AIG had performed a due diligence review
of SunAmerica's business.
(v) The complementary nature of the two companies' businesses and the
belief of senior management that AIG and SunAmerica share a similar culture
and possess complementary skills.
(vi) The structure of the Merger and the terms of the Merger Agreement
and the Voting Agreement, including the fact that the fixed Exchange Ratio
provides certainty as to the number of shares of AIG Common Stock to be
issued in the Merger and that the Merger is intended to qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and for "pooling of interests" accounting
treatment. See "The Merger Agreement -- General -- Merger Consideration"
and "-- Terms of the Merger".
(vii) The financial and strategic analyses and presentation to the AIG
Board on August 19, 1998 as well as the opinion of Morgan Stanley that, as
of August 19, 1998, and subject to the assumptions made, matters considered
and limitations on the review undertaken, the Exchange Ratio pursuant to
the Merger Agreement was fair from a financial point of view to AIG. See
"-- Opinion of AIG's Financial Advisor".
The foregoing discussion addresses the material factors considered by the
AIG Board in its consideration of the Merger. In view of the variety of factors
and the amount of information considered, the AIG Board did not find it
practicable to, and did not, make specific assessments of, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination was made after consideration of all of the
factors as a whole. In addition, individual members of the AIG Board may have
given different weights to different factors.
THE AIG BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER,
DECLARED THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND DETERMINED
THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, AIG AND THE AIG
SHAREHOLDERS. ACCORDINGLY, THE AIG BOARD UNANIMOUSLY RECOMMENDS THAT THE AIG
SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER.
23
<PAGE> 34
SUNAMERICA REASONS FOR THE MERGER; RECOMMENDATION OF THE SUNAMERICA BOARD
In reaching its determination to recommend approval and adoption of the
Merger Agreement and the Merger, the SunAmerica Board consulted with SunAmerica
management, as well as with its financial advisors, Goldman Sachs and
Wasserstein Perella, and considered a number of factors, including the
following:
(i) The SunAmerica Board's review of SunAmerica's business,
operations, financial condition, earnings and prospects.
(ii) The anticipated benefits of the Merger for SunAmerica's core
retirement savings products and investment services businesses as a result
of the financial, marketing and distribution advantages that will result
from a combination with AIG. The SunAmerica Board noted, in particular,
that the Merger would enable SunAmerica to introduce its retirement
products more broadly into the world markets that are served by AIG's
expansive global network.
(iii) The business, operations, financial condition, earnings and
prospects of each of SunAmerica and AIG. In making its determination, the
SunAmerica Board took into account the fact that senior management of
SunAmerica had performed a due diligence review of AIG's business.
(iv) The belief that the combined company's expected strong credit
position both domestically and internationally will provide the combined
company with enhanced opportunities to market SunAmerica's financial
products and less costly access to the capital markets relative to
SunAmerica on a stand-alone basis.
(v) The anticipated financial impact of the proposed transaction on
the combined company's future financial performance and on SunAmerica
Shareholders. The combined company's ability to achieve such results
depends on various factors, a number of which will be beyond its control,
including the regulatory environment, economic conditions and unanticipated
changes in business conditions and inflation, and there can be no assurance
in this regard.
(vi) The fact that the Exchange Ratio represented a premium over the
market price of SunAmerica Common Stock as of the last trading day prior to
date on which the SunAmerica Board approved the Merger Agreement.
(vii) The structure of the Merger and the terms of the Merger
Agreement and the Voting Agreement, including the fact that the Merger is
intended to qualify as a tax-free reorganization under Section 368(a) of
the Code and for "pooling of interests" accounting treatment.
(viii) The nonfinancial terms of the transaction, including the fact
that SunAmerica is expected to be operated separately within the AIG
corporate group.
(ix) The complementary nature of the two companies' businesses and the
belief of senior management that SunAmerica and AIG share a similar culture
and possess complementary skills.
(x) The presentations by Goldman Sachs and Wasserstein Perella with
respect to the transaction and the opinion of each of such firms as to the
fairness, from a financial point of view, of the Exchange Ratio to be
received by holders of shares of SunAmerica Common Stock in the Merger. See
"-- Opinions of SunAmerica's Financial Advisors".
(xi) The opportunity for SunAmerica Shareholders to participate, as
holders of AIG Common Stock, in a larger, more diversified financial
products and services company by means of a transaction which is designed
to be tax-free to SunAmerica Shareholders.
The foregoing discussion addresses the material factors considered by the
SunAmerica Board in its consideration of the Merger. In view of the variety of
factors and the amount of information considered, the SunAmerica Board did not
find it practicable to, and did not, make specific assessments of, quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. The determination was made after consideration of all of the
factors as a whole. In addition, individual members of
24
<PAGE> 35
the SunAmerica Board may have given different weights to different factors. For
a discussion of the interests of certain members of SunAmerica's management and
the SunAmerica Board in the Merger, see "-- Interests of Certain Persons in the
Merger".
THE SUNAMERICA BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER, DECLARED THAT THE MERGER AGREEMENT AND THE MERGER ARE ADVISABLE AND
DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, SUNAMERICA
AND THE SUNAMERICA SHAREHOLDERS. ACCORDINGLY, THE SUNAMERICA BOARD UNANIMOUSLY
RECOMMENDS THAT THE SUNAMERICA SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER.
OPINION OF AIG'S FINANCIAL ADVISOR
AIG retained Morgan Stanley to act as its financial advisor in connection
with the Merger and related matters based upon Morgan Stanley's qualifications,
expertise and reputation. On August 19, 1998, Morgan Stanley delivered its oral
opinion to the AIG Board that, as of such date and based upon the procedures and
subject to the assumptions and qualifications described to the AIG Board and
later set forth in the written opinion of Morgan Stanley dated August 19, 1998,
the Exchange Ratio pursuant to the Merger Agreement was fair from a financial
point of view to AIG. AIG did not impose any limitations with respect to the
investigations made or procedures followed by Morgan Stanley in rendering its
opinion.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION DATED AUGUST 19, 1998,
WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED, AND
SCOPE AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX C TO
THIS JOINT PROXY STATEMENT/PROSPECTUS (THE "MORGAN STANLEY OPINION") AND IS
INCORPORATED HEREIN BY REFERENCE. AIG SHAREHOLDERS ARE URGED TO, AND SHOULD,
READ THE MORGAN STANLEY OPINION CAREFULLY AND IN ITS ENTIRETY. THE MORGAN
STANLEY OPINION IS DIRECTED TO THE AIG BOARD AND THE FAIRNESS OF THE EXCHANGE
RATIO, FROM A FINANCIAL POINT OF VIEW, TO AIG PURSUANT TO THE MERGER AGREEMENT
AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER NOR DOES IT CONSTITUTE A
RECOMMENDATION TO ANY AIG SHAREHOLDER AS TO HOW TO VOTE AT THE AIG SPECIAL
MEETING. THE SUMMARY OF THE MORGAN STANLEY OPINION SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE MORGAN STANLEY OPINION.
In arriving at its opinion, Morgan Stanley (i) reviewed certain publicly
available financial statements and other information of SunAmerica and AIG,
respectively; (ii) reviewed certain internal financial statements and other
financial and operating data concerning SunAmerica prepared by the management of
SunAmerica; (iii) analyzed certain financial projections prepared by the
management of SunAmerica; (iv) discussed the past and current operations and
financial condition and the prospects of SunAmerica with senior executives of
SunAmerica; (v) discussed the past and current operations and financial
condition and the prospects of AIG with senior executives of AIG; (vi) discussed
with the senior managements of SunAmerica and AIG the strategic objectives of
the Merger and their estimates of the synergies, cost savings and other benefits
expected to result from the Merger; (vii) analyzed the pro forma impact of the
Merger on AIG's earnings per share of AIG Common Stock; (viii) reviewed the
reported prices and trading activity for SunAmerica Common Stock and AIG Common
Stock; (ix) compared the financial performance of SunAmerica and AIG and the
prices and trading activity of SunAmerica Common Stock and AIG Common Stock with
that of certain other comparable publicly-traded companies and their securities;
(x) reviewed the financial terms, to the extent publicly available, of certain
comparable acquisition transactions; (xi) participated in discussions and
negotiations among representatives of SunAmerica and AIG and their financial and
legal advisors; (xii) reviewed the Merger Agreement and certain related
documents; and (xiii) performed such other analyses and considered such other
factors as Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of the Morgan Stanley Opinion. With
respect to the financial projections of SunAmerica and the estimates of the
synergies, cost savings and other benefits expected to result from the Merger,
Morgan Stanley assumed that they were reasonably prepared on bases reflecting
the best currently available estimates and judgments of the future financial
performance of SunAmerica and AIG. Morgan Stanley had limited access to internal
financial or
25
<PAGE> 36
other operating data regarding AIG, as AIG was aware, and therefore the
financial and other information regarding AIG reviewed by Morgan Stanley in
connection with the rendering of the Morgan Stanley Opinion was limited to
publicly available information and certain discussions with AIG's senior
management regarding AIG's financial condition and prospects and their strategic
objectives of the Merger and their estimates of the synergies, cost savings and
other benefits expected to result from the Merger. In addition, Morgan Stanley
assumed that the Merger will be consummated in accordance with the terms set
forth in the Merger Agreement, including, among other things, that the Merger
will be accounted for as a "pooling of interests" business combination in
accordance with United States generally accepted accounting principles ("U.S.
GAAP") and the Merger will be treated as a tax-free reorganization and/or
exchange, each pursuant to the Code. Morgan Stanley did not make any independent
valuation or appraisal of the assets or liabilities of SunAmerica, nor was
Morgan Stanley furnished with any such appraisals. The Morgan Stanley Opinion
was necessarily based on economic, market and other conditions as in effect on,
and the information made available to Morgan Stanley as of, the date of the
Morgan Stanley Opinion. Morgan Stanley did not express any opinion as to the
prices at which the AIG Common Stock will trade at any time.
The following is a brief summary of certain analyses performed by Morgan
Stanley and reviewed with the AIG Board on August 19, 1998 in connection with
the preparation of the Morgan Stanley Opinion and with its oral presentation to
the AIG Board on such date:
AIG and SunAmerica Common Stock Performance. Morgan Stanley's analysis of
the performance of AIG Common Stock and SunAmerica Common Stock consisted of a
historical analysis of the indexed price performance of AIG Common Stock and
SunAmerica Common Stock from July 29, 1988 through August 18, 1998, and relative
to the indexed price performance of the Standard and Poor's industrial average
of 500 stocks (the "S&P 500"). Morgan Stanley also analyzed the relative
price/earnings ratios for AIG and SunAmerica on a monthly basis for the periods
from July 31, 1988 to July 31, 1998 as well as AIG's current price/earnings
ratio versus its historical price/earnings ratio on a monthly basis for the last
ten years.
Comparable Public Company Analysis. As part of its analysis, Morgan
Stanley compared certain financial information of SunAmerica with corresponding
publicly available information of a group of ten publicly traded companies that
Morgan Stanley considered comparable in certain respects with SunAmerica (the
"Comparable Public Companies"), which group included: (i) two publicly-traded
companies primarily involved in the asset accumulation sector of the life
insurance industry (the "Comparable Asset Accumulators"), which are Hartford
Life, Inc. and Nationwide Financial Services, Inc.; (ii) six publicly-traded
life insurance and annuity companies (the "Comparable Life and Annuity
Companies"), which are Equitable Companies Inc., Protective Life Corporation,
Liberty Financial Companies, Inc., American General Corporation, Conseco, Inc.
and ReliaStar Financial Corp.; and (iii) two publicly-traded asset management
companies (the "Comparable Asset Managers"), which are Franklin Resources, Inc.
and T. Rowe Price Associates, Inc. Historical financial information used in
connection with the ratios provided below was as of June 30, 1998 with respect
to the financial information for SunAmerica, and as of March 31, 1998 with
respect to financial information for the Comparable Public Companies.
Morgan Stanley analyzed the relative performance of SunAmerica by comparing
certain market trading statistics for SunAmerica with those of the Comparable
Public Companies. The market trading information used in ratios provided below
is as of August 18, 1998. The market trading information used in the valuation
analysis was (i) market price to adjusted (excluding the effects of Financial
Accounting Standards No. 115 ("FAS 115")) book value (which was 5.0x in the case
of SunAmerica; 3.8x in the case of the average of the Comparable Asset
Accumulators; 2.4x in the case of the average of the Comparable Life and Annuity
Companies; and 7.6x in the case of the Comparable Asset Managers); (ii) market
price to estimated earnings per share for 1998 (which was 23.8x in the case of
SunAmerica; 21.3x in the case of the average of the Comparable Asset
Accumulators; 15.9x in the case of the average of the Comparable Life and
Annuity Companies; and 25.9x in the case of the average of the Comparable Asset
Managers); and (iii) market price to estimated earnings per share for 1999
(which was 19.9x in the case of SunAmerica; 18.4x in the case of the average of
the Comparable Asset Accumulators; 13.8x in the case of the average of the
Comparable Life and Annuity Companies; and 21.9x in the case of the average of
the Comparable Asset Managers). Earnings per share estimates for SunAmerica
Common Stock were based on Morgan Stanley Dean Witter research
26
<PAGE> 37
estimates. Earnings per share estimates for the Comparable Public Companies were
based on median I/B/E/S International, Inc. ("IBES") estimates as of August 18,
1998. IBES is a data service that monitors and publishes compilations of
earnings estimates by selected research analysts regarding companies of interest
to institutional investors. The implied range of public market values for
SunAmerica Common Stock, on a stand-alone basis, derived from the analysis of
the Comparable Public Companies' market price to book value, market price to
1998 estimated earnings per share, and market price to 1999 estimated earnings
per share ranged from approximately $58 to $65 per share based on SunAmerica's
book value (excluding FAS 115) and 1998 and 1999 earnings estimates, as adjusted
to reflect the conversion of certain SunAmerica securities that would occur at,
or prior to, the Effective Time.
Acquisition Premiums over Public Market Valuation Analysis. Using the
implied public market values for SunAmerica Common Stock derived from the
Comparable Public Company analysis, Morgan Stanley performed an analysis of the
implied acquisition value of SunAmerica Common Stock, based on premiums to
public market values. Using a range of premiums from 25% to 45%, a range Morgan
Stanley considered representative of the acquisition premiums paid in comparable
acquisitions, the implied acquisition value of SunAmerica Common Stock ranged
from approximately $76 to $89.
Precedent Transaction Analysis. Using publicly available information,
Morgan Stanley performed an analysis of seven precedent transactions (the
"Precedent Transactions") in the insurance and asset management business
segments that Morgan Stanley deemed comparable to the Merger in order to compare
the multiples of book value and projected earnings indicated by the Exchange
Ratio in the Merger to those multiples indicated for the Precedent Transactions.
The seven transactions constituting the Precedent Transactions were
(acquiree/acquiror): Life ReCorporation/Swiss Reinsurance Corporation; General
ReCorporation/Berkshire Hathaway Inc.; Mercury Asset Management Group
PLC/Merrill Lynch & Co.; Equitable of Iowa Companies/ING Group; Security
Connecticut Corporation/ReliaStar Financial Corporation; Chubb Life Insurance
Co. of America/Jefferson-Pilot Corporation; and USLife Corporation/American
General Corporation.
The ranges of multiples of book value (based on the acquired company's most
recently reported book value per share prior to the announcement of the
transaction) and of estimated earnings per share (based on IBES estimates of the
acquired company's earnings per share prior to announcement of the transaction
(or in the case of Mercury Asset Management, the earnings per share for the
twelve months prior to announcement of the transaction)) for the Precedent
Transactions were 1.0x to 17.0x and 14.1x to 25.4x, respectively. The multiple
of SunAmerica's book value as of June 30, 1998 (excluding FAS 115) and of Morgan
Stanley Dean Witter research's estimated fiscal 1999 earnings for Sun America,
indicated by the Exchange Ratio in the Merger was 5.9x and 26.8x, respectively.
Morgan Stanley also analyzed the multiples of SunAmerica's internal management
earnings estimates for fiscal 1999 (which were higher than Morgan Stanley Dean
Witter research and IBES earnings estimates) indicated by the Exchange Ratio in
the Merger. The foregoing multiples indicated by the Exchange Ratio were based
on the closing prices of AIG Common Stock on August 18, 1998 and the book value
and earnings estimates of SunAmerica were adjusted to reflect the conversion of
certain SunAmerica securities that would occur at, or prior to, the time of the
Merger.
Pro Forma Earnings Analysis. Morgan Stanley analyzed the financial impact
of the Merger on AIG's estimated earnings per share and the estimates of the
synergies, cost savings and other benefits expected to result from the Merger
under two different scenarios for the years 1999 and 2000. Under the first
scenario, the earnings estimates for SunAmerica were based on Morgan Stanley
Dean Witter research estimates for calendar 1999 on a stand-alone basis, and an
assumed annual growth rate for calendar year 2000. Under the second scenario,
the earnings estimates for SunAmerica were based on SunAmerica's internal
management estimates for calendar 1999 on a stand-alone basis, and an assumed
annual growth rate for calendar year 2000. In both scenarios, the earnings
estimates for AIG on a stand-alone basis were based on median IBES EPS estimates
for calendar year 1999, and the median IBES projected five-year growth rate. In
addition, in both scenarios the earnings estimates for SunAmerica were adjusted
to reflect the conversion of certain SunAmerica securities that would occur at,
or prior to, the Effective Time.
27
<PAGE> 38
No company or transaction used in the Comparable Public Company and
Precedent Transaction Analyses is identical to SunAmerica or the Merger.
Accordingly, an analysis of the results of the foregoing, including the
acquisition premium over public market value analysis, necessarily involves
complex considerations and judgments concerning financial and operating
characteristics of SunAmerica and other general business, economic, market, or
financial factors that could affect the public trading value of the companies to
which they are being compared. Mathematical analysis (such as determining the
average or the median) is not itself a meaningful method of using comparable
public company data.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all its
analyses as a whole and did not attribute any particular weight to any analysis
or factor considered by it. Morgan Stanley believes that selecting any portion
of Morgan Stanley's analyses, without considering all analyses, would create an
incomplete view of the process underlying its opinion. In addition, Morgan
Stanley may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of SunAmerica.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of SunAmerica. The analyses
performed by Morgan Stanley are not necessarily indicative of actual value,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were performed solely as part of Morgan Stanley's
analysis of whether the Exchange Ratio pursuant to the Merger Agreement was fair
from a financial point of view to AIG, and were conducted in connection with the
delivery of the Morgan Stanley Opinion. The analyses do not purport to be
appraisals or to reflect the prices at which SunAmerica might actually be sold.
As described above, the Morgan Stanley Opinion and the information provided
by Morgan Stanley to the AIG Board were two of a number of factors taken into
consideration by the AIG Board in making its determination to recommend the
approval and adoption of the Merger Agreement and the Merger. Consequently, the
Morgan Stanley analyses described above should not be viewed as determinative of
the opinion of the AIG Board or the view of the management with respect to the
value of SunAmerica, or whether the AIG Board would have been willing to agree
to a different Exchange Ratio.
The Exchange Ratio was determined through negotiations between AIG and its
advisors and SunAmerica and its advisors.
The AIG Board retained Morgan Stanley based upon its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. As part of its investment banking business, Morgan Stanley is
regularly engaged in the valuation of business and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuation for estate, corporate and other purposes. In the ordinary course
of its business, Morgan Stanley and its affiliates may actively trade the debt
and equity securities or senior loans of AIG and SunAmerica for their own
account and for the accounts of customers and, accordingly, may at any time hold
a long- or short-term position in such securities. In the past, Morgan Stanley
has provided financial advisory and financing services to AIG and SunAmerica and
its affiliates, for which services Morgan Stanley has received customary fees.
Pursuant to a letter agreement dated August 17, 1998 between AIG and Morgan
Stanley, Morgan Stanley is entitled to an advisory fee of between $400,000 and
$500,000 or, if the Merger with SunAmerica is consummated, a transaction fee
equal to $15 million, which is payable upon the Closing (as defined under the
caption "The Merger Agreement -- Closing; Effective Time") and against which any
advisory fee paid would be credited. AIG has also agreed to reimburse Morgan
Stanley for its reasonable expenses, including the fees of outside counsel
engaged with AIG's consent. In addition, AIG has agreed to indemnify Morgan
Stanley and its affiliates against certain liabilities and expenses, including
liabilities under federal securities laws, arising out of the engagement and the
transactions in connection therewith.
28
<PAGE> 39
OPINIONS OF SUNAMERICA'S FINANCIAL ADVISORS
Goldman Sachs Opinion
On August 19, 1998, Goldman Sachs delivered its oral opinion to the
SunAmerica Board to the effect that, as of such date, the Exchange Ratio to be
received by the holders of shares of SunAmerica Common Stock pursuant to the
Merger Agreement was fair from a financial point of view to such holders of
shares of SunAmerica Common Stock. Goldman Sachs confirmed its oral opinion by
delivering to the SunAmerica Board a written opinion dated August 19, 1998 (the
"Goldman Sachs Opinion").
THE FULL TEXT OF THE GOLDMAN SACHS OPINION, WHICH SETS FORTH ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN IN CONNECTION THEREWITH, IS ATTACHED AS APPENDIX D TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE GOLDMAN
SACHS OPINION WAS PROVIDED FOR THE INFORMATION AND ASSISTANCE OF THE SUNAMERICA
BOARD IN CONNECTION WITH ITS CONSIDERATION OF THE MERGER. THE GOLDMAN SACHS
OPINION ADDRESSES ONLY THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE
EXCHANGE RATIO TO THE HOLDERS OF SHARES OF SUNAMERICA COMMON STOCK AND DOES NOT
CONSTITUTE A RECOMMENDATION AS TO HOW ANY HOLDER OF SHARES OF SUNAMERICA COMMON
STOCK SHOULD VOTE AT THE SUNAMERICA SPECIAL MEETING WITH RESPECT TO THE MERGER
OR ANY OTHER MATTER RELATED THERETO. THE DESCRIPTION OF THE GOLDMAN SACHS
OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX
D. HOLDERS OF SHARES OF SUNAMERICA COMMON STOCK ARE URGED TO READ THE GOLDMAN
SACHS OPINION IN ITS ENTIRETY.
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 SunAmerica, having provided certain investment banking services to
SunAmerica from time to time, including having advised SunAmerica in its
acquisition of the annuity operations of John Alden Financial Corporation in
1997, having acted as co-manager of its offering of 10 million 8 1/2% Premium
Equity Redemption Cumulative Security Units (the "SunAmerica Security Units") in
1996, and having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Merger Agreement.
Since August 1, 1996, Goldman Sachs has received compensation from SunAmerica
for such services of approximately $3.4 million other than fees payable to
Goldman Sachs pursuant to the terms of an engagement letter agreement, dated
August 19, 1998 (the "Goldman Sachs Engagement Letter"). Goldman Sachs has also
provided certain investment banking services to AIG from time to time, including
having acted as financial advisor with respect to AIG's investment in 20th
Century Industries in 1994 and having acted as financial advisor in its bid for
American Bankers Insurance Group, Inc. in 1997, and Goldman Sachs may provide
investment banking services to AIG, including acting as financial advisor, in
the future. Goldman Sachs provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of SunAmerica or AIG for its own account and for the accounts of
customers and may hold, at any time, a long or short position in such
securities. As of August 19, 1998, Goldman Sachs and its wholly-owned
subsidiaries held for their accounts and for the accounts of their customers a
long position of 1,499,361 shares of SunAmerica Common Stock and a short
position of 651,056 shares of SunAmerica Common Stock.
In connection with the Goldman Sachs Opinion, Goldman Sachs reviewed, among
other things, the Merger Agreement; Annual Reports to Shareholders and Annual
Reports on Form 10-K of SunAmerica for the five fiscal years ended September 30,
1997; Annual Reports to Shareholders and Annual Reports on Form 10-K of AIG for
the five fiscal years ended December 31, 1997; certain interim reports to
shareholders and Quarterly Reports on Form 10-Q of SunAmerica and AIG; selected
Statutory Annual Statements filed by certain insurance subsidiaries of
SunAmerica and AIG with the insurance departments of the states under the laws
of which they are respectively organized; certain other communications from
SunAmerica and AIG to their respective shareholders; certain internal financial
and actuarial analyses for SunAmerica and AIG and financial forecasts for
SunAmerica, each prepared by their respective managements and provided to
Goldman Sachs for purposes of its analysis; and estimates of certain cost
savings and operating synergies that the
29
<PAGE> 40
management of SunAmerica expects will result from the Merger. Goldman Sachs also
held discussions with members of the senior management of SunAmerica and AIG
regarding 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 SunAmerica Common Stock and AIG Common
Stock, compared certain financial information and stock market information for
SunAmerica and AIG with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the insurance industry specifically and in other
industries generally and performed such other studies and analyses and reviewed
such other information as Goldman Sachs considered appropriate. As the
SunAmerica Board was aware, Goldman Sachs requested but did not receive
financial forecasts of AIG. Goldman Sachs' review of such matters was limited to
a discussion with AIG management of certain publicly available estimates of
AIG's future financial performance provided by IBES.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it, and assumed such accuracy and
completeness for purposes of rendering the Goldman Sachs Opinion. In that
regard, Goldman Sachs assumed and relied upon, with the SunAmerica Board's
consent, the reasonableness and accuracy of the financial forecasts of
SunAmerica, including, without limitation, the projected estimates of cost
savings and operating synergies expected to result from the Merger. Goldman
Sachs is not an actuarial firm and its services did not include actuarial
determinations or evaluations by it or an attempt to evaluate actuarial
assumptions. In addition, Goldman Sachs did not make an independent evaluation
or appraisal of the assets and liabilities of SunAmerica or AIG or any of their
subsidiaries and was not furnished with any such evaluation or appraisal.
Goldman Sachs was not requested to, and did not, solicit third party indications
of interest in acquiring all or part of SunAmerica or investigate any
alternative transactions that might be available to SunAmerica. Goldman Sachs
assumed, with the SunAmerica Board's consent, that the Merger will be accounted
for as a "pooling of interests" under generally accepted accounting principles.
Goldman Sachs also assumed, with the SunAmerica Board's consent, that obtaining
all regulatory and other approvals and third party consents required for
consummation of the Merger will not have an adverse impact on SunAmerica or AIG
or on the anticipated benefits of the Merger.
Wasserstein Perella Opinion
On August 19, 1998, Wasserstein Perella delivered its oral opinion to the
SunAmerica Board to the effect that, as of such date, and based upon and subject
to the assumptions, limitations and qualifications set forth in such opinion,
the Exchange Ratio to be received by the holders of shares of SunAmerica Common
Stock pursuant to the Merger Agreement was fair from a financial point of view
to such holders of shares of SunAmerica Common Stock. Wasserstein Perella
confirmed its oral opinion by delivery to the SunAmerica Board a written
opinion, dated August 19, 1998 (the "Wasserstein Perella Opinion").
THE FOLLOWING SUMMARY OF THE WASSERSTEIN PERELLA OPINION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE WASSERSTEIN PERELLA OPINION
ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS AS APPENDIX E AND INCORPORATED
HEREIN BY REFERENCE. HOLDERS OF SHARES OF SUNAMERICA COMMON STOCK ARE URGED TO,
AND SHOULD, READ THE WASSERSTEIN PERELLA OPINION CAREFULLY IN ITS ENTIRETY AND
CONSIDER THE ASSUMPTIONS MADE AND LIMITS OF THE REVIEW BY WASSERSTEIN PERELLA.
THE WASSERSTEIN PERELLA OPINION IS ADDRESSED TO THE SUNAMERICA BOARD AND
ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIO
TO BE RECEIVED BY THE HOLDERS OF SHARES OF SUNAMERICA COMMON STOCK PURSUANT TO
THE MERGER. THE EXCHANGE RATIO TO BE RECEIVED BY THE HOLDERS OF SHARES OF
SUNAMERICA COMMON STOCK PURSUANT TO THE MERGER WAS DETERMINED BY SUNAMERICA AND
AIG THROUGH ARM'S-LENGTH NEGOTIATIONS IN WHICH WASSERSTEIN PERELLA AND GOLDMAN
SACHS ADVISED SUNAMERICA. THE WASSERSTEIN PERELLA OPINION DOES NOT ADDRESS THE
UNDERLYING BUSINESS DECISION BY SUNAMERICA TO EFFECT THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY HOLDER OF SHARES OF SUNAMERICA COMMON STOCK AS TO HOW SUCH HOLDER SHOULD
VOTE WITH RESPECT TO THE MERGER AND SHOULD NOT BE RELIED UPON BY ANY HOLDER OF
SUNAMERICA COMMON STOCK AS SUCH. THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE A
COMPLETE DESCRIPTION OF THE ANALYSIS PERFORMED BY WASSERSTEIN PERELLA.
The SunAmerica Board selected Wasserstein Perella as its financial advisor
in connection with the proposed merger because Wasserstein Perella is an
internationally recognized investment banking firm and
30
<PAGE> 41
members of Wasserstein Perella have substantial experience in transactions
similar to the Merger. Wasserstein Perella is an investment banking firm engaged
in, among other things, 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 corporate and other purposes. In addition,
Wasserstein Perella has performed various investment banking services for
SunAmerica and AIG from time to time in the past, and may provide such services
to SunAmerica and AIG in the future. In the ordinary course of Wasserstein
Perella's business, Wasserstein Perella may actively trade the debt and equity
securities of SunAmerica and AIG for its own account and for the accounts of
customers and, accordingly, may hold, at any time, a long or short position in
such securities.
In connection with the Wasserstein Perella Opinion, Wasserstein Perella
reviewed, among other things, the Merger Agreement; Annual Reports to
Stockholders and Annual Reports on Form 10-K of SunAmerica for the five fiscal
years ended September 30, 1997; Annual Reports to Stockholders and Annual
Reports on Form 10-K of AIG for the five fiscal years ended December 31, 1997;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
SunAmerica and AIG; Statutory Annual Statements filed by certain insurance
subsidiaries of SunAmerica and AIG with the Insurance Departments of the States
under the laws of which they are respectively organized for the five years ended
December 31, 1997; certain other communications from SunAmerica and AIG to their
respective stockholders; certain internal financial and actuarial analyses for
SunAmerica and AIG and certain financial forecasts for SunAmerica, in each case
prepared by their respective managements and provided to Wasserstein Perella for
purposes of its analysis; and estimates of certain cost savings and operating
synergies that the management of SunAmerica expects will result from the Merger.
Wasserstein Perella also held discussions with members of the senior managements
of SunAmerica and AIG regarding past and current business operations, financial
condition and future prospects of their respective companies. In addition,
Wasserstein Perella reviewed the reported price and trading activity for the
shares of SunAmerica Common Stock and the shares of AIG Common Stock, compared
certain financial and stock market information for SunAmerica and AIG with
similar information for certain other companies, the securities of which are
publicly traded, that Wasserstein Perella believed may be relevant or comparable
in certain respects to SunAmerica and AIG or one or more of their businesses or
assets, and Wasserstein Perella reviewed the financial terms of certain recent
business combinations in the insurance industry specifically, and in other
industries generally, that it believed to be reasonably comparable to the Merger
or otherwise relevant to its inquiry. Wasserstein Perella also performed such
other financial studies, analyses and investigations and reviewed such other
information as it considered appropriate for purposes of the Wasserstein Perella
Opinion. As the SunAmerica Board was aware, Wasserstein Perella requested but
did not receive financial forecasts of AIG. Wasserstein Perella's review of such
matters was limited to a discussion with AIG management of certain publicly
available estimates of AIG's future financial performance provided by IBES.
In Wasserstein Perella's review and analysis and in formulating its
opinion, Wasserstein Perella assumed and relied upon the accuracy and
completeness of all of the financial and other information provided to or
discussed with it or publicly available, and Wasserstein Perella did not assume
any responsibility for independent verification of any such information. In that
regard, Wasserstein Perella assumed and relied upon, with the consent of
SunAmerica, the reasonableness and accuracy of the financial forecasts of
SunAmerica, including, without limitation, the projected estimates of certain
cost savings and operating synergies expected to result from the Merger, and
assumed that such forecasts, projections and estimates were reasonably prepared
in good faith and on bases reflecting the best currently available judgments of
the management of SunAmerica and that such estimates will be realized in the
amounts and times contemplated thereby. Wasserstein Perella expressed no opinion
with respect to such forecasts, projections and estimates or the assumptions
upon which they are based. Wasserstein Perella is not an actuarial firm and its
advisory services did not include actuarial determinations or evaluations by it
or an attempt to evaluate actuarial assumptions. In addition, Wasserstein
Perella did not review any of the books and records of SunAmerica or AIG, or
assume any responsibility for conducting a physical inspection of the properties
or facilities of SunAmerica or AIG or for making or obtaining an independent
evaluation or appraisal of the assets and liabilities of SunAmerica or AIG or
any of their subsidiaries and have not been furnished with any such evaluation
or appraisal. Wasserstein Perella was not requested to, and did not, solicit
third-party indications of interest in
31
<PAGE> 42
acquiring all or part of SunAmerica or investigate any alternative transactions
that may be available to SunAmerica. SunAmerica informed Wasserstein Perella and
Wasserstein Perella assumed, with the consent of SunAmerica, that the Merger
will qualify as a tax-free "reorganization" under the provisions of Section
368(a) of the Code and be accounted for as a "pooling of interests" under
generally accepted accounting principles. Wasserstein Perella also assumed that
obtaining all regulatory and other approvals and third-party consents required
for consummation of the Merger will not have an adverse impact on SunAmerica or
AIG or on the anticipated benefits of the Merger, and assumed that the
transactions described in the Merger Agreement will be consummated without
waiver or modification of any of the material terms or conditions contained
therein by any party thereto. The Wasserstein Perella Opinion is necessarily
based on economic and market conditions and other circumstances as they exist
and can be evaluated by Wasserstein Perella as of the date of the Wasserstein
Perella Opinion. Wasserstein Perella did not express any opinion as to the
prices at which any of the securities of SunAmerica or AIG will actually trade
at any time.
Financial Analyses used by Goldman Sachs and Wasserstein Perella
The following is a summary of certain of the financial analyses used by
Goldman Sachs and Wasserstein Perella in connection with providing their
respective opinions to the SunAmerica Board of Directors on August 19, 1998.
Implied Multiple Analysis. Goldman Sachs and Wasserstein Perella
calculated the premium to market price of SunAmerica on August 18, 1998,
aggregate equity consideration based upon the Exchange Ratio and AIG's market
price on August 18, 1998 ("Aggregate Equity Consideration") as a multiple of the
latest twelve months ("LTM") net income and Aggregate Equity Consideration as a
multiple of U.S. GAAP book value for the Merger and for selected transactions in
the life and accumulation industry (the "Selected Life and Accumulation Industry
Transactions") and in the financial services industry (the "Selected Financial
Services Industry Transactions"). With respect to the Merger, the premium to
market was 28.7%, Aggregate Equity Consideration as a multiple of LTM net income
was 34.6x and Aggregate Equity Consideration as a multiple of U.S. GAAP book
value was 5.1x. In comparison, for the Selected Life and Accumulation Industry
Transactions, (i) the premium to market ranged from 10.9% to 51.4% with a median
of 19.5%, (ii) Aggregate Equity Consideration as a multiple of LTM net income
ranged from a low of 13.1x to a high of 37.4x with a median of 17.3x, and (iii)
Aggregate Equity Consideration as a multiple of U.S. GAAP book value ranged from
a low of 1.1x to a high of 4.1x with a median of 2.1x. Such analysis also
indicated that for Selected Financial Services Industry Transactions, (i) the
premium to market ranged from 22.1% to 82.5% with a median of 36.2%, (ii)
Aggregate Equity Consideration as a multiple of LTM net income ranged from a low
of 12.2x to a high of 32.0x with a median of 23.9x, and (iii) Aggregate Equity
Consideration as a multiple of U.S. GAAP book value ranged from a low of 1.9x to
a high of 10.9x with a median of 3.7x.
Summary Financial Information. Goldman Sachs and Wasserstein Perella
reviewed summary financial information (i) for SunAmerica for the fiscal years
ended September 30, 1993 through 1997 and for the nine-month periods ended June
30, 1997 and 1998 and (ii) for AIG for the fiscal years ended December 31, 1993
through 1997 and for the six-month periods ended June 30, 1997 and 1998.
Historical Trading and Exchange Ratio Analysis. Goldman Sachs and
Wasserstein Perella reviewed the historical weekly trading prices for SunAmerica
Common Stock for the period from August 20, 1993 through August 18, 1998 (the
"SunAmerica Historical Stock Prices") and for AIG Common Stock for the period
from August 20, 1993 through August 18, 1998 (the "AIG Historical Stock
Prices"). Goldman Sachs and Wasserstein Perella also reviewed the implied ratio
of the market price of a share of SunAmerica Common Stock to the market price of
a share of AIG Common Stock for each week during the period from August 20, 1993
to August 18, 1998, which ranged from a low of 0.269 to a high of 0.675 with a
median of 0.397.
Selected Companies Analysis. Goldman Sachs and Wasserstein Perella
calculated certain financial information, ratios and public market multiples
relating to SunAmerica, and compared them to corresponding financial
information, ratios and public market multiples for Hartford Life Inc. and
Nationwide Financial Services, Inc. (the "Selected Accumulation Companies"), and
financial information, ratios and public market
32
<PAGE> 43
multiples relating to AIG to corresponding financial information, ratios and
public market multiples for Citigroup (pro forma for the announced merger of
Citicorp and Travelers Group Inc.), American Express Co. and Allstate Corp. (the
"Selected Other Financial Companies"). The multiples of the Selected
Accumulation Companies, the Selected Other Financial Companies, SunAmerica and
AIG were calculated using financial data as of June 30, 1998 and market data as
of August 18, 1998. Earnings estimates used in the analysis were based on the
latest median IBES earnings per share ("EPS") estimates. The analysis showed,
among other things, that the ratio of price to EPS (i) using estimated 1998 EPS
ranged from a low of 20.1x to a high of 22.5x for the Selected Accumulation
Companies as compared to 24.3x for SunAmerica based on IBES estimates and 23.4x
for SunAmerica based on SunAmerica management estimates, and from a low of 14.4x
to a high of 21.1x for the Selected Other Financial Companies as compared to
27.0x for AIG, and (ii) using estimated 1999 EPS ranged from a low of 17.5x to a
high of 19.3x for the Selected Accumulation Companies as compared to 20.1x for
SunAmerica based on IBES estimates and 17.6x based on SunAmerica management
estimates, and from a low of 13.4x to a high of 18.6x for the Selected Other
Financial Companies as compared to 23.8x for AIG. The analysis also showed that
(i) the 1998 to 1999 estimated EPS growth rate ranged from 14.5% to 16.7% for
the Selected Accumulation Companies as compared to 19.4% for SunAmerica, and
from 7.5% to 15.4% for the Selected Other Financial Companies as compared to
13.4% for AIG, and (ii) the IBES five-year EPS growth rate ranged from a low of
15.0% to a high of 16.0% for the Selected Accumulation Companies as compared to
15.0% for SunAmerica and from a low of 12.0% to a high of 15.0% for the Selected
Other Financial Companies as compared to 13.8% for AIG. Finally, the analysis
showed that (i) the ratio of 1998 price to earning ratio to IBES estimated
five-year growth rate ranged from 1.3x to 1.5x for the Selected Accumulation
Companies as compared to 1.6x for SunAmerica, and from 1.2x to 1.5x for the
Selected Other Financial Companies as compared to 2.0x for AIG, and (ii) the
ratio of price to book ranged from a low of 3.16x to a high of 4.13x for the
Selected Accumulation Companies as compared to 4.37x for SunAmerica and from a
low of 2.68x to a high of 5.25x for the Selected Other Financial Companies as
compared to 3.89x for AIG.
Pro Forma Earnings Analysis. Goldman Sachs and Wasserstein Perella
prepared a pro forma earnings analysis of the Merger using earnings estimates
for AIG and SunAmerica for the years 1999 and 2000. This analysis assumed the
Merger would be accounted for as a pooling of interests under U.S. GAAP and
assumed cost savings resulting from the Merger, as provided by SunAmerica
management. For each of these years, Goldman Sachs and Wasserstein Perella
compared the EPS for AIG, on a stand-alone basis, to the EPS for the combined
company on a pro forma basis based upon (i) IBES median estimates with respect
to AIG and SunAmerica management estimates for 1999 and assuming a growth rate
supplied by SunAmerica management for 2000 with respect to SunAmerica and (ii)
IBES estimates with respect to AIG and SunAmerica.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Goldman
Sachs and Wasserstein Perella believe that their analyses must be considered as
a whole and that selecting portions of their analyses, without considering the
analyses taken as a whole, would create an incomplete view of the process
underlying the analyses set forth in the Goldman Sachs Opinion and the
Wasserstein Perella Opinion. In addition, Goldman Sachs and Wasserstein Perella
considered the results of all such analyses and did not assign relative weights
to any of the analyses, so the ranges of valuations resulting from any
particular analysis described above should not be taken to be Goldman Sachs' or
Wasserstein Perella's view of the actual value of SunAmerica or a combination of
SunAmerica and AIG.
In performing their analyses, Goldman Sachs and Wasserstein Perella made
numerous assumptions with respect to industry performance, general business,
economic and regulatory conditions and other matters, many of which are beyond
the control of SunAmerica or AIG. The analyses performed by Goldman Sachs and
Wasserstein Perella are not necessarily indicative of actual values, trading
values or actual future results which might be achieved, all of which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Goldman Sachs' or Wasserstein Perella's
analysis of the fairness of the Exchange Ratio pursuant to the Merger Agreement
to holders of shares of SunAmerica Common Stock from a financial point of view
and were provided to the SunAmerica Board. The analyses do not purport to be
appraisals or to reflect the prices at which a company might be sold. In
addition, as described
33
<PAGE> 44
above, the Goldman Sachs Opinion and the Wasserstein Perella Opinion constituted
one of many factors taken into consideration by the SunAmerica Board in making
its determination to approve the Merger. Consequently, the analyses described
above should not be viewed as determinative of the SunAmerica Board's or
SunAmerica management's opinion with respect to the value of SunAmerica or a
combination of SunAmerica and AIG, or of whether the SunAmerica Board or
SunAmerica management would have been willing to agree to a different exchange
ratio. SunAmerica placed no limits on the scope of the analysis performed, or
opinion expressed, by Goldman Sachs or Wasserstein Perella.
Terms of Goldman Sachs' Engagement
Pursuant to the terms of the Goldman Sachs Engagement Letter, SunAmerica
has agreed to pay Goldman Sachs $5 million at the time of the signing of the
Merger Agreement and has agreed to pay Goldman Sachs an additional $5 million
upon the consummation of the transactions contemplated by the Merger Agreement.
In addition, SunAmerica also agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including attorneys' fees (which shall not
exceed $100,000 without SunAmerica's prior approval), and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws, in connection with this engagement.
Terms of Wasserstein Perella's Engagement
Pursuant to the terms of an engagement letter agreement, dated August 19,
1998, SunAmerica has agreed to pay Wasserstein Perella $5 million at the time of
the signing of the Merger Agreement and has agreed to pay Wasserstein Perella an
additional $5 million upon consummation of the transactions contemplated by the
Merger Agreement. In addition, SunAmerica also agreed to reimburse Wasserstein
Perella for its reasonable out-of-pocket expenses, including attorneys' fees
(which shall not exceed $100,000 without SunAmerica's approval), and to
indemnify Wasserstein Perella against certain liabilities, including certain
liabilities under the federal securities laws, in connection with such
engagement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses the material federal income tax
consequences of the Merger. The summary is based upon the Code, applicable
Treasury regulations thereunder and administrative rulings and judicial
authority as of the date hereof. All of the foregoing are subject to change,
possibly with retroactive effect, and any such change could affect the
continuing validity of the discussion. The discussion assumes that holders of
shares of SunAmerica Common Stock hold such shares as capital assets. Further,
the discussion does not address the tax consequences that may be relevant to a
particular shareholder subject to special treatment under certain federal income
tax laws, such as dealers in securities, traders in securities that elect to use
a mark-to-market method of accounting, non-United States persons, tax-exempt
organizations, shareholders who acquired shares of SunAmerica Common Stock
through the exercise of options, grants of performance shares under SunAmerica's
equity-based compensation plans or otherwise as compensation or through a
tax-qualified retirement plan, or holders that hold SunAmerica Common Stock as
part of a straddle or conversion transaction. This discussion does not address
any consequences arising under the laws of any state, locality or foreign
jurisdiction.
(i) General. It is intended that the Merger constitute a "reorganization"
pursuant to Section 368(a) of the Code. The respective obligations of the
parties to consummate the Merger are conditioned on the receipt by AIG of an
opinion of Sullivan & Cromwell, and the receipt by SunAmerica of an opinion of
Wachtell, Lipton, Rosen & Katz, each dated the Closing Date (as defined under
the caption "The Merger Agreement -- Closing; Effective Time"), and each to the
effect that (i) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) each of
AIG and SunAmerica will be a party to that reorganization within the meaning of
Section 368(b) of the Code, and (iii) no gain or loss will be recognized by the
SunAmerica Shareholders who exchange all of their SunAmerica Common Stock solely
for shares of AIG Common Stock pursuant to the Merger (except with respect to
any cash received in lieu of a fractional share interest in AIG Common Stock).
See "The Merger Agreement -- Conditions of the Merger". Such opinions will be
based upon, among other things, representa-
34
<PAGE> 45
tions of AIG, SunAmerica and/or officers and principal shareholders of AIG and
SunAmerica customarily given in transactions of this type.
(ii) Consequences to Holders of SunAmerica Common Stock. As a
"reorganization", the Merger would have the following consequences for holders
of SunAmerica Common Stock: No gain or loss would be recognized by a holder of
SunAmerica Common Stock as a result of the surrender of shares of SunAmerica
Common Stock in exchange for shares of AIG Common Stock pursuant to the Merger,
except as discussed below with respect to cash received in lieu of fractional
shares of AIG Common Stock. The aggregate tax basis of the shares of AIG Common
Stock received in the Merger (including any fractional shares of AIG Common
Stock deemed received as described below) would be the same as the aggregate tax
basis of the shares of SunAmerica Common Stock surrendered in exchange therefor.
The holding period of the shares of AIG Common Stock received (including any
fractional shares of AIG Common Stock deemed received as described below) would
include the holding period of shares of SunAmerica Common Stock surrendered in
exchange therefor.
If a holder of shares of SunAmerica Common Stock receives cash in lieu of a
fractional share interest in AIG Common Stock in the Merger, such fractional
share interest would be treated as having been distributed to the holder, and
such cash amount would be treated as received in redemption of the fractional
share interest. In general, the holder would recognize capital gain or loss
equal to the cash amount received for the fractional share of AIG Common Stock
reduced by the portion of the holder's tax basis in shares of SunAmerica Common
Stock surrendered that is allocable to the fractional share interest in AIG
Common Stock. The capital gain or loss would be long-term capital gain or loss
if the holder's holding period in the fractional share interest for federal
income tax purposes is more than one year. Long-term capital gain of a
non-corporate U.S. holder is generally subject to a maximum tax rate of 20%.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. THUS, SUNAMERICA
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS,
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX
LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
REQUIRED REGULATORY FILINGS AND APPROVALS
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger cannot be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and specified waiting period requirements have been satisfied. AIG
and SunAmerica filed notification and report forms under the HSR Act with the
FTC and the Antitrust Division on September 15, 1998 and September 16, 1998,
respectively.
At any time before or after consummation of the Merger, the Antitrust
Division or the FTC or any state could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of AIG or SunAmerica. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of SunAmerica or businesses of
AIG or SunAmerica by AIG. Private parties may also seek to take legal action
under the antitrust laws under certain circumstances.
Insurance. SunAmerica's insurance subsidiaries are subject to the
insurance statutes of the jurisdictions in which they are incorporated, the
jurisdictions in which they are licensed, and the insurance holding company acts
in those jurisdictions. These statutes generally require prior approval for
persons acquiring control of insurance companies domiciled or commercially
domiciled in the state, whether directly or indirectly, through merger or
acquisition or otherwise. Accordingly, in connection with the Merger, in August
and September 1998, AIG filed an application for approval of acquisition of
control of or merger with a domestic or commercially domiciled insurer or a
comparable application (each, a "Form A") in Arizona, California, and New York
and filed a similar application in the Cayman Islands.
35
<PAGE> 46
The insurance laws and regulations of Arizona require a public hearing
before consummation of the acquisition of control described in the Arizona Form
A filing. As of the date hereof, no hearing has yet been scheduled for Arizona.
New York does not require a hearing prior to approval, but AIG would be entitled
to a hearing in the event that the New York Insurance Department proposed not to
grant the approval. Hearings are not required in California or the Cayman
Islands. As of the date hereof, no Form A approvals have been obtained by AIG.
In addition to the Form A filings, in September 1998, AIG filed
Pre-Acquisition Notification Forms Regarding the Potential Competitive Impact of
a Proposed Merger or Acquisition by a Non-Domiciliary Insurer Doing Business in
this State or by a Domestic Insurer (each, a "Form E") in Delaware, Georgia, New
Hampshire, New Jersey, Tennessee and Washington as required by applicable law.
The Form E filings are generally reviewed within 60 days with respect to
Washington and 30 days with respect to the other five states after filing with
the applicable state insurance departments, which may request additional
information on the competitive impact of a proposed acquisition. Approval of the
Merger is not required in these states, but the insurance departments of these
states could determine to take action to impose conditions on the Merger.
There can be no assurance that the required regulatory approvals described
above will be received or, if received, of the timing and the terms and
conditions thereof.
Premium Finance Companies. SunAmerica's three premium finance companies
are subject to applicable laws of the states in which they are domiciled
(California and Delaware) and in which they do business. Certain of those
states, including Arizona, California, Florida, Iowa, Louisiana, Massachusetts,
New York and Texas, require prior approval or notification of the applicable
regulatory agency for a change in control of a premium finance company domiciled
or doing business in such state. Accordingly, in connection with the Merger, by
the end of October 1998, AIG expects to have submitted the necessary
applications for such approvals in Arizona, California, Florida, Iowa,
Louisiana, Massachusetts, New York and Texas.
Banking. The indirect acquisition by AIG of Resources Trust Company, a
wholly-owned subsidiary of SunAmerica which was chartered by the State of
Colorado and which is insured by the Federal Deposit Insurance Corporation (the
"FDIC"), will require the approval of the Banking Board of the State of Colorado
and is subject to the prior notice and approval requirements of the Change in
Bank Control Act of 1978, as amended (the "CIBC Act"). Under the CIBC Act, AIG
is required to give 60 days' prior written notice to the FDIC of the
acquisition, during which time the FDIC may act on the notice either by
approving or disapproving the acquisition or by requiring additional information
regarding the acquisition or additional time to consider the notice. Under
Article 23 of the Colorado Revised Statutes, AIG must also receive the approval
of the Banking Board of the State of Colorado in order to acquire control of
Resources Trust Company.
Broker-Dealer and Investment Adviser. Pursuant to certain contracts
("Investment Contracts"), various SunAmerica subsidiaries (the "Advisory
Entities") provide investment management, investment advisory, sub-advisory,
administration, distribution or certain other services to fund clients ("Fund
Clients") registered under the Investment Company Act of 1940 (the "1940 Act")
and/or private clients ("Advisory Clients") pursuant to the Investment Advisers
Act of 1940 (the "Advisers Act"). SunAmerica operates its broker-dealer
operations, known as the SunAmerica Financial Network, through six of its
wholly-owned broker-dealers: Advantage Capital Corporation, Royal Alliance
Associates, Inc., SunAmerica Securities, Inc., Sentra Securities Corporation,
Spelman & Co., Inc. and FSC Securities Corporation; SunAmerica also owns two
additional broker-dealers: Keogler Morgan & Co. and SunAmerica Capital Services,
Inc. (collectively, the "SunAmerica Broker-Dealers").
Certain of the Investment Contracts pursuant to which the Advisory Entities
provide services may terminate as a result of the Merger or may require the
consent of Advisory Clients for their continuance after the Merger. As a result,
approvals by the boards of directors/trustees and securityholders of Fund
Clients registered under the 1940 Act of new Investment Contracts between such
Fund Clients and the same Advisory Entity on terms substantially identical to
those of the terminating agreements will be sought by SunAmerica in connection
with the Merger. The obligations of AIG under the Merger Agreement are subject
36
<PAGE> 47
to the receipt by SunAmerica of the approvals and consents from SunAmerica's
Fund Clients and Advisory Clients representing at least 80% of the total assets,
as of the date of the Merger Agreement, subject to Investment Contracts with all
of SunAmerica's Fund Clients and Advisory Clients. See "The Merger
Agreement -- Conditions of the Merger" and "-- Certain Covenants -- Fund Client
Contracts; Non-Fund Advisory Contracts; Qualification of Fund Clients and Fund
Client Boards". In connection with obtaining the approval of securityholders of
Fund Clients, various proxy solicitation materials will be reviewed by the
Commission and an exemptive order pursuant to the 1940 Act will be sought from
the Commission to permit the Advisory Entities to continue to earn advisory fees
for services to Fund Clients prior to obtaining securityholder approval. It is
expected that, pursuant to this exemptive order, such fees will be paid into an
escrow account pending securityholder approval. SunAmerica will also seek, as
necessary, the approval of Advisory Clients in the manner required under
advisory contracts entered into between Advisory Entities and Advisory Clients
and by the Advisers Act. Following the Effective Time, the Advisory Entities
will amend their registrations with the Commission to reflect the change of
ownership.
Each SunAmerica Broker-Dealer has notified or will notify the National
Association of Securities Dealers, Inc. (the "NASD") of the change of ownership
of the SunAmerica Broker-Dealers pursuant to the Merger. Following the Effective
Time, each broker-dealer owned by AIG (including the former SunAmerica
Broker-Dealers) will be required to amend filings previously made with the
Commission.
RESALE OF AIG COMMON STOCK
All shares of AIG Common Stock received by SunAmerica Common Shareholders
in the Merger will be freely transferable, except that shares of AIG Common
Stock received by persons who are deemed to be "affiliates" (as such term is
defined in Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act")) of SunAmerica at the time of the SunAmerica Special Meeting
may be resold by them only in transactions permitted by the resale provisions of
Rule 145 under the Securities Act (or Rule 144 under the Securities Act in the
case of such persons who become affiliates of AIG) or as otherwise permitted
under the Securities Act. Persons who may be deemed to be "affiliates" of
SunAmerica or AIG generally include individuals or entities that control, are
controlled by, or are under common control with, such party and may include
certain officers and directors of such party as well as principal shareholders
of such party.
Pursuant to the terms of the Merger Agreement, each of SunAmerica and AIG
has delivered to the other a list of names of those persons whom they believe to
be "affiliates" of their respective companies for the purposes of applicable
interpretations regarding the "pooling of interests" method of accounting and,
in the case of SunAmerica, within the meaning of Rule 145 under the Securities
Act. Each of SunAmerica and AIG has agreed to use its best efforts to cause each
person who is identified as an "affiliate" in the list referred to above to
deliver to the other party, prior to the date of the SunAmerica Special Meeting
in the case of AIG, or the AIG Special Meeting in the case of SunAmerica, a
letter (each an "Affiliate Letter") in the form attached to the Merger
Agreement. Such Affiliate Letter shall provide that, in the case of SunAmerica
affiliates, each such person will agree not to sell, transfer or otherwise
dispose of any shares of (i) SunAmerica Common Stock or SunAmerica Class B Stock
that such person may own from the period beginning on the date that is 30 days
prior to the date of the Closing and ending at the earlier of the Effective Time
or the termination of the Merger Agreement or (ii) AIG Common Stock to be
received by such person in or pursuant to the Merger, except in compliance with
applicable provisions of the Securities Act. Such Affiliate Letter, in the case
of both SunAmerica affiliates and AIG affiliates, shall provide that each such
person will agree not to, from and after the period beginning on the date that
is 30 days prior to the Effective Time, sell, transfer or otherwise dispose of,
or reduce any risk relative to, AIG Common Stock, or any capital stock of
SunAmerica, until after such time as financial results covering at least 30 days
of post-Merger operations of AIG and SunAmerica have been published.
This Joint Proxy Statement/Prospectus cannot be used in connection with
resales of AIG Common Stock received in the Merger by any person who may be
deemed to be an "affiliate" of SunAmerica or AIG under the Securities Act.
37
<PAGE> 48
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Following the Merger, AIG will continue the operations of SunAmerica. As of
the date of this Joint Proxy Statement/Prospectus, AIG intends to cause the
business of SunAmerica to be operated at SunAmerica's Los Angeles headquarters
separately from the other subsidiaries of AIG following the Effective Time. The
board of directors of AIG will be comprised of the members of the current AIG
Board, and two additional members designated by SunAmerica. See "-- Interests of
Certain Persons in the Merger". The officers of AIG also will remain unchanged
as a result of the Merger. The SunAmerica Shareholders will become shareholders
of AIG, and their rights as shareholders will be governed by the AIG
Certificate, the AIG By-Laws and the laws of the State of Delaware. See
"Comparison of Rights of SunAmerica Shareholders and AIG Shareholders".
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of SunAmerica's management have interests in the Merger
that are in addition to their interests as SunAmerica Shareholders generally.
The SunAmerica Board was aware of these interests and considered them, among
other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
The Merger Agreement provides that at the Effective Time, AIG will cause to
be elected to the AIG Board two persons to be designated by SunAmerica and
reasonably acceptable to AIG. AIG and SunAmerica expect that Eli Broad, Chairman
and Chief Executive Officer of SunAmerica, and Jay S. Wintrob, Vice Chairman of
SunAmerica, will be the designees of SunAmerica.
Employment Arrangements with SunAmerica
Jay S. Wintrob is a party to a change of control employment agreement with
SunAmerica (the "Wintrob Agreement"), dated as of April 27, 1995, that provides
that upon a termination of Mr. Wintrob's employment by SunAmerica other than for
Cause or Disability or by Mr. Wintrob for Good Reason (in each case, as defined
in the Wintrob Agreement) within the five-year period following a Change of
Control (as defined in the Wintrob Agreement), Mr. Wintrob will be entitled to
receive the following: (i) cash severance equal to the product of (A) Mr.
Wintrob's average annual cash compensation (based on the average of his base
salary plus bonus or incentive compensation earned in the three fiscal years
prior to the date of termination) and (B) a multiple based on the time remaining
from the date of termination until the expiration of the five-year employment
period, which may not be greater than two or less than one; (ii) accrued and
unpaid base salary, deferred compensation and vacation pay; and (iii) other
benefits (excluding severance benefits) pursuant to the terms of SunAmerica's
plans. In addition, upon any such termination, unvested options will vest and
remain exercisable for one year from the date of termination, and the
restrictions on awards of certain restricted stock will lapse.
Pursuant to the terms of a letter agreement between SunAmerica and Gary W.
Krat, dated as of August 15, 1997 (the "Krat Agreement"), upon a termination of
Mr. Krat's employment by SunAmerica without Cause (as defined in the Krat
Agreement), he will be entitled to receive severance pay equal to one year of
base salary.
Pursuant to the terms of a letter agreement between SunAmerica and Michael
L. Fowler, dated as of July 14, 1992 (the "Fowler Agreement"), among other
things, Mr. Fowler is eligible to receive incentive compensation and payments
based on the profits associated with the business he manages (the "Incentive
Payments"), which are payable following certain specified periods, provided that
Mr. Fowler continues to be employed by SunAmerica as of such payment dates. In
connection with the Merger, the Board approved an amendment to the Fowler
Agreement to provide that if Mr. Fowler's employment is terminated after the
Effective Time either by the Company without cause or by Mr. Fowler for good
reason, Mr. Fowler will be entitled to receive the Incentive Payments earned in
respect of periods ending prior to his date of termination without regard to his
continued employment.
38
<PAGE> 49
Other Employment Arrangements
After the date of this Joint Proxy Statement/Prospectus and before the
Effective Time, it is expected that certain members of SunAmerica's key
management will be offered an opportunity to enter into employment agreements
designed to retain and ensure the continued employment of such members of key
management following the Effective Time.
Long-Term Compensation Programs
Pursuant to the terms of the SunAmerica Long-Term Incentive Plan (the
"LTIP"), upon a Change of Ownership of SunAmerica (as defined in the LTIP), all
conditions to the payment of an award, including awards to certain executive
officers and employee directors of SunAmerica, will be deemed satisfied. The
values of the awards granted to Messrs. Broad, Wintrob, Krat and Fowler under
the LTIP that will be deemed earned are approximately $0, $4,482,500, $1,630,000
and $611,250, respectively.
Stock-Based Rights
The Merger Agreement provides that, at the Effective Time, each outstanding
option to purchase shares of SunAmerica Common Stock (each, a "SunAmerica
Option") and each other right with respect to SunAmerica Common Stock (each, a
"SunAmerica Award") under SunAmerica's 1997 Employee Incentive Stock Plan, 1988
Employee Stock Plan, 1995 Performance Stock Plan Amended and Restated 1996, 1998
Long-Term Performance-Based Incentive Plan for the Chief Executive Officer,
Long-Term Performance-Based Incentive Plan Amended and Restated 1997,
Non-Employee Directors' Stock Option Plan or 1987 Restricted Stock Plan (the
"SunAmerica Stock Plans"), whether vested or unvested, will be deemed to
constitute an option to acquire or a right to receive shares of AIG Common Stock
and will be converted into and become an option or a right with respect to AIG
Common Stock. Pursuant to the terms of the SunAmerica Stock Plans, as a result
of the Merger, the unvested SunAmerica Options held by employees, including
certain executive officers, and directors, will become fully vested and
exercisable. In addition, as a result of the Merger, the restrictions on certain
awards of restricted stock (including certain performance-based restricted
stock) held by employees, including certain executive officers and employee
directors, will lapse. The numbers of unvested SunAmerica Options held by
Messrs. Broad, Wintrob, Krat and Fowler under the SunAmerica Stock Plans that
will vest and become exercisable as a result of the Merger are approximately 0,
322,140, 122,490 and 27,900, respectively. The aggregate number of unvested
SunAmerica Options held by the non-employee directors of SunAmerica that will
become fully vested and exercisable as a result of the Merger is approximately
19,198. The number of shares of SunAmerica Common Stock underlying awards of
restricted stock held by Messrs. Broad, Wintrob, Krat and Fowler under the
SunAmerica Stock Plans that will become non-forfeitable and transferable as a
result of the Merger are approximately 41,238, 387,657, 157,500, and 45,000,
respectively. See "The Merger Agreement -- Certain Covenants -- Stock Options
and Other Awards".
Indemnification and Insurance
The Merger Agreement provides that the Surviving Corporation will indemnify
the present and former directors and officers of SunAmerica to the fullest
extent permitted by law against any liabilities or expenses incurred in
connection with any claim or proceeding arising out of matters existing or
occurring at or prior to the Effective Time. The Merger Agreement further
provides that, for a period of four years following the Effective Time, the
Surviving Corporation will maintain a policy of directors' and officers'
liability insurance for acts and omissions occurring prior to the Effective Time
at least as favorable as SunAmerica's current policy, so long as the annual
premium therefor is not in excess of 150% of the current amount expended by
SunAmerica to procure such insurance. See "The Merger Agreement -- Certain
Covenants -- Indemnification; Directors' and Officers' Insurance".
39
<PAGE> 50
ABSENCE OF APPRAISAL RIGHTS
AIG Shareholders are not entitled to any dissenters' rights under the DGCL
as a result of the proposal to be voted upon at the AIG Special Meeting.
SunAmerica Shareholders are not entitled to any appraisal rights under the MGCL
as a result of the proposal to be voted upon at the SunAmerica Special Meeting.
See "Comparison of Rights of SunAmerica Shareholders and AIG
Shareholders -- Appraisal Rights of Dissenting Shareholders".
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by each of AIG
and SunAmerica of a letter from its independent public accountant that the
Merger will qualify for "pooling of interests" accounting treatment for the
Merger. See "The Merger Agreement -- Conditions of the Merger".
AIG and SunAmerica believe that the Merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes. Under this method of
accounting, AIG will restate, retroactively at the Effective Time, its
consolidated financial statements to include the assets, liabilities,
shareholders' equity and results of operations of SunAmerica as if the companies
had always been combined.
The unaudited pro forma financial information contained in this Joint Proxy
Statement/Prospectus has been prepared using the "pooling of interests"
accounting method to account for the Merger. See "Summary -- Comparative Per
Share Market Price Information" and "Selected Consolidated Financial Data".
PUBLIC TRADING MARKETS
SunAmerica Common Stock is currently listed on the NYSE and the Pacific
Exchange, Inc. under the symbol "SAI". In addition, SunAmerica Depositary Shares
and SunAmerica Security Units (as defined under the caption "The Merger
Agreement -- Treatment of SunAmerica Series E Preferred Shares, SunAmerica
Depositary Shares and SunAmerica Security Units") are listed on the NYSE. Upon
consummation of the Merger, SunAmerica Common Stock, SunAmerica Depositary
Shares and SunAmerica Security Units will be delisted from the NYSE and
deregistered under the Exchange Act. AIG Common Stock currently is listed on the
NYSE under the symbol "AIG". Application will be made for the listing on the
NYSE of the shares of AIG Common Stock to be issued in the Merger. The
authorization for listing on the NYSE upon official notice of issuance of the
shares of AIG Common Stock issuable to SunAmerica Shareholders pursuant to the
Merger Agreement is a condition to the consummation of the Merger. See "The
Merger Agreement -- Conditions of the Merger".
40
<PAGE> 51
THE MERGER AGREEMENT
The following describes certain aspects of the proposed Merger, including
material provisions of the Merger Agreement. The following description of the
Merger does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, which is attached as Appendix A to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference. All holders
of AIG Common Stock, SunAmerica Common Stock and SunAmerica Class B Stock and
are urged to read the Merger Agreement carefully.
GENERAL; MERGER CONSIDERATION
The Merger Agreement provides for a business combination between AIG and
SunAmerica in which, subject to the satisfaction of the conditions therein, the
Merger will be effected and the holders of SunAmerica Common Stock (other than
the Excluded Shares) will be issued AIG Common Stock in a transaction intended
to qualify as a "pooling of interests" for accounting purposes and as a
"reorganization" within the meaning of Section 368(a) of the Code for federal
income tax purposes. In the Merger, each outstanding share of SunAmerica Common
Stock (other than Excluded Shares) will be converted into and become
exchangeable for the Merger Consideration. Each share of AIG Common Stock (other
than those held by SunAmerica or one of its subsidiaries) will remain
outstanding following the Merger.
The terms of the Merger are set forth in the Merger Agreement, a copy of
which is attached hereto as Appendix A.
TERMS OF THE MERGER
Pursuant to the Merger Agreement, and on the terms and conditions set forth
therein, at the Effective Time, SunAmerica will be merged with and into AIG.
Upon consummation of the Merger, the separate corporate existence of SunAmerica
will cease and AIG will be the surviving corporation in the Merger (the
"Surviving Corporation") and will continue to be governed by the laws of
Delaware. As a result of the Merger and without any action on the part of the
SunAmerica Shareholders, each issued and outstanding share of SunAmerica Common
Stock (other than the Excluded Shares) shall be converted into, and become
exchangeable for, 0.855 of a share of AIG Common Stock and the right, if any, to
receive cash in lieu of any fractional shares into which such shares of
SunAmerica Common Stock have been converted and any distribution or dividend in
respect of AIG Common Stock with a record date which is at or after the
Effective Time, in each case without interest.
If at any time during the period between the date of the Merger Agreement
and the Effective Time there is a change in the number of shares of SunAmerica
Common Stock other than as permitted by the Merger Agreement or AIG Common Stock
or securities convertible or exchangeable into or exercisable for shares of
SunAmerica Common Stock other than as permitted by the Merger Agreement or AIG
Common Stock, respectively, issued and outstanding as a result of a
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction, the Merger Consideration will be equitably
adjusted.
No fractional shares of AIG Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of SunAmerica Common
Stock who would otherwise have been entitled to receive a fractional share of
AIG Common Stock will be entitled to receive cash, in lieu thereof representing
such holder's proportionate interest in the net proceeds from the sale by the
Exchange Agent (as defined under the caption "-- Exchange of Certificates") on
behalf of such holder of the aggregate fractional shares of AIG Common Stock
that such holder otherwise would be entitled to receive. Any such sale shall be
made by the Exchange Agent within five business days after the date upon which
the SunAmerica Certificates (or affidavit(s) of loss in lieu thereof) that would
otherwise result in the issuance of such fractional shares of AIG Common Stock
have been received by the Exchange Agent.
41
<PAGE> 52
CLOSING; EFFECTIVE TIME
The closing of the Merger (the "Closing") will take place on the tenth
business day after which the last to be fulfilled or waived of the conditions to
the Merger set forth in the Merger Agreement to be fulfilled prior to Closing is
satisfied or waived or on such other day as SunAmerica and AIG agree in writing
(the "Closing Date"). As soon as practicable following the Closing, SunAmerica
and AIG will cause the Articles of Merger to be executed, acknowledged and filed
with and accepted for record by the Department and cause the Delaware
Certificate of Merger to be executed and acknowledged and filed with the
Secretary of State of Delaware as provided in DCGL Section 251. The Merger will
become effective at the Effective Time, which is defined in the Merger Agreement
as the date on which the latest of the following actions is completed: (a) at
the time the Articles of Merger are accepted for record by the Department, (b)
the Delaware Certificate of Merger has been duly filed with the Secretary of
State of Delaware, or (c) at such later time agreed to by SunAmerica and AIG and
established under the Articles of Merger and the Delaware Certificate of Merger
but not later than 30 days after the date of the filing and acceptance for
record of the Articles of Merger by the Department. See "-- Conditions of the
Merger".
EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, AIG shall deposit, or shall cause to be
deposited, with an exchange agent (the "Exchange Agent") for the benefit of the
holders of SunAmerica Common Stock, certificates representing the shares of AIG
Common Stock and cash in lieu of fractional shares and, after the Effective
Time, if applicable, any cash, dividends or other distributions with respect to
the AIG Common Stock to be issued or paid pursuant to the terms of the Merger
Agreement in exchange for shares of SunAmerica Common Stock outstanding
immediately prior to the Effective Time upon due surrender of the certificates
formerly representing SunAmerica Common Stock ("SunAmerica Certificates") (or
affidavit(s) of loss in lieu thereof) (such certificates for shares of AIG
Common Stock, together with the amount of any cash, dividends or other
distributions payable with respect thereto, being hereinafter referred to as the
"Exchange Fund"). Promptly after the Effective Time, the Surviving Corporation
will cause the Exchange Agent to mail to each holder of record of SunAmerica
Common Stock (other than holders of Excluded Shares) a letter of transmittal and
instructions concerning the exchange of SunAmerica Certificates for certificates
representing shares of AIG Common Stock and, if applicable, any cash, unpaid
dividends or other distributions and cash in lieu of fractional shares. Upon
surrender of a SunAmerica Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the holder of such
SunAmerica Certificate will be entitled to receive in exchange therefor a
certificate representing that number of whole shares of AIG Common Stock that
such holder is entitled to receive pursuant to the Merger Agreement and a check
in the amount (after giving effect to any required tax withholdings) of any cash
in lieu of fractional shares plus, if applicable, any cash, unpaid non-stock
dividends and any other dividends or other distributions, that such holder has
the right to receive pursuant to the provisions of the Merger Agreement, and the
SunAmerica Certificate so surrendered will forthwith be canceled. No interest
will be paid or accrued on any amount payable upon due surrender of the
SunAmerica Certificates.
HOLDERS OF SUNAMERICA COMMON STOCK SHOULD NOT SEND THEIR SUNAMERICA
CERTIFICATES TO THE EXCHANGE AGENT UNTIL TRANSMITTAL MATERIALS ARE RECEIVED FROM
THE EXCHANGE AGENT. HOLDERS OF AIG COMMON STOCK WILL NOT EXCHANGE THEIR
CERTIFICATES REPRESENTING SHARES OF AIG COMMON STOCK.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES; TRANSFERS
All shares of AIG Common Stock to be issued pursuant to the Merger will be
deemed issued and outstanding as of the Effective Time and whenever a dividend
or other distribution is declared by AIG in respect of the AIG Common Stock, the
record date for which is at or after the Effective Time, that declaration will
include dividends or other distributions in respect of all shares issuable
pursuant the Merger Agreement. No dividends or other distributions in respect of
the AIG Common Stock will be paid to any holder of any unsurrendered SunAmerica
Certificate until such SunAmerica Certificate is surrendered for exchange in
accordance with the Merger Agreement. Subject to the effect of applicable laws,
following surrender of any such SunAmerica Certificate, there will be issued
and/or paid to the holder of the certificates
42
<PAGE> 53
representing whole shares of AIG Common Stock issued in exchange therefor,
without interest, (a) at the time of such surrender, the dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole shares of AIG Common Stock and not paid and (b) at
the appropriate payment date, the dividends or other distributions payable with
respect to such whole shares of AIG Common Stock with a record date after the
Effective Time but with a payment date subsequent to surrender. After the
Effective Time, there shall be no transfers on the stock transfer books of
SunAmerica of the shares of SunAmerica Common Stock that were outstanding
immediately prior to the Effective Time.
TREATMENT OF SUNAMERICA SERIES E PREFERRED SHARES, SUNAMERICA DEPOSITARY SHARES
AND SUNAMERICA SECURITY UNITS
SunAmerica has agreed to take all necessary action to call for redemption
all of the SunAmerica Series E Preferred Shares (as defined under the caption
"Comparison of Rights of SunAmerica Shareholders and AIG Shareholders") and
$3.10 Depositary Shares representing SunAmerica Series E Preferred Shares (the
"SunAmerica Depositary Shares") (and will comply with all provisions relating to
such securities, including notice provisions) so that such securities are
redeemed prior to or on October 31, 1998 and, in exchange for such securities,
SunAmerica will deliver to the holders of such securities shares of SunAmerica
Common Stock plus all accrued and unpaid dividends on the securities redeemed in
accordance with the terms of such securities.
SunAmerica has also agreed to take all necessary action to call for
redemption all of the outstanding SunAmerica Security Units (and will comply
with all provisions relating to such securities, including notice provisions) so
that such securities are redeemed prior to the Effective Time and, in exchange
for such securities, SunAmerica will deliver to the holders of such securities
shares of SunAmerica Common Stock plus all accrued and unpaid dividends on the
securities redeemed in accordance with the terms of such securities.
Accordingly, SunAmerica mailed the required notice to holders of SunAmerica
Series E Preferred Shares and SunAmerica Depositary Shares on September 22, 1998
and to holders of SunAmerica Security Units on October 7, 1998.
HOLDERS OF SUNAMERICA SERIES E PREFERRED SHARES, SUNAMERICA DEPOSITARY
SHARES AND SUNAMERICA SECURITY UNITS SHOULD NOT SEND THEIR CERTIFICATES
REPRESENTING SUCH SECURITIES TO THE EXCHANGE AGENT. HOLDERS OF SUCH SECURITIES
WILL RECEIVE INSTRUCTION FROM SUNAMERICA IN CONNECTION WITH THE REDEMPTION OF
SUCH SECURITIES.
CORPORATE GOVERNANCE
Certificate of Incorporation and By-Laws of the Surviving Corporation
The Merger Agreement provides that the AIG Certificate and the AIG By-Laws
as in effect immediately prior to the Effective Time will continue to be the
certificate of incorporation and bylaws of the Surviving Corporation.
Directors and Officers of the Surviving Corporation
The Merger Agreement provides that the directors of AIG immediately prior
to the Effective Time shall continue to be the directors of the Surviving
Corporation and that AIG shall cause to be elected to the board of the Surviving
Corporation two persons to be designated by SunAmerica and reasonably acceptable
to AIG. The Merger Agreement further provides that the officers of AIG at the
Effective Time shall be the officers of the Surviving Corporation.
CONDITIONS OF THE MERGER
Mutual Conditions
The obligation of each of SunAmerica and AIG to effect the Merger is
subject to, among other things, the satisfaction or waiver at or prior to the
Effective Time of each of the following conditions:
(a) the receipt of the SunAmerica Requisite Vote and the AIG Requisite
Vote, each in accordance with applicable law;
43
<PAGE> 54
(b) the authorization for listing on the NYSE upon official notice of
issuance of the shares of AIG Common Stock issuable to SunAmerica
Shareholders;
(c) the expiration or termination of the waiting period applicable to
the consummation of the Merger under the HSR Act and applicable insurance
laws, and, other than the filing of the Articles of Merger with and
acceptance for record thereof by the Department and the filing of the
Delaware Certificate of Merger with the Secretary of State of the State of
Delaware, all notices, reports and other filings required to be made prior
to the Effective Time by SunAmerica or AIG or any of their respective
subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by
SunAmerica, AIG or any of their respective subsidiaries or affiliates (as
defined in the Exchange Act) from, any governmental or regulatory
authority, agency, commission, body or other governmental entity
("Governmental Entity") and such consents, registrations, approvals,
permits and authorizations (collectively, "Governmental Consents") in
connection with the execution and delivery of the Merger Agreement by
SunAmerica or AIG and the consummation of the Merger and the other
transactions contemplated thereby having been made or obtained (as the case
may be);
(d) no court or Governmental Entity of competent jurisdiction having
enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits the consummation of the Merger
(an "Order"), and no Governmental Entity shall have instituted any
proceeding or threatened to institute any proceedings seeking any such
Order;
(e) the Registration Statement on Form S-4 (the "Registration
Statement") to register the AIG Common Stock to be issued in the Merger, of
which this Joint Proxy Statement/Prospectus is a part, having been declared
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement having been issued, and no
proceedings for that purpose having been initiated or threatened, by the
Commission;
(f) the receipt by AIG of all state securities and "blue sky" permits
and approvals, if any, necessary to consummate the transactions
contemplated by the Merger Agreement;
(g) the other party's representations and warranties (without giving
effect to any qualifications as to materiality), being true and correct as
of the date of the Merger Agreement (except where the failure to be true
and correct would not, individually or in the aggregate, be reasonably
likely to have a SunAmerica Material Adverse Effect or an AIG Material
Adverse Effect (each as defined in the Merger Agreement), as the case may
be) and as of the Closing Date and the receipt of certificates signed by
such party's executive officers to such effect;
(h) the performance in all material respects by the other party of its
obligations under the Merger Agreement and the receipt of certificates
signed by certain of such party's executive officers to such effect;
(i) the receipt by the other party of all material third party
consents (and, in the case of such consents and Governmental Consents
obtained by SunAmerica, the absence of any conditions imposed by or in
connection with such consents on the operations of any asset or businesses
of the parties which is reasonably likely to materially and adversely
impact the economic or business benefits to AIG and its subsidiaries of the
transactions contemplated by the Merger Agreement);
(j) the receipt by each party of the opinion of their respective tax
counsel regarding the treatment of the Merger as a "reorganization" under
the Code;
(k) the receipt by each party of a letter from their respective
independent accountants to the effect that the Merger will qualify for
"pooling of interests" accounting treatment; and
(l) the receipt by each party of an Affiliates Letter from each person
identified as an affiliate of the other (see "-- Certain
Covenants -- Certain Other Covenants").
44
<PAGE> 55
Additional Conditions to the Obligations of AIG
In addition, the obligations of AIG under the Merger Agreement are subject
to the receipt by SunAmerica of the approvals and consents from SunAmerica's
Fund Clients and Advisory Clients representing at least 80% of the total assets,
as of the date of the Merger Agreement, which are subject to Investment
Contracts with SunAmerica's Fund Clients and Advisory Clients. See "-- Certain
Other Covenants" and "-- Fund Client Contracts; Non-Fund Advisory Contracts;
Qualification of Fund Clients and Fund Client Boards".
CERTAIN COVENANTS
Conduct of SunAmerica's Business Prior to the Merger
SunAmerica has agreed as to itself and, where indicated, each of its
subsidiaries that after the date of the Merger Agreement and prior to the
Effective Time (unless AIG shall otherwise approve in writing and except as
otherwise expressly contemplated by the Merger Agreement or as disclosed in the
SunAmerica Disclosure Letter) that, among other things:
(a) SunAmerica and its subsidiaries will conduct their businesses in
the ordinary and usual course consistent with past practice (it being
understood that nothing contained in the Merger Agreement permits
SunAmerica to enter into or engage in (through acquisition, product
extension or otherwise) the business of selling any products or services
materially different from existing products or services of SunAmerica and
its subsidiaries or to enter into or engage in any new lines of business
without AIG's prior written approval);
(b) SunAmerica and its subsidiaries will use their best efforts to
preserve their business organizations intact and maintain their existing
relations and goodwill with customers, suppliers, reinsurers, distributors,
regulators, creditors, lessors, employees and business associates;
(c) SunAmerica will not issue, sell, pledge, dispose of or encumber
any capital stock owned by it of any of its subsidiaries except in
connection with the redemption of the SunAmerica Series E Preferred Shares
(and the simultaneous conversion of the SunAmerica Depositary Shares),
redemption of the SunAmerica Security Units and the conversion of the
SunAmerica Class B Stock (as described in the Merger Agreement and the
Voting Agreement, as the case may be);
(d) SunAmerica will not amend or modify the SunAmerica Charter or
SunAmerica By-Laws or comparable governing instruments;
(e) SunAmerica will not split, combine or reclassify its outstanding
shares of stock;
(f) SunAmerica will not authorize, declare, set aside or pay any
dividend payable in cash, stock or property in respect of any capital stock
other than dividends from its wholly-owned subsidiaries, regular quarterly
cash dividends paid by it on the SunAmerica Common Stock not in excess of
$0.15 per share of SunAmerica Common Stock and regular dividends and
distributions paid by it on the SunAmerica Series E Preferred Shares and
the SunAmerica Security Units pursuant to the terms thereof;
(g) SunAmerica will not repurchase, redeem or otherwise acquire
(except in connection with any SunAmerica Stock Plan (as such term is
defined under the caption "-- Employee Benefits") and the redemption of
SunAmerica Series E Preferred Shares (and the simultaneous conversion of
the SunAmerica Depositary Shares) and the redemption of SunAmerica Security
Units as described above or permit any of its subsidiaries to purchase or
otherwise acquire any shares of its stock or any securities convertible
into or exchangeable or exercisable for any shares of its stock;
(h) neither SunAmerica nor its subsidiaries will issue, sell, pledge,
dispose of or encumber any shares of, or any securities convertible into,
or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights or agreements of any kind to acquire, any shares of
its capital stock of any class or any voting debt or any other property or
assets (other than shares issuable pursuant to options outstanding on the
date of the Merger Agreement under any of the SunAmerica Stock Plans or
upon redemption of the SunAmerica Series E Preferred Shares (and the
simultaneous conversion of the SunAmerica
45
<PAGE> 56
Depositary Shares), the redemption of the SunAmerica Security Units or the
conversion of the SunAmerica Class B Stock as described in the Merger
Agreement and the Voting Agreement, as the case may be);
(i) other than in the ordinary and usual course of business, neither
SunAmerica nor any of its subsidiaries will transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any other
property or assets (including capital stock of its subsidiaries) or incur
or modify any material indebtedness or other liability;
(j) neither SunAmerica nor any of its subsidiaries will incur any
long-term indebtedness (other than replacement debt as it matures) in
excess of $250 million, incur any short-term indebtedness which is
reflected on SunAmerica's balance sheet (as determined in accordance with
U.S. GAAP) at the end of the financial quarter in which such short-term
indebtedness was incurred;
(k) neither SunAmerica nor any of its subsidiaries will make or
authorize or commit for any capital expenditures other than in amounts less
than $25 million in the aggregate or, by any means, make any acquisition
of, or investment in, assets or stock of any other person or entity (other
than in the ordinary course of business) in excess of $50 million;
provided, however, that no such acquisition can be of a controlling
interest in any other person;
(l) neither SunAmerica nor any of its subsidiaries will terminate,
establish, adopt, enter into, make any new, or accelerate the vesting or
payment of any existing, grants or awards under, amend or otherwise modify
any of SunAmerica's compensation and benefit plans except in the ordinary
course of business consistent with past practice or as may be required by
law, or contractual obligations in effect as of the date of the Merger
Agreement, or as contemplated by the Merger Agreement, or increase the
salary, wage, bonus or other compensation of any employees other than
normal base wage and base salary increases in the ordinary and usual course
of business;
(m) neither SunAmerica nor any of its subsidiaries will settle or
compromise any material claims or litigation, pay, discharge, settle or
satisfy any material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of claims, liabilities or obligations in the
ordinary and usual course of business and within the amounts reflected or
reserved on the most recent consolidated financial statements contained in
each registration statement, report, proxy statement or information
statement prepared by SunAmerica since September 30, 1995, including (A)
SunAmerica's Annual Report on Form 10-K for the year ended September 30,
1997 and (B) SunAmerica's Quarterly Report on Form 10-Q for the periods
ended December 31, 1997, March 31, 1998 and June 30, 1998, each in the form
(including exhibits, annexes and any amendments thereto) filed with the
Commission (collectively, including any such reports filed with the
Commission subsequent to the date hereof, the "SunAmerica Reports");
(n) neither SunAmerica nor any of its subsidiaries will modify, amend
or terminate any of its material contracts or waive, release or assign any
material rights or claims, except in the ordinary and usual course of
business;
(o) neither SunAmerica nor any of its subsidiaries will make any
material tax election or permit any insurance policy naming it as a
beneficiary or loss-payable payee to be canceled or terminated except in
the ordinary and usual course of business;
(p) neither SunAmerica nor any of its subsidiaries will enter into any
agreement containing any provision or covenant limiting in any material
respect the ability of SunAmerica or any subsidiary or affiliate to sell
any products or services of or to any other person, engage in any line of
business or compete with or to obtain products or services from any person
or limiting the ability of any person to provide products or services to
SunAmerica or any of its subsidiaries or affiliates;
(q) neither SunAmerica nor any of its subsidiaries will take any
action or omit to take any action that would cause any of its
representations and warranties in the Merger Agreement to become untrue in
any material respect; and
46
<PAGE> 57
(r) neither SunAmerica nor any of its subsidiaries will authorize or
enter into any agreement to take any of the foregoing actions.
Agreement Not to Solicit Other Offers
SunAmerica has agreed that it will not, and it will not permit or cause any
of its subsidiaries, or any of SunAmerica's or its subsidiaries' directors and
officers to, and SunAmerica shall direct and cause its and its subsidiaries'
employees, agents and representatives (including any advisor, investment banker,
attorney or accountant retained by it or any of its subsidiaries) (collectively,
its "Representatives") not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation or
similar transaction involving, or any purchase of 50% or more of the assets or
any voting securities of, SunAmerica and any of its subsidiaries (any such
proposal or offer, for the purpose of the Merger Agreement being referred to as
an "Acquisition Proposal"). SunAmerica has further agreed that it will not, and
it will not permit or cause any of its subsidiaries or any of SunAmerica's or
its subsidiaries' officers and directors to, and SunAmerica shall direct and
cause its employees, agents and Representatives not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, whether made before or after the date of the Merger Agreement, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; provided, however, that SunAmerica may, and may authorize and permit
its employees, agents and Representatives to, furnish or cause to be furnished
confidential information and may participate in such negotiations and
discussions if the SunAmerica Board determines in good faith (after having
consulted with and considered the advice of outside legal counsel) that such
action is necessary in order for its directors to comply with their respective
fiduciary duties under applicable law. SunAmerica has agreed to immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted theretofore with respect to any of the
foregoing. SunAmerica has further agreed that it will take the necessary steps
to promptly inform its officers, directors, subsidiaries and Representatives of
the foregoing obligations and the obligations in the Confidentiality Agreement
(as defined in the Merger Agreement). SunAmerica has agreed to notify AIG
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of SunAmerica's officers,
directors or its Representatives indicating, in connection with such notice, the
name of such person and the material terms and conditions of any proposals or
offers. SunAmerica has also agreed to promptly request each person that has
theretofore executed a confidentiality agreement in connection with its
consideration of an Acquisition Proposal to return all confidential information
theretofore furnished to such person by or on behalf of SunAmerica or any of its
subsidiaries.
Employee Benefits
AIG has agreed that from the Effective Time until the first anniversary
thereof, the employees of SunAmerica and its subsidiaries will continue to be
provided with benefits under employee benefit plans (other than plans involving
the issuance of SunAmerica Common Stock) that are substantially similar in the
aggregate to those currently provided by SunAmerica and its subsidiaries to such
employees. Any such employees will receive credit under any plans in which the
employees are eligible to participate after the Effective Time for service with
SunAmerica or its subsidiaries (to the extent service was recognized under
SunAmerica's compensation and benefit plans) prior to the Effective Time in
connection with any welfare benefit plan for all purposes (other than benefit
levels or amounts) and any pension plan for purposes of eligibility, vesting and
benefit entitlement (but not benefit accruals or the amount or level of employer
contributions). AIG also has agreed to cause all pre-existing conditions or
limitations and any eligibility waiting periods (to the extent such limitations
or waiting periods did not apply to such employees under SunAmerica's
compensation and benefit plans) under group health plans of AIG or any of its
subsidiaries to be waived with respect to such employees and their eligible
dependents. AIG also agreed to give each such employee credit for the plan year
in which the Effective Time occurs towards applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to the Effective Time during
the applicable plan year.
47
<PAGE> 58
AIG has agreed to honor all employee benefit obligations to current and
former employees under SunAmerica's compensation and benefit plans and all
employee severance plans (or policies) in existence on the date of the Merger
Agreement, all employment or severance agreements entered into by SunAmerica or
adopted by the SunAmerica Board prior to the date of the Merger Agreement and
all employment agreements and amendments thereto authorized by the SunAmerica
Board on or prior to the date of the Merger Agreement and disclosed to AIG.
Nothing in the Merger Agreement prevents AIG from terminating any of
SunAmerica's compensation and benefit plans (other than any severance plan or
policy of SunAmerica prior to the first anniversary of the Effective Time) in
accordance with their terms and subject to applicable law.
SunAmerica has agreed to take such actions as may be necessary to provide
that the exercise date in respect of the offering period under SunAmerica's 1997
Employee Stock Purchase Plan (the "1997 ESPP") in which the Effective Time falls
will be accelerated, and all unexercised options granted in respect of such
offering period will be exercised immediately prior to the Effective Time.
SunAmerica has further agreed to take all such actions as may be necessary to
terminate the 1997 ESPP as of the Effective Time and to cease all further
offerings and payroll deductions under the 1997 ESPP.
Stock Options and Other Awards
The Merger Agreement provides that at the Effective Time, each SunAmerica
Option, whether vested or unvested, will be deemed to constitute an option to
acquire, on the same terms and conditions, the same number of shares of AIG
Common Stock as the holder of such SunAmerica Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time (rounded to the nearest whole number),
at a price per share (rounded to the nearest whole cent) equal to the aggregate
exercise price for the shares of SunAmerica Common Stock otherwise purchasable
pursuant to such SunAmerica Option divided by the number of full shares of AIG
Common Stock deemed purchasable pursuant to such SunAmerica Option as provided
above; provided, however, that in the case of any SunAmerica Option to which
Section 422 of the Code applies, the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option will be subject to such adjustments as are necessary in order to
satisfy the requirements of Section 424(a) of the Code.
At the Effective Time, each SunAmerica Award, whether vested or unvested,
will be deemed to constitute a right to receive or acquire, on the same terms
and conditions as were applicable under the SunAmerica Award, the same number of
shares of AIG Common Stock as the holder of such SunAmerica Award would have
been entitled to receive pursuant to the Merger had such holder received such
SunAmerica Award in full immediately prior to the Effective Time (rounded to the
nearest whole number).
Effective at the Effective Time, AIG has agreed to assume (i) each
SunAmerica Option in accordance with the terms of the relevant SunAmerica Stock
Plan under which such SunAmerica Option was issued and the stock option
agreement by which such SunAmerica Option is evidenced, and (ii) each SunAmerica
Award in accordance with the terms of the relevant SunAmerica Stock Plan under
which such SunAmerica Award was issued and award agreement by which such
SunAmerica Award is evidenced. At or prior to the Effective Time, AIG has agreed
to take all corporate action necessary to reserve for issuance a sufficient
number of shares of AIG Common Stock (i) for delivery upon exercise of
SunAmerica Options and (ii) for issuance with respect to SunAmerica Awards
assumed by AIG.
Pooling of Interests
The Merger Agreement provides that during the period from the date of the
Merger Agreement until the Effective Time, none of AIG, SunAmerica or any of
their respective subsidiaries or other affiliates over which they exercise
control, will knowingly take any action, or knowingly fail to take any action,
that is reasonably likely to jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes. See "-- Conditions of the
Merger".
48
<PAGE> 59
Access
SunAmerica has agreed to provide, and to cause its subsidiaries to provide,
AIG's officers, directors, employees, counsel, accountants and other authorized
representatives access during normal business hours to its and its subsidiaries'
property, books, contracts and records throughout the period prior to the
Effective Time and during such period to furnish to AIG all information as it
may reasonably request. Such access may be denied, however, if in SunAmerica's
reasonable judgment such access would result in the disclosure of trade secrets
of third parties or the violation of SunAmerica's confidentiality obligations,
provided that SunAmerica has used all reasonable efforts to obtain the consent
of such third parties to such inspection or disclosure. No such investigation
will affect or be deemed to modify any representation or warranty made by
SunAmerica.
Indemnification; Directors' and Officers' Insurance
AIG has agreed to indemnify and hold harmless each present and former
director and officer of SunAmerica (when acting in such capacity) from liability
arising out of matters existing or occurring at or prior to the Effective Time
to the fullest extent that SunAmerica would have been permitted to indemnify
such parties under Maryland law and the SunAmerica Articles and SunAmerica
By-Laws. AIG also has agreed that the Surviving Corporation will maintain a
policy of directors' and officers' liability insurance coverage for up to four
years following the Effective Time, subject to certain maximum required premium
amounts. See "The Merger -- Interests of Certain Persons in the Merger".
Compliance with 1940 Act Section 15
SunAmerica has agreed to use all commercially reasonable efforts to ensure
compliance with Section 15(f) of the 1940 Act prior to the Closing so that the
transactions contemplated by the Merger Agreement will be in compliance
therewith, including assuring that at the time of Closing at least 75% of the
Board of Directors or Trustees of each Fund Client are not "interested persons"
(as such term is defined in the 1940 Act) of the Surviving Corporation or
SunAmerica. AIG has agreed to use all commercially reasonable efforts to assure
compliance with Section 15(f) of the 1940 Act as it applies to transactions
contemplated by the Merger Agreement and, from and after the Closing, to conduct
the business of the Surviving Corporation to assure that, insofar as within the
control of AIG, (i) for three years after the Closing Date at least 75% of the
members of the Board of Directors or Trustees of each Fund Client which enters
into a replacement Investment Contract are not "interested persons" of the
Surviving Corporation or SunAmerica and (ii) there is not imposed on any Fund
Client an "unfair burden" (within the meaning of Section 15(f) of the 1940 Act)
as a result of the transactions contemplated by the Merger Agreement, or any
express or implied terms, conditions or understandings applicable thereto.
Fund Client Contracts; Non-Fund Advisory Contracts;
Qualification of Fund Clients and Fund Client Boards
SunAmerica has agreed to use its best efforts to cause (a) the
consideration and due approval by the Board of Directors of each Fund Client,
and to the extent required by the 1940 Act, the consideration and due approval
by such Fund Client's securityholders, of a new Investment Contract with the
same Advisory Entity or (in the case of SunAmerica, the Surviving Corporation)
to become effective upon the Closing, in each case, on the same material terms
as in effect on the date of the Merger Agreement and (b) to the extent
necessary, the preparation and filing of an application to the Commission for
exemptive relief under Section 15(a) of the 1940 Act to permit each Fund Client
to operate under such new Investment Contract prior to securityholder approval.
SunAmerica or the relevant Advisory Entity has agreed to notify each
Advisory Client of the transactions contemplated by the Merger Agreement and to
use its best efforts to obtain such Advisory Client's consent to the
"assignment" (as defined in the Advisers Act) of its Investment Contract
involving investment advisory services in a form reasonably satisfactory to AIG.
49
<PAGE> 60
Subject to fiduciary duties to Fund Clients, SunAmerica has agreed to use
its best efforts to cause the Fund Clients to take no action that would prevent
any Fund Client from qualifying as a "regulated investment company" (within the
meaning of Section 851 of the Code) or that would be inconsistent with any Fund
Client's prospectus and other offering, advertising and marketing materials.
Certain Other Covenants
The Merger Agreement also contains certain other agreements relating to the
conduct of the parties prior to the Effective Time, including those requiring
the parties (i) to cooperate and use their reasonable best efforts in preparing,
filing and obtaining all necessary regulatory approvals and consents; (ii) to
keep one another apprised of the status of matters relating to the Merger; (iii)
to give prompt notice of any change, individually or in the aggregate, which is
reasonably likely to result in a material adverse effect; (iv) to coordinate
payment of dividends to ensure holders of SunAmerica Common Stock do not receive
multiple dividends, or fail to receive a dividend, in any calendar quarter; (v)
to use their best efforts to cause the shares of AIG Common Stock to be issued
in the Merger to be approved for listing on the NYSE and (vi) to use their
respective best efforts to deliver to the other party, prior to the date of the
SunAmerica Special Meeting in the case of AIG, or the AIG Special Meeting in the
case of SunAmerica, necessary Affiliates Letters. SunAmerica and AIG have also
agreed that none of the information they supply for inclusion in the
Registration Statement and this Joint Proxy Statement/Prospectus will contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading. In addition,
SunAmerica has agreed (i) to deliver to AIG certain additional information
relating to SunAmerica's business and operations, and SunAmerica and AIG have
agreed that such information will not be deemed to modify any of SunAmerica's
representations in the Merger Agreement; and (ii) at the request of AIG, to
promptly withdraw any applications made to any applicable regulatory authority
to convert SunAmerica's subsidiary Resources Trust Company to a thrift and (iii)
to cooperate with AIG to protect intellectual property rights of SunAmerica Inc.
REPRESENTATIONS AND WARRANTIES
Mutual Representations and Warranties
SunAmerica and AIG have made representations relating to, among other
things: (a) each of SunAmerica's and AIG's capitalization and organization and
similar corporate matters; (b) authorization, execution, delivery, performance
and enforceability of the Merger Agreement and related matters; (c) conflicts
under governing documents, required consents, approvals and filings, and
violations of any agreements, licenses, permits or laws; (d) documents filed
with the Commission (and, in the case of SunAmerica, applicable insurance
regulatory authorities) and financial statements, and the accuracy of
information contained therein; (e) absence of undisclosed liabilities; (f)
absence of certain material adverse events, changes or effects; (g) litigation
and liabilities; (h) compliance with insurance laws and regulations, related
insurance matters, compliance with other laws and required licenses and permits;
(i) Year 2000 compliance; (j) knowledge concerning qualification of the Merger
as a "pooling of interests" transaction or a "reorganization" under Section
368(a) of the Code; (k) receipt of fairness opinions from their respective
financial advisers; and (l) actions taken in connection with takeover statutes.
Additional Representations and Warranties of SunAmerica
SunAmerica has made additional representations relating to, among other
things: (a) retirement and other employee plans and matters relating to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (b)
compliance with environmental laws; (c) certain tax matters; (d) ownership of
intellectual property and absence of infringement of third-party intellectual
property; (e) the absence of brokers and finders; (f) the disclosure and
enforceability of certain material contracts; (g) the absence of regulatory
disqualifications; (h) the adequacy of reserves and related matters; (i) the
operation of its insurance business and the maintenance of separate accounts;
(j) investment contracts, funds and clients; (k) broker-dealer operations; and
(l) its derivatives instruments.
50
<PAGE> 61
Additional Representations and Warranties of AIG
AIG has made additional representations relating to, among other things:
(a) prior to the Effective Time, AIG will have taken all necessary corporate
action to permit it to issue the number of shares of AIG Common Stock required
to be issued in the Merger; and (b) as of the date of the Merger Agreement, AIG
intends to cause the business of SunAmerica to be operated separately from other
subsidiaries of AIG following the Effective Time.
TERMINATION
The Merger Agreement may be terminated: (i) at any time prior to the
Effective Time, whether before or after approval of the Merger Agreement by the
SunAmerica Shareholders or AIG Shareholders, by mutual written consent of
SunAmerica and AIG by action of the SunAmerica Board and the AIG Board,
respectively; (ii) by action of the SunAmerica Board or the AIG Board if the
Merger shall not have been consummated by June 30, 1999, whether such date is
before or after the date of approval by the SunAmerica Shareholders; (iii) by
action of the SunAmerica Board or the AIG Board if the SunAmerica Requisite Vote
or the AIG Requisite Vote shall not have been obtained at the SunAmerica Special
Meeting or the AIG Special Meeting, as the case may be, or at any adjournments
or postponements thereof; (iv) at any time prior to the Effective Time (provided
that the terminating party is not then in material breach under the Merger
Agreement) by action of the SunAmerica Board or the AIG Board, as the case may
be, in the event of any of (A) a breach of a representation or warranty by the
other party which would be reasonably likely to have, individually or in the
aggregate, a SunAmerica Material Adverse Effect or an AIG Material Adverse
Effect (both as defined in the Merger Agreement), as the case may be, which
breach cannot be cured or has not been cured within 20 days after written notice
thereof; (B) a material breach by the other party of any covenant or agreement
in the Merger Agreement, which breach cannot be or has not been cured within 20
days after written notice thereof; or (c) a SunAmerica Material Adverse Effect
exists (in which case AIG may terminate) or an AIG Material Adverse Effect
exists (in which case SunAmerica may terminate); (v) by action of the SunAmerica
Board or the AIG Board if any order permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become final and
non-appealable (whether before or after approval by the SunAmerica Shareholders
or AIG Shareholders); or (vi) by AIG, any time prior to the Effective Time,
whether before or after the approval by AIG Shareholders, by action of the AIG
Board if the SunAmerica Board shall have withdrawn or adversely modified its
approval or recommendation of the Merger Agreement or failed to reconfirm such
recommendation within five business days after a written request by AIG to do
so, provided that the right to terminate pursuant to clause (ii) above shall not
be available to any party that has breached in any material respect its
obligations under the Merger Agreement in any manner that proximately
contributed to the occurrence of the failure of the Merger to be consummated.
EXPENSES AND TERMINATION FEES
The Merger Agreement provides that the Surviving Corporation will pay all
expenses, including those of the Exchange Agent, arising in connection with the
exchange of SunAmerica Common Stock for the Merger Consideration. Except as
described below, whether or not the Merger is consummated, all costs and
expenses incurred in connection with the Merger Agreement, the Merger and the
other transactions contemplated by the Merger Agreement will be paid by the
party incurring such expenses, except that the filing fee for the Registration
Statement and expenses incurred in connection with the printing and mailing of
the Joint Proxy Statement/Prospectus and the Registration Statement will be
shared equally by AIG and SunAmerica.
The Merger Agreement provides that if it is terminated by SunAmerica or AIG
in the manner described in clause (ii), clause (iii) (with respect only to the
SunAmerica Requisite Vote) or clause (vi), each under the caption
"-- Termination", and prior to the date of such termination any person (other
than AIG) has made to SunAmerica or any of its subsidiaries a bona fide
Acquisition Proposal or has publicly announced the intention (whether or not
conditional) to make a proposal or offer relating to an Acquisition Proposal to
SunAmerica or any of its subsidiaries, then, no later than two days following
the earlier to occur of (a) the entrance into an agreement by SunAmerica or any
of its subsidiaries concerning a transaction which is an Acquisition Proposal or
(b) the date any person (other than AIG) purchases 50% or more of the assets or
51
<PAGE> 62
voting securities of SunAmerica and its subsidiaries (provided that, the
entering of any definitive agreement described in clauses (a) and (b) above by
SunAmerica or any of its subsidiaries or if there is no such agreement with
respect to a purchase described in clause (b) above, any tender, exchange or
other offer or arrangement is first publicly disclosed, within 18 months of such
termination of the Merger Agreement), SunAmerica shall pay AIG a termination fee
of $500 million. If SunAmerica or AIG terminates the Merger Agreement in the
manner described in clause (iii) (with respect only to the AIG Requisite Vote)
under the caption "-- Termination", then AIG will, no later than two days after
the Merger Agreement has been terminated, pay SunAmerica a termination fee of
$500 million.
AMENDMENT AND WAIVER; RIGHT TO REVISE FORM OF MERGER
Subject to the provisions of applicable law, any provision of the Merger
Agreement may be amended or modified at any time prior to the Effective Time by
means of a written agreement executed and delivered by duly authorized officers
of the respective parties. The conditions to each of the parties' obligations to
consummate the Merger are for the sole benefit of such party and may be waived
by such party in whole or in part to the extent permitted by applicable law.
Subject to applicable law, pursuant to the Merger Agreement, SunAmerica and
AIG may mutually agree to revise the structure of the Merger to the extent they
determine such change to be desirable, provided any such change does not affect
the consideration to be received by SunAmerica Shareholders, cause any material
delay in the consummation of the Merger or adversely affect the ability of the
Merger to qualify as a reorganization under Section 368(a) of the Code.
52
<PAGE> 63
RELATED AGREEMENTS AND TRANSACTIONS
VOTING AGREEMENT
The following description of certain terms of the Voting Agreement is only
a summary and does not purport to be complete. This discussion is qualified in
its entirety by reference to the complete text of the Voting Agreement, a copy
of which is attached hereto as Appendix B.
Voting and Proxies
In order to induce AIG to enter into the Merger Agreement, Mr. Broad
entered into the Voting Agreement with AIG. Pursuant to the Voting Agreement,
Mr. Broad has agreed to vote, and to cause any holder of record to vote,
3,634,605 shares of SunAmerica Common Stock and 13,340,591 shares of SunAmerica
Class B Stock beneficially owned by him (which shares he has represented are all
the shares of SunAmerica Common Stock and SunAmerica Class B Stock beneficially
owned by him for which he has the sole authority to vote, excluding any shares
of SunAmerica Common Stock or SunAmerica Class B Stock which he has the right to
obtain upon the exercise of stock options outstanding on the date of the Voting
Agreement) (collectively, the "Shares") and all shares of SunAmerica Common
Stock and all shares of SunAmerica Class B Stock subsequently acquired by him
(including by conversion of SunAmerica Class B Stock into SunAmerica Common
Stock) and all shares of SunAmerica Common Stock and all shares of SunAmerica
Class B Stock for which Mr. Broad voluntarily acquires the right to vote or to
share in the voting (collectively, the "New Shares") in favor of adoption and
approval of the Merger Agreement and the Merger (and each other action and
transaction contemplated by the Merger Agreement or by the Voting Agreement) at
every meeting of the shareholders of SunAmerica at which such matters are
considered and at every adjournment thereof. Mr. Broad has agreed to deliver to
AIG upon request a proxy which shall be coupled with an interest and irrevocable
to the extent permitted under Maryland law, with the total number of his Shares
and any New Shares correctly indicated thereon. Mr. Broad also has agreed to use
his reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary or advisable in order to consummate and
make effective the transactions contemplated by the Voting Agreement.
Prohibited Actions
During the term of the Voting Agreement, Mr. Broad has agreed not to, and
not to permit any entity under his control to, deposit any of the Shares in a
voting trust or subject the Shares to any agreement, arrangement or
understanding with respect to voting the Shares other than agreements entered
into with AIG.
Conversion of SunAmerica Class B Stock
Mr. Broad has agreed to convert, immediately prior to the Effective Time,
each share of SunAmerica Class B Stock held by him into one fully paid and
nonassessable share of SunAmerica Common Stock, in accordance with the terms of
the SunAmerica Class B Stock as set forth in the SunAmerica Charter. The
SunAmerica Charter provides that when the number of outstanding shares of
SunAmerica Class B Stock outstanding falls below 5% of the aggregate number of
the issued and outstanding shares of SunAmerica Common Stock and SunAmerica
Class B Stock, the outstanding shares of SunAmerica Class B Stock will
immediately be converted into shares of SunAmerica Common Stock. Accordingly,
all of the outstanding shares of SunAmerica Class B Stock will be converted into
shares of SunAmerica Common Stock immediately following conversion of the shares
of SunAmerica Class B Stock held by Mr. Broad pursuant to the Voting Agreement.
Other Provisions
The Voting Agreement also contains provisions relating to, among other
things, representations and warranties by Mr. Broad and specific performance of
the Voting Agreement. The Voting Agreement terminates upon the earlier to occur
of (i) the Effective Time or (ii) the termination of the Merger Agreement in
accordance with its terms.
53
<PAGE> 64
INFORMATION REGARDING AIG
AIG is a holding company with a market capitalization, as of September 30,
1998, of approximately $82.3 billion, which through its subsidiaries is
primarily engaged in a broad range of insurance and insurance-related activities
and financial services in the United States and abroad. AIG's primary activities
include both general and life insurance operations. AIG's principal insurance
company subsidiaries are American Home Assurance Company, National Union Fire
Insurance Company of Pittsburgh, Pa., New Hampshire Insurance Company, Lexington
Insurance Company, American International Underwriters Overseas, Ltd., American
Life Insurance Company, American International Assurance Company, Limited, Nan
Shan Life Insurance Company, Ltd., The Philippine American Life and General
Insurance Company, American International Reinsurance Company, Ltd. and United
Guaranty Residential Insurance Company.
AIG's general insurance subsidiaries are multiple line companies writing
substantially all lines of property and casualty insurance. One or more of these
companies is licensed to write substantially all of these lines in all states of
the United States and in more than 100 foreign countries.
AIG's life insurance subsidiaries offer a wide range of traditional
insurance and financial and investment products. One or more of these
subsidiaries is licensed to write life insurance in all states in the United
States and in over 70 foreign countries.
AIG operations which contribute to financial services income include
primarily A.I. Credit Corp. ("AICCO"), AIG Financial Products Corp. and its
subsidiary companies ("AIGFP"), AIG Trading Group Inc. and its subsidiaries
("AIGTG"), International Lease Finance Corporation ("ILFC") and UeberseeBank AG.
AICCO's business is principally in premium financing. AIGFP structures financial
transactions, including long-dated interest rate and currency swaps and
structures borrowings through notes, bonds and guaranteed investment agreements.
AIGTG engages in various commodities trading, foreign exchange trading and
market making activities. ILFC is engaged primarily in the acquisition of new
and used commercial jet aircraft and the leasing and remarketing of such
aircraft to airlines around the world. UeberseeBank AG operates as a Swiss bank.
During the third quarter of 1998, AIG increased its ownership interest in
each of Transatlantic Holdings, Inc. ("TRH") and 20th Century Industries ("20th
Century") to more than 50%. Through their respective subsidiaries, TRH is the
largest broker market reinsurer in the United States and 20th Century is the
ninth largest publicly held personal automobile insurer in the United States.
54
<PAGE> 65
INFORMATION REGARDING SUNAMERICA
SunAmerica is a financial services company which specializes in retirement
savings and investment products and services and has a market capitalization, as
of September 30, 1998, of approximately $13.2 billion. SunAmerica earns fees or
spread income on assets, which at June 30, 1998 were approximately $112 billion.
Together, the SunAmerica life insurance companies rank among the largest U.S.
issuers of tax-deferred fixed and variable annuities and guaranteed investment
contracts ("GICs"). SunAmerica's principal insurance company subsidiaries are
SunAmerica Life Insurance Company, Anchor National Life Insurance Company,
SunAmerica National Life Insurance Company, First SunAmerica Life Insurance
Company and CalAmerica Life Insurance Company. Complementing these annuity and
GIC operations are SunAmerica's asset management operations; its six
broker-dealers, which provide a broad range of financial planning and investment
services through more than 9,400 independent registered representatives
nationwide; its trust company, which provides administrative and custodial
services to qualified retirement plans; and its premium finance company, one of
the nation's leaders in its field.
SunAmerica's six wholly-owned broker-dealers, known as the SunAmerica
Financial Network, comprise the largest network of independent registered
representatives in the nation and the fifth-largest securities sales force,
based on industry data. These wholly-owned broker-dealers accounted for
approximately one-third of SunAmerica's total annuity sales in fiscal 1997. The
Company also distributes its products and services through an extensive network
of independent broker-dealers, full-service securities firms, independent
general insurance agents, major financial institutions and, in the case of its
GICs, by marketing directly to banks, municipalities, asset management firms,
certain trusts and direct plan sponsors and through intermediaries, such as
managers or consultants servicing these groups. These six wholly-owned
broker-dealers are Advantage Capital Corporation, Royal Alliance Associates,
Inc., SunAmerica Securities, Inc., Sentra Securities Corporation, Spelman & Co.,
Inc. and FSC Securities Corporation.
In recent years, SunAmerica has expanded its offerings of fee-based
products and services such as variable annuities, mutual funds, trust services
and premium financing. Fee income has also expanded through the receipt of
broker-dealer net retained commissions, resulting primarily from the expansion
of SunAmerica's wholly-owned broker-dealer network, through both acquisitions
and internal recruiting, and increased demand for long-term investment products.
55
<PAGE> 66
UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS OF AIG AND SUNAMERICA
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of AIG and
SunAmerica, including their respective subsidiaries, after giving effect to the
Merger. The unaudited pro forma combined balance sheets at December 31, 1997 and
June 30, 1998 with respect to AIG and September 30, 1997 and March 31, 1998 with
respect to SunAmerica, set forth below, give effect to the Merger as if it had
occurred at December 31, 1997. The unaudited pro forma combined statements of
income for each of the three years ended December 31, 1997, 1996 and 1995 and
six months ended June 30, 1998 and 1997 with respect to AIG and the three fiscal
years ended September 30, 1997, 1996 and 1995 and six months ended March 31,
1998 and 1997 with respect to SunAmerica give effect to the Merger as if it had
occurred on January 1, 1995. These statements are prepared on the basis of
accounting for the Merger as a "pooling of interests" and are based on the
assumptions set forth in the notes thereto.
The following pro forma financial information has been prepared from, and
should be read in conjunction with, the audited historical consolidated
financial statements and related notes thereto of AIG and SunAmerica,
incorporated by reference herein. The following information is not necessarily
indicative of the financial position or operating results that would have
occurred had the Merger been consummated on the date, or at the beginning of the
period for which the Merger is being given effect, nor is it necessarily
indicative of future financial position or operating results. See "Where You Can
Find More Information".
56
<PAGE> 67
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
AIG SUNAMERICA
DECEMBER 31, SEPTEMBER 30, PRO FORMA
1997 1997 ADJUSTMENTS COMBINED
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments and cash:
Fixed maturities:
Bonds available for sale, at market
value................................. $ 38,077,792 $18,523,655 $ -- $ 56,601,447
Bonds held to maturity, at amortized
cost.................................. 12,530,315 -- -- 12,530,315
Bonds trading securities, at market
value................................. 718,548 -- -- 718,548
Preferred stocks, at amortized cost..... 239,331 -- -- 239,331
Equity securities:
Common stocks, at market value.......... 5,209,274 96,541 -- 5,305,815
Non-redeemable preferred stocks, at
market value.......................... 138,745 -- -- 138,745
Mortgage loans on real estate, policy and
collateral loans -- net................. 7,919,764 3,139,309 -- 11,059,073
Financial services assets:
Flight equipment primarily under
operating leases, net of accumulated
depreciation.......................... 14,438,074 -- -- 14,438,074
Securities available for sale, at market
value................................. 9,145,317 -- -- 9,145,317
Trading securities, at market value..... 3,974,561 -- -- 3,974,561
Spot commodities, at market value....... 459,517 -- -- 459,517
Unrealized gain on interest rate and
currency swaps, options and forward
transactions.......................... 7,422,290 -- -- 7,422,290
Trading assets.......................... 6,715,486 -- -- 6,715,486
Securities purchased under agreements to
resell, at contract value............. 4,551,191 -- -- 4,551,191
Other invested assets...................... 4,681,423 1,655,324 -- 6,336,747
Short-term investments, at cost............ 3,332,542 993,349 -- 4,325,891
Cash....................................... 86,917 -- -- 86,917
------------ ----------- ------------ ------------
Total investments and cash............ 119,641,087 24,408,178 -- 144,049,265
Investment income due and accrued............ 1,368,404 296,637 -- 1,665,041
Premiums and insurance balances
receivable -- net.......................... 10,282,987 -- -- 10,282,987
Reinsurance assets........................... 16,110,521 -- -- 16,110,521
Deferred policy acquisition costs............ 6,592,506 1,118,582 -- 7,711,088
Investments in partially-owned companies..... 1,121,173 -- -- 1,121,173
Real estate and other fixed assets, net of
accumulated depreciation................... 2,342,187 -- -- 2,342,187
Separate and variable accounts............... 3,993,971 9,514,675 -- 13,508,646
Other assets................................. 2,517,851 298,814 -- 2,816,665
------------ ----------- ------------ ------------
Total assets.......................... $163,970,687 $35,636,886 $ -- $199,607,573
============ =========== ============ ============
</TABLE>
See accompanying notes to pro forma combined financial statements.
57
<PAGE> 68
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------
AIG SUNAMERICA
DECEMBER 31, SEPTEMBER 30, PRO FORMA
1997 1997 ADJUSTMENTS COMBINED
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
LIABILITIES:
Reserve for losses and loss expenses........ $ 33,400,160 $ -- $ -- $ 33,400,160
Reserve for unearned premiums............... 8,739,006 -- -- 8,739,006
Future policy benefits for life and accident
and health insurance contracts............ 24,502,005 -- -- 24,502,005
Policyholders' contract deposits............ 10,323,112 19,998,418 -- 30,321,530
Other policyholders' funds.................. 2,352,514 -- -- 2,352,514
Reserve for commissions, expenses and
taxes..................................... 1,739,945 -- -- 1,739,945
Insurance balances payable.................. 1,702,578 -- -- 1,702,578
Funds held by companies under reinsurance
treaties.................................. 336,585 -- -- 336,585
Income taxes payable:
Current................................... 585,375 2,025 -- 587,400
Deferred.................................. 470,706 383,764 -- 854,470
Financial services liabilities:
Borrowings under obligations of guaranteed
investment agreements................... 8,000,326 -- -- 8,000,326
Securities sold under agreements to
repurchase, at contract value........... 2,706,310 -- -- 2,706,310
Trading liabilities....................... 5,366,421 -- -- 5,366,421
Securities and spot commodities sold but
not yet purchased, at market value...... 5,171,680 -- -- 5,171,680
Unrealized loss on interest rate and
currency swaps, options and forward
transactions............................ 5,979,571 -- -- 5,979,571
Deposits due to banks and other
depositors.............................. 972,423 427,433 -- 1,399,856
Commercial paper.......................... 2,208,167 -- -- 2,208,167
Notes, bonds and loans payable............ 12,608,891 -- -- 12,608,891
Commercial paper............................ 1,166,740 -- -- 1,166,740
Notes, bonds, loans and mortgages payable... 1,276,521 1,136,072 -- 2,412,593
Separate and variable accounts.............. 3,993,971 9,514,675 -- 13,508,646
Other liabilities........................... 5,966,553 1,095,393 -- 7,061,946
------------ ----------- --------- ------------
Total liabilities.................... 139,569,560 32,557,780 -- 172,127,340
------------ ----------- --------- ------------
Preferred shareholders' equity in subsidiary
company................................... 400,000 495,000 -- 895,000
------------ ----------- --------- ------------
CAPITAL FUNDS:
Common stock................................ 1,897,804 179,076 309,297 2,386,177
Nontransferable Class B Stock............... -- 16,273 (16,273) --
Preferred stock............................. -- 248,000 -- 248,000
Additional paid-in capital.................. 105,689 750,401 (293,024) 563,066
Unrealized appreciation of investments, net
of taxes.................................. 1,350,182 209,910 -- 1,560,092
Cumulative translation adjustments, net of
taxes..................................... (1,178,041) -- -- (1,178,041)
Retained earnings........................... 22,920,991 1,180,446 -- 24,101,437
Treasury stock, at cost..................... (1,095,498) -- -- (1,095,498)
------------ ----------- --------- ------------
Total capital funds.................. 24,001,127 2,584,106 -- 26,585,233
------------ ----------- --------- ------------
Total liabilities and capital
funds.............................. $163,970,687 $35,636,886 $ -- $199,607,573
============ =========== ========= ============
</TABLE>
See accompanying notes to pro forma combined financial statements.
58
<PAGE> 69
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
AIG SUNAMERICA
JUNE 30, MARCH 31, PRO FORMA
1998 1998 ADJUSTMENTS COMBINED
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments and cash:
Fixed maturities:
Bonds available for sale, at market
value.................................. $ 39,998,093 $18,955,142 $ -- $ 58,953,235
Bonds held to maturity, at amortized
cost................................... 11,991,025 -- -- 11,991,025
Bonds trading securities, at market
value.................................. 791,507 -- -- 791,507
Preferred stocks, at amortized cost...... 232,218 -- -- 232,218
Equity securities:
Common stocks, at market value........... 5,108,222 108,532 -- 5,216,754
Non-redeemable preferred stocks, at
market value........................... 227,558 -- -- 227,558
Mortgage loans on real estate, policy and
collateral loans -- net.................. 8,278,255 2,994,918 -- 11,273,173
Financial services assets:
Flight equipment primarily under
operating leases, net of accumulated
depreciation........................... 16,035,894 -- -- 16,035,894
Securities available for sale, at market
value.................................. 7,686,970 -- -- 7,686,970
Trading securities, at market value...... 5,875,223 -- -- 5,875,223
Spot commodities, at market value........ 365,608 -- -- 365,608
Unrealized gain on interest rate and
currency swaps, options and forward
transactions........................... 8,060,799 -- -- 8,060,799
Trading assets........................... 6,497,672 -- -- 6,497,672
Securities purchased under agreements to
resell, at contract value.............. 7,690,933 -- -- 7,690,933
Other invested assets....................... 5,797,925 1,937,338 -- 7,735,263
Short-term investments, at cost............. 3,772,939 982,521 -- 4,755,460
Cash........................................ 162,854 -- -- 162,854
------------ ----------- ------------ ------------
Total investments and cash............. 128,573,695 24,978,451 -- 153,552,146
Investment income due and accrued............... 1,613,057 286,682 -- 1,899,739
Premiums and insurance balances
receivable -- net............................. 11,512,725 -- -- 11,512,725
Reinsurance assets.............................. 16,134,201 -- -- 16,134,201
Deferred policy acquisition costs............... 6,801,252 1,126,772 -- 7,928,024
Investments in partially-owned companies........ 1,141,286 -- -- 1,141,286
Real estate and other fixed assets, net of
accumulated depreciation...................... 2,333,692 -- -- 2,333,692
Separate and variable accounts.................. 5,063,969 11,415,780 -- 16,479,749
Other assets.................................... 2,929,344 431,895 -- 3,361,239
------------ ----------- ------------ ------------
Total assets........................... $176,103,221 $38,239,580 $ -- $214,342,801
============ =========== ============ ============
</TABLE>
See accompanying notes to pro forma combined financial statements.
59
<PAGE> 70
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
AIG SUNAMERICA
JUNE 30, MARCH 31, PRO FORMA
1998 1998 ADJUSTMENTS COMBINED
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
LIABILITIES:
Reserve for losses and loss expenses...... $ 33,913,832 $ -- $ -- $ 33,913,832
Reserve for unearned premiums............. 9,204,004 -- -- 9,204,004
Future policy benefits for life and
accident and health insurance
contracts.............................. 25,869,309 -- -- 25,869,309
Policyholders' contract deposits.......... 11,168,502 20,348,022 -- 31,516,524
Other policyholders' funds................ 2,336,715 -- -- 2,336,715
Reserve for commissions, expenses and
taxes.................................. 2,097,075 -- -- 2,097,075
Insurance balances payable................ 1,998,597 -- -- 1,998,597
Funds held by companies under reinsurance
treaties............................... 331,008 -- -- 331,008
Income taxes payable:
Current................................ 552,088 3,647 -- 555,735
Deferred............................... 597,349 505,079 -- 1,102,428
Financial services liabilities:
Borrowings under obligations of
guaranteed investment agreements..... 8,543,659 -- -- 8,543,659
Securities sold under agreements to
repurchase, at contract value........ 4,694,009 -- -- 4,694,009
Trading liabilities.................... 4,879,728 -- -- 4,879,728
Securities and spot commodities sold
but not yet purchased, at market
value................................ 6,980,492 -- -- 6,980,492
Unrealized loss on interest rate and
currency swaps, options and forward
transactions......................... 5,859,944 -- -- 5,859,944
Deposits due to banks and other
depositors........................... 962,161 438,416 -- 1,400,577
Commercial paper....................... 3,331,517 -- -- 3,331,517
Notes, bonds and loans payable......... 12,733,857 -- -- 12,733,857
Commercial paper.......................... 1,253,137 -- -- 1,253,137
Notes, bonds, loans and mortgages
payable................................ 1,379,273 1,236,290 -- 2,615,563
Separate and variable accounts............ 5,063,969 11,415,780 -- 16,479,749
Other liabilities......................... 6,223,537 950,615 -- 7,174,152
------------ ----------- -------- ------------
Total liabilities................. 149,973,762 34,897,849 -- 184,871,611
------------ ----------- -------- ------------
Preferred shareholders' equity in
subsidiary company..................... 400,000 495,000 -- 895,000
------------ ----------- -------- ------------
CAPITAL FUNDS:
Common stock.............................. 1,897,804 179,093 309,322 2,386,219
Nontransferable Class B Stock............. -- 16,273 (16,273) --
Preferred stock........................... -- 248,000 -- 248,000
Additional paid-in capital................ 87,873 746,072 (293,049) 540,896
Retained earnings......................... 24,645,131 1,392,638 -- 26,037,769
Accumulated other comprehensive income.... 173,387 264,655 -- 438,042
Treasury stock, at cost................... (1,074,736) -- -- (1,074,736)
------------ ----------- -------- ------------
Total capital funds............... 25,729,459 2,846,731 -- 28,576,190
------------ ----------- -------- ------------
Total liabilities and capital
funds........................... $176,103,221 $38,239,580 $ -- $214,342,801
============ =========== ======== ============
</TABLE>
See accompanying notes to pro forma combined financial statements.
60
<PAGE> 71
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL SIX MONTHS ENDED
----------------------------
AIG SUNAMERICA
JUNE 30, MARCH 31, PRO FORMA
1998 1998 COMBINED
------------ ------------ ----------
<S> <C> <C> <C>
GENERAL INSURANCE OPERATIONS:
Net premiums written...................................... $6,998,633 $ -- $6,998,633
Change in unearned premium reserve........................ (378,520) -- (378,520)
---------- -------- ----------
Net premiums earned....................................... 6,620,113 -- 6,620,113
Net investment income..................................... 1,002,749 -- 1,002,749
Realized capital gains.................................... 96,356 -- 96,356
---------- -------- ----------
7,719,218 -- 7,719,218
---------- -------- ----------
Losses and loss expenses incurred......................... 5,039,947 -- 5,039,947
Underwriting expenses..................................... 1,299,291 -- 1,299,291
---------- -------- ----------
6,339,238 -- 6,339,238
---------- -------- ----------
Operating income.......................................... 1,379,980 -- 1,379,980
---------- -------- ----------
LIFE INSURANCE OPERATIONS:
Premium and fee income.................................... 4,982,427 209,793 5,192,220
Net investment income..................................... 1,560,063 403,343 1,963,406
Realized capital gains (losses)........................... (14,495) 5,452 (9,043)
---------- -------- ----------
6,527,995 618,588 7,146,583
---------- -------- ----------
Death and other benefits.................................. 2,092,099 -- 2,092,099
Increase in future policy benefits........................ 2,323,747 -- 2,323,747
Acquisition and insurance expenses........................ 1,258,305 265,856 1,524,161
---------- -------- ----------
5,674,151 265,856 5,940,007
---------- -------- ----------
Operating income.......................................... 853,844 352,732 1,206,576
---------- -------- ----------
Financial services operating income......................... 405,836 -- 405,836
Equity in income of minority-owned insurance operations..... 57,127 -- 57,127
Other realized capital losses............................... (3,095) -- (3,095)
Minority interest expense................................... (32,981) -- (32,981)
Other income (deductions) -- net............................ (70,211) -- (70,211)
---------- -------- ----------
INCOME BEFORE INCOME TAXES.................................. 2,590,500 352,732 2,943,232
---------- -------- ----------
Total income taxes.......................................... 761,957 95,200 857,157
---------- -------- ----------
NET INCOME.................................................. $1,828,543 $257,532 $2,086,075
========== ======== ==========
Earnings per common share:
Net income -- Basic....................................... $ 1.74 $ -- $ 1.72
Net income -- Diluted..................................... $ 1.73 $ -- $ 1.68
Average shares outstanding -- Basic......................... 1,049,545 164,765 1,214,310
Average shares outstanding -- Diluted....................... 1,054,760 190,087 1,244,847
</TABLE>
See accompanying notes to pro forma combined financial statements.
61
<PAGE> 72
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL SIX MONTHS ENDED
----------------------------
AIG SUNAMERICA
JUNE 30, MARCH 31, PRO FORMA
1997 1997 COMBINED
------------ ------------ ----------
<S> <C> <C> <C>
GENERAL INSURANCE OPERATIONS:
Net premiums written................................. $6,856,889 $ -- $6,856,889
Change in unearned premium reserve................... (648,797) -- (648,797)
---------- -------- ----------
Net premiums earned.................................. 6,208,092 -- 6,208,092
Net investment income................................ 902,951 -- 902,951
Realized capital gains............................... 78,599 -- 78,599
---------- -------- ----------
7,189,642 -- 7,189,642
---------- -------- ----------
Losses and loss expenses incurred.................... 4,741,855 -- 4,741,855
Underwriting expenses................................ 1,212,944 -- 1,212,944
---------- -------- ----------
5,954,799 -- 5,954,799
---------- -------- ----------
Operating income..................................... 1,234,843 -- 1,234,843
---------- -------- ----------
LIFE INSURANCE OPERATIONS:
Premium and fee income............................... 4,848,790 143,577 4,992,367
Net investment income................................ 1,405,110 295,673 1,700,783
Realized capital gains (losses)...................... 6,249 (18,746) (12,497)
---------- -------- ----------
6,260,149 420,504 6,680,653
---------- -------- ----------
Death and other benefits............................. 1,931,359 -- 1,931,359
Increase in future policy benefits................... 2,368,354 -- 2,368,354
Acquisition and insurance expenses................... 1,219,117 181,702 1,400,819
---------- -------- ----------
5,518,830 181,702 5,700,532
---------- -------- ----------
Operating income..................................... 741,319 238,802 980,121
---------- -------- ----------
Financial services operating income.................... 306,949 -- 306,949
Equity in income of minority-owned insurance 57,789 -- 57,789
operations...........................................
Other realized capital losses.......................... (10,136) -- (10,136)
Minority interest expense.............................. (20,242) -- (20,242)
Other income (deductions) -- net....................... (43,851) -- (43,851)
---------- -------- ----------
INCOME BEFORE INCOME TAXES............................. 2,266,671 238,802 2,505,473
---------- -------- ----------
Total income taxes..................................... 659,241 71,600 730,841
---------- -------- ----------
NET INCOME............................................. $1,607,430 $167,202 $1,774,632
========== ======== ==========
Earnings per common share:
Net income -- Basic.................................. $ 1.52 $ -- $ 1.47
Net income -- Diluted................................ $ 1.52 $ -- $ 1.44
Average shares outstanding -- Basic.................... 1,054,594 150,602 1,205,196
Average shares outstanding -- Diluted.................. 1,059,409 172,247 1,231,656
</TABLE>
See accompanying notes to pro forma combined financial statements.
62
<PAGE> 73
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL TWELVE MONTHS ENDED
-------------------------------
AIG SUNAMERICA
DECEMBER 31, SEPTEMBER 30, PRO FORMA
1997 1997 COMBINED
------------- -------------- -----------
<S> <C> <C> <C>
GENERAL INSURANCE OPERATIONS:
Net premiums written.............................. $13,407,529 $ -- $13,407,529
Change in unearned premium reserve................ (986,489) -- (986,489)
----------- ---------- -----------
Net premiums earned............................... 12,421,040 -- 12,421,040
Net investment income............................. 1,853,523 -- 1,853,523
Realized capital gains............................ 128,175 -- 128,175
----------- ---------- -----------
14,402,738 -- 14,402,738
----------- ---------- -----------
Losses and loss expenses incurred................. 9,356,219 -- 9,356,219
Underwriting expenses............................. 2,574,653 -- 2,574,653
----------- ---------- -----------
11,930,872 -- 11,930,872
----------- ---------- -----------
Operating income.................................. 2,471,866 -- 2,471,866
----------- ---------- -----------
LIFE INSURANCE OPERATIONS:
Premium and fee income............................ 9,925,639 317,703 10,243,342
Net investment income............................. 2,896,469 679,377 3,575,846
Realized capital gains (losses)................... 21,186 (29,203) (8,017)
----------- ---------- -----------
12,843,294 967,877 13,811,171
----------- ---------- -----------
Death and other benefits.......................... 4,052,180 -- 4,052,180
Increase in future policy benefits................ 4,759,018 -- 4,759,018
Acquisition and insurance expenses................ 2,460,613 430,827 2,891,440
----------- ---------- -----------
11,271,811 430,827 11,702,638
----------- ---------- -----------
Operating income.................................. 1,571,483 537,050 2,108,533
----------- ---------- -----------
Financial services operating income................. 701,337 -- 701,337
Equity in income of minority-owned insurance
operations........................................ 113,636 -- 113,636
Other realized capital losses....................... (30,846) -- (30,846)
Minority interest expense........................... (31,926) -- (31,926)
Other income (deductions) -- net.................... (96,652) -- (96,652)
----------- ---------- -----------
INCOME BEFORE INCOME TAXES.......................... 4,698,898 537,050 5,235,948
----------- ---------- -----------
Total income taxes.................................. 1,366,563 158,000 1,524,563
----------- ---------- -----------
NET INCOME.......................................... $ 3,332,335 $ 379,050 $ 3,711,385
=========== ========== ===========
Earnings per common share:
Net income -- Basic............................... $ 3.16 $ -- $ 3.08
Net income -- Diluted............................. $ 3.15 $ -- $ 3.01
Average shares outstanding -- Basic................. 1,052,895 153,371 1,206,266
Average shares outstanding -- Diluted............... 1,057,477 175,896 1,233,373
</TABLE>
See accompanying notes to pro forma combined financial statements.
63
<PAGE> 74
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL TWELVE MONTHS ENDED
-------------------------------
AIG SUNAMERICA
DECEMBER 31, SEPTEMBER 30, PRO FORMA
1996 1996 COMBINED
------------- -------------- -----------
<S> <C> <C> <C>
GENERAL INSURANCE OPERATIONS:
Net premiums written.............................. $12,691,679 $ -- $12,691,679
Change in unearned premium reserve................ (836,864) -- (836,864)
----------- ----------- -----------
Net premiums earned............................... 11,854,815 -- 11,854,815
Net investment income............................. 1,690,798 -- 1,690,798
Realized capital gains............................ 64,985 -- 64,985
----------- ----------- -----------
13,610,598 -- 13,610,598
----------- ----------- -----------
Losses and loss expenses incurred................. 8,996,431 -- 8,996,431
Underwriting expenses............................. 2,408,600 -- 2,408,600
----------- ----------- -----------
11,405,031 -- 11,405,031
----------- ----------- -----------
Operating income.................................. 2,205,567 -- 2,205,567
----------- ----------- -----------
LIFE INSURANCE OPERATIONS:
Premium and fee income............................ 8,978,246 248,411 9,226,657
Net investment income............................. 2,675,881 492,756 3,168,637
Realized capital gains (losses)................... 34,798 (30,314) 4,484
----------- ----------- -----------
11,688,925 710,853 12,399,778
----------- ----------- -----------
Death and other benefits.......................... 3,733,523 -- 3,733,523
Increase in future policy benefits................ 4,370,055 -- 4,370,055
Acquisition and insurance expenses................ 2,261,589 318,826 2,580,415
----------- ----------- -----------
10,365,167 318,826 10,683,993
----------- ----------- -----------
Operating income.................................. 1,323,758 392,027 1,715,785
----------- ----------- -----------
Financial services operating income................. 523,906 -- 523,906
Equity in income of minority-owned insurance
operations........................................ 99,359 -- 99,359
Other realized capital losses....................... (11,792) -- (11,792)
Minority interest expense........................... (43,226) -- (43,226)
Other income (deductions) -- net.................... (84,350) -- (84,350)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES.......................... 4,013,222 392,027 4,405,249
----------- ----------- -----------
Total income taxes.................................. 1,115,965 117,600 1,233,565
----------- ----------- -----------
NET INCOME.......................................... $ 2,897,257 $ 274,427 $ 3,171,684
=========== =========== ===========
Earnings per common share:
Net income -- Basic............................... $ 2.73 $ -- $ 2.63
Net income -- Diluted............................. $ 2.72 $ -- $ 2.57
Average shares outstanding -- Basic................. 1,059,851 146,710 1,206,561
Average shares outstanding -- Diluted............... 1,063,974 170,447 1,234,421
</TABLE>
See accompanying notes to pro forma combined financial statements.
64
<PAGE> 75
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL TWELVE MONTHS ENDED
------------------------------
AIG SUNAMERICA
DECEMBER 31, SEPTEMBER 30, PRO FORMA
1995 1995 COMBINED
------------ ------------- -----------
<S> <C> <C> <C>
GENERAL INSURANCE OPERATIONS:
Net premiums written................................ $11,893,022 $ -- $11,893,022
Change in unearned premium reserve.................. (487,291) -- (487,291)
----------- -------- -----------
Net premiums earned................................. 11,405,731 -- 11,405,731
Net investment income............................... 1,547,572 -- 1,547,572
Realized capital gains.............................. 68,077 -- 68,077
----------- -------- -----------
13,021,380 -- 13,021,380
----------- -------- -----------
Losses and loss expenses incurred................... 8,659,835 -- 8,659,835
Underwriting expenses............................... 2,329,259 -- 2,329,259
----------- -------- -----------
10,989,094 -- 10,989,094
----------- -------- -----------
Operating income.................................... 2,032,286 -- 2,032,286
----------- -------- -----------
LIFE INSURANCE OPERATIONS:
Premium and fee income.............................. 8,038,150 198,604 8,236,754
Net investment income............................... 2,264,905 365,555 2,630,460
Realized capital gains (losses)..................... 32,703 (33,012) (309)
----------- -------- -----------
10,335,758 531,147 10,866,905
----------- -------- -----------
Death and other benefits............................ 3,348,058 -- 3,348,058
Increase in future policy benefits.................. 3,739,976 -- 3,739,976
Acquisition and insurance expenses.................. 2,157,119 251,541 2,408,660
----------- -------- -----------
9,245,153 251,541 9,496,694
----------- -------- -----------
Operating income.................................... 1,090,605 279,606 1,370,211
----------- -------- -----------
Financial services operating income................... 417,741 -- 417,741
Equity in income of minority-owned insurance
operations.......................................... 81,722 -- 81,722
Other realized capital losses......................... (28,946) -- (28,946)
Minority interest expense............................. (36,317) -- (36,317)
Other income (deductions) -- net...................... (91,208) -- (91,208)
----------- -------- -----------
INCOME BEFORE INCOME TAXES............................ 3,465,883 279,606 3,745,489
----------- -------- -----------
Total income taxes.................................... 955,500 85,400 1,040,900
----------- -------- -----------
NET INCOME............................................ $ 2,510,383 $194,206 $ 2,704,589
=========== ======== ===========
Earnings per common share:
Net income -- Basic................................. $ 2.35 $ -- $ 2.25
Net income -- Diluted............................... $ 2.35 $ -- $ 2.20
Average shares outstanding -- Basic................... 1,066,550 136,210 1,202,760
Average shares outstanding -- Diluted................. 1,070,268 159,409 1,229,677
</TABLE>
See accompanying notes to pro forma combined financial statements.
65
<PAGE> 76
AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES AND SUNAMERICA INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) The unaudited pro forma combined balance sheets and pro forma combined
statements of income reflect a combination based upon an exchange ratio of
0.855 of a share of AIG Common Stock for each outstanding share of
SunAmerica Common Stock. If the Merger had been consummated at June 30,
1998, the diluted number of shares of AIG Common Stock which would have been
issued would have approximated 200,000,000 after reflecting AIG's stock
split in the form of a 50 percent stock dividend paid July 31, 1998.
(b) Per share data for AIG has been retroactively adjusted to reflect the common
stock split in the form of a 50 percent common stock dividend paid July 31,
1998.
(c) With respect to AIG, certain accounts have been reclassified in the 1997,
1996 and 1995 financial statements to conform to the 1998 presentation.
(d) SunAmerica reports on a fiscal year ending September 30.
66
<PAGE> 77
DESCRIPTION OF AIG CAPITAL STOCK
The following description does not purport to be complete and is qualified
in its entirety by reference to the AIG Certificate, the AIG By-Laws and the
DGCL.
GENERAL
The authorized capital stock of AIG consists of 2,000,000,000 shares of AIG
Common Stock and 6,000,000 shares of Serial Preferred Stock, par value $5.00 per
share ("AIG Preferred Stock"). As of September 30, 1998, there were
1,049,959,401 shares of AIG Common Stock outstanding, and no shares of AIG
Preferred Stock outstanding.
AIG COMMON STOCK
All of the outstanding shares of AIG Common Stock are fully paid and
nonassessable. Subject to the prior rights of the holders of AIG Preferred Stock
that may be issued and outstanding, the holders of AIG Common Stock are entitled
to receive dividends as and when declared by the AIG Board out of funds legally
available therefor, and, in the event of the dissolution of AIG, to share
ratably in all assets remaining after payment of liabilities and satisfaction of
the liquidation preferences, if any, of then outstanding shares of AIG Preferred
Stock, as provided in the AIG Certificate. Each holder of AIG Common Stock is
entitled to one vote for each share held of record on all matters presented to a
vote at a shareholders meeting, including the election of directors. Holders of
AIG Common Stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock. Additional authorized shares of AIG Common Stock may be issued without
shareholder approval.
AIG PREFERRED STOCK
The authorized but unissued shares of AIG Preferred Stock are available for
issuance from time to time at the discretion of the AIG Board without
shareholder approval. The AIG Board has the authority to determine for each
series of AIG Preferred Stock it establishes the number, designation,
preferences, limitations, and relative rights of the shares of such series,
subject to applicable law and the provisions of any outstanding series of AIG
Preferred Stock. The terms of any series of AIG Preferred Stock, including
without limitation the dividend rate, redemption price, liquidation rights,
sinking fund provisions, conversion rights and voting rights, and any
corresponding effect on other shareholders, will be dependent largely on factors
existing at the time of issuance. Such terms and effects could include
restrictions on dividends on the AIG Common Stock if dividends on the AIG
Preferred Stock are in arrears, dilution of the voting power of other
shareholders to the extent a series of the AIG Preferred Stock has voting
rights, and reduction of amounts available for liquidation as a result of any
liquidation preference granted to any series of AIG Preferred Stock.
67
<PAGE> 78
COMPARISON OF RIGHTS OF SUNAMERICA SHAREHOLDERS
AND AIG SHAREHOLDERS
AIG is incorporated under the laws of the State of Delaware. SunAmerica is
incorporated under the laws of the State of Maryland. The holders of shares of
SunAmerica Common Stock and SunAmerica Class B Stock whose rights as
shareholders are currently governed by Maryland law, the SunAmerica Charter and
the SunAmerica By-Laws, will, upon the exchange of their shares, in the case of
the SunAmerica Class B Stock, for SunAmerica Common Stock prior to the Effective
Time in accordance with the Merger Agreement and the Voting Agreement and, in
the case of the SunAmerica Common Stock, for shares of AIG Common Stock at the
Effective Time pursuant to the Merger, become holders of AIG Common Stock and
their rights as such will be governed by Delaware law, the AIG Certificate and
the AIG By-Laws. The material differences between the rights of holders of
shares of SunAmerica Common Stock and SunAmerica Class B Stock and the rights of
holders of shares of AIG Common Stock, which result from differences in their
governing corporate documents and differences in Delaware and Maryland corporate
law, are summarized below.
The following summary is not intended to be complete and is qualified in
its entirety by reference to the MGCL, the DGCL, the SunAmerica Charter, the
SunAmerica By-Laws, the AIG Certificate and the AIG By-Laws, as appropriate. The
identification of specific differences is not meant to indicate that other
equally or more significant differences do not exist. Copies of the SunAmerica
Charter, the SunAmerica By-Laws, the AIG Certificate and the AIG By-Laws are
incorporated herein by reference and will be sent to holders of SunAmerica
Common Stock and SunAmerica Class B Stock upon request. See "Where You Can Find
More Information".
AUTHORIZED STOCK
The SunAmerica Charter provides for authorized stock consisting of
350,000,000 shares of SunAmerica Common Stock, $1.00 par value per share,
25,000,000 shares of SunAmerica Nontransferable Class B Stock, 15,000,000 shares
of Transferable Class B Stock, $1.00 par value per share, and 20,000,000 shares
of Preferred Stock, no par value, of which 92,000 have been designated as Series
E Mandatory Conversion Premium Dividend Preferred Stock (the "SunAmerica Series
E Preferred Stock"). Outstanding shares of such SunAmerica Series E Preferred
Stock (the "SunAmerica Series E Preferred Shares") shall be redeemed prior to
the Effective Time and, pursuant to the MGCL and the SunAmerica Charter, will
have the status of authorized and unissued shares of SunAmerica Preferred Stock.
See "The Merger Agreement -- Treatment of SunAmerica Series E Preferred Shares,
SunAmerica Depositary Shares and SunAmerica Security Units".
The AIG Certificate provides for authorized stock consisting of
2,000,000,000 shares of AIG Common Stock, $2.50 par value per share, and
6,000,000 shares of Serial Preferred Stock, $5.00 par value per share.
ELECTION AND SIZE OF BOARD OF DIRECTORS
The MGCL provides that directors, unless their terms are staggered, shall
hold office until the next annual meeting of shareholders and until their
successors are elected and qualify. The charter or bylaws of a Maryland
corporation may provide for staggered terms for directors of up to five years
and the charter may authorize the election of directors by any class or series
of shares. If the board is divided into classes, the term of at least one class
shall expire each year. Unless the charter or bylaws provide otherwise,
directors of Maryland corporations are elected by a plurality of all the votes
cast at a meeting at which a quorum is present. The MGCL provides that every
corporation shall have at least three directors and that the precise number of
directors shall be specified in a corporation's charter until such number is
changed in accordance with the corporation's bylaws.
The SunAmerica By-Laws provide that directors are elected by a plurality of
votes cast at annual meetings at which a quorum is present and shall hold office
until the next annual meeting and until their successors are elected and
qualify. The SunAmerica Charter does not provide for cumulative voting.
The SunAmerica Charter provides that the number of directors shall be nine
but may be increased or decreased from time to time pursuant to the SunAmerica
By-Laws but shall never be less than three. The
68
<PAGE> 79
SunAmerica By-Laws provide that the number of directors shall be set in the
SunAmerica Charter unless amended by a majority of the SunAmerica Board, but in
no event shall the SunAmerica Board be composed of more than 12 or less than
three directors. The SunAmerica Board is not divided into classes and is
currently composed of 11 directors.
Under Delaware law, directors, unless their terms are staggered, are
elected at each annual shareholders meeting. The certificate of incorporation
may authorize the election of certain directors by one or more classes or series
of shares, and the certificate of incorporation, an initial bylaw or a bylaw
adopted by a vote of the shareholders may provide for staggered terms for the
directors. The certificate of incorporation or the bylaws also may allow the
shareholders or the board of directors to fix or change the number of directors,
but a corporation must have at least one director. Under Delaware law,
shareholders do not have cumulative voting rights unless the certificate of
incorporation so provides.
The AIG By-Laws provide that directors are elected by a plurality of votes
at annual meetings and hold office until the next annual meeting and until their
successors are elected and qualify or until their earlier resignation or
removal. The AIG Certificate does not provide for cumulative voting.
The AIG Certificate provides that the number of directors shall be fixed in
the manner provided in the AIG By-Laws. The AIG By-Laws fix the number of
directors at not less than seven nor more than 21. Currently, the AIG Board is
not divided into classes and is composed of 17 directors. The AIG By-Laws
provide that the size of the AIG Board may be increased by the vote of a
majority of directors then in office, although less than a quorum, or by the
affirmative vote of the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon.
STANDARDS OF CONDUCT FOR DIRECTORS
Under Maryland law, the standards of conduct for directors are governed by
statute. Section 2-405.1(a) of the MGCL requires that a director of a Maryland
corporation perform his or her duties in "good faith", with "a reasonable
belief" that his or her actions are "in the best interests of the corporation"
and with the care of an "ordinarily prudent person in a like position . . .
under similar circumstances".
Under Delaware law, the standards of conduct for directors have developed
through written opinions of the Delaware courts in cases decided by them.
Generally, directors of Delaware corporations are subject to a duty of loyalty,
a duty of care and a duty of candor to the shareholders. The duty of loyalty has
been said to require directors to refrain from self-dealing. According to the
Delaware Supreme Court, the duty of care requires "directors . . . in managing
the corporate affairs . . . to use that amount of care which ordinarily careful
and prudent men would use in similar circumstances" and the duty of candor
requires directors "to disclose fully and fairly all material information within
the board's control when it seeks shareholder action." Later case law has
established "gross negligence" as the test for breach of the standard for the
duty of care in the process of decision-making by directors of Delaware
corporations.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services, or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The SunAmerica Charter
provides that the personal liability of its directors and officers to SunAmerica
or its shareholders for money damages shall be limited to the fullest extent
permitted under the MGCL.
Delaware law permits a corporation to adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director
(but not an officer) to the corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director, except that such provision shall not
limit the liability of a director for (i) any breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) liability under Section 174 of the DGCL for unlawful payment of
dividends or stock purchases or
69
<PAGE> 80
redemptions, or (iv) any transaction from which the director derived an improper
personal benefit. The AIG Certificate provides that no director of AIG shall be
liable to it or its shareholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such an exemption from liability or
limitation thereof is not permitted under the DGCL.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The MGCL requires a corporation (unless its charter provides otherwise,
which the SunAmerica Charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses (including attorney's fees) actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or other capacities unless it is
established that (a) the act or omission of the director or officer was material
to the matter giving rise to the proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property or
services, or (c) in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the act or omission was unlawful. However,
under the MGCL, a Maryland corporation may not indemnify for an adverse judgment
in a suit by or in the right of the corporation or in which the director was
found to have received an improper personal benefit, unless a court so orders
and then only for expenses.
In addition, the MGCL permits a corporation to advance reasonable expenses
to a director or officer upon the corporation's receipt of (a) a written
affirmation by the director or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification by the corporation and (b)
a written undertaking by or on behalf of the director or officer to repay the
amount paid or reimbursed by the corporation if it shall ultimately be
determined that the standard of conduct was not met.
Under the MGCL, termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent creates a rebuttable presumption that such
person is not entitled to indemnification.
The SunAmerica Charter provides for indemnification for any director or
officer to the fullest extent required or permitted by the MGCL, including the
advancement of expenses. In the Merger Agreement, AIG has agreed to continue the
indemnification rights of officers and directors of SunAmerica with respect to
matters existing or occurring prior to the Effective Time and to continue
directors' and officers' liability insurance coverage, as described above in
"The Merger Agreement -- Certain Covenants".
Under Delaware law, a corporation may indemnify any person made a party or
threatened to be made a party to any type of proceeding (other than an action by
or in the right of the corporation) because he is or was an officer, director,
employee or agent of the corporation or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
entity, against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such proceeding: (1) if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; or (2) in the case of a
criminal proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation may indemnify any person made a party or threatened to
be made a party to any threatened, pending or completed action or suit brought
by or in the right of the corporation because he was an officer, director,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other entity, against expenses actually and reasonably incurred in connection
with such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation,
except that there may be no such indemnification if the person is found liable
to the corporation unless, in such a case, the court determines the person is
entitled thereto. A corporation must indemnify a director, officer, employee or
agent who successfully defends himself in a proceeding to which he was a party
because he was a director, officer, employee or agent of the corporation against
expenses actually and reasonably incurred by him. Expenses incurred by an
officer or director (or other employees or agents as deemed appropriate by the
board of directors) in defending a civil or criminal proceeding may be paid by
the corporation in advance of the final
70
<PAGE> 81
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation. The
Delaware law indemnification and expense advancement provisions are not
exclusive of any other rights which may be granted by the AIG By-Laws, a vote of
shareholders or disinterested directors, agreement or otherwise.
Under the DGCL, termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent shall not, of itself, create a presumption
that such person is prohibited from being indemnified.
The AIG Certificate provides for the indemnification to the fullest extent
permitted by law of any person made, or threatened to be made, a party to an
action, suit or proceeding (whether, civil, criminal, administrative or
investigative) by reason of the fact that he or his testator or intestate is or
was a director, officer or employee of AIG or serves or served any other
enterprise at the request of AIG.
REMOVAL OF DIRECTORS
The MGCL entitles shareholders to remove directors of corporations without
cumulative voting and without classified boards, with or without cause, by the
affirmative vote of a majority of the votes entitled to be cast for the election
of directors, unless the charter of the corporation provides otherwise.
Directors elected by a particular voting group may only be removed by the
shareholders of that voting group. No decrease or increase in the number of
directors by amendment to the SunAmerica By-Laws effected by the SunAmerica
Board shall affect the tenure of office of any incumbent director.
Under the DGCL, a director of a corporation that does not have a classified
board of directors or cumulative voting may be removed, with or without cause,
with the approval of a majority of the outstanding shares entitled to vote.
VACANCIES ON THE BOARD OF DIRECTORS
Under the MGCL, shareholders may elect a successor to fill a vacancy on the
board of directors which results from the removal of a director. A director
elected by the shareholders to fill a vacancy which results from the removal of
a director serves for the balance of the term of the removed director. Unless
the charter provides otherwise, if the holders of any class or series of stock
are entitled separately to elect one or more directors, any vacancy created by
the removal of a director elected by such class or series may be filled by the
shareholders of such class or series. A vacancy in a class of directors that
holders of a class or series of shares is entitled to elect may be filled by the
remaining directors elected by that class or series or by the sole remaining
director so elected. Under the MGCL, as well as the SunAmerica By-Laws, a
majority of the remaining directors may appoint a director to fill a vacancy,
unless the vacancy was created by an increase in the size of the SunAmerica
Board. Any vacancy resulting from an increase in the number of directors may be
filled by a majority vote of the entire board. There is no provision in the MGCL
providing for the filling of vacancies on the board of directors by the Maryland
courts. A director elected by the board of directors to fill a vacancy serves
until the next annual meeting of shareholders and until his successor is elected
and qualifies.
Under Delaware law, unless the certificate of incorporation or bylaws
provide otherwise, the board of directors of a corporation may fill any vacancy
on the board, including vacancies resulting from an increase in the number of
directors. The AIG By-Laws provide that any vacancy created by the removal of a
director with or without cause by holders of a majority of shares entitled to
vote at an election of directors may be filled by the same majority (or by a
majority of the holders of a class or series of shares where such class or
series is entitled to elect one or more of the directors of the class from which
a director was removed). Other vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the shareholders having a right to vote as a single class or from any other
cause may be filled by a majority of directors then in office, although less
than a quorum, or by the sole remaining director. Whenever the holders of any
class or series of stock are entitled to elect one or more directors, vacancies
and newly created directorships of such class or series may be filled by a
majority of the directors elected by such class or series thereof then in office
or by the sole remaining director so elected.
71
<PAGE> 82
ACTION BY WRITTEN CONSENT
Under the MGCL, any action required or permitted to be taken at a meeting
of shareholders may be taken without a meeting only if a unanimous written
consent is signed by each shareholder entitled to vote on the matter and a
written waiver of any right to dissent is signed by each shareholder who would
have been entitled to notice of, but could not vote at, such shareholder meeting
and such consent and waiver are filed with the records of the shareholders
meeting.
Delaware law provides that, unless limited by the certificate of
incorporation, any action that could be taken by shareholders at a meeting may
be taken without a meeting if a consent (or consents) in writing, setting forth
the action so taken, is signed by the holders of record of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. The AIG By-Laws provide that prompt notice of an
action taken by written consent which is not unanimous is required to be given
to those shareholders who do not consent.
AMENDMENTS TO CHARTER
Under the MGCL, an amendment of a corporate charter requires a resolution
by the board of directors setting forth the proposed amendment and declaring it
advisable and approval by the shareholders of the corporation by the affirmative
vote of two-thirds of all shares entitled to vote on the matter, unless the
charter provides otherwise. The SunAmerica Charter provides that no provisions
of the SunAmerica Charter may be amended without the affirmative vote of the
holders of a majority of the shares of SunAmerica Common Stock and a majority of
the shares of SunAmerica Nontransferable Class B Stock, each voting separately
as a class. Any amendment to the terms or contract rights of any classes of
stock set out in the SunAmerica Charter requires authorization by the vote or
votes required by the laws of Maryland or the provisions of the SunAmerica
Charter.
Under Delaware law, unless a higher vote is required in the certificate of
incorporation, an amendment to the certificate of incorporation of a corporation
may be approved by a majority of the outstanding shares and a majority of the
outstanding shares of each class entitled to vote upon the proposed amendment.
AMENDMENTS TO BY-LAWS
The MGCL provides that the power to adopt, alter and repeal a corporation's
bylaws shall be vested in the shareholders, except to the extent that a
corporation's charter or bylaws confer this power on the corporation's board of
directors. With certain exceptions, the SunAmerica By-Laws provide that a
majority of SunAmerica shareholders has the power to amend, adopt or repeal the
SunAmerica By-Laws at any annual meeting or any special meeting called for that
purpose and that the SunAmerica Board may, at any special or regular meeting
thereof, amend, adopt or repeal the SunAmerica By-Laws.
The DGCL provides that a corporation's bylaws may be amended by that
corporation's shareholders, or, if so provided in the corporation's certificate
of incorporation, the corporation's directors. The AIG Certificate gives its
directors the power to make, alter, amend, change, add to or repeal the AIG
By-Laws. The AIG By-Laws provide that they may be amended or repealed, and new
bylaws may be adopted, by the affirmative vote of a majority of the AIG Board,
but the holders of a majority of the shares then entitled to vote may adopt
additional bylaws and may amend or repeal any bylaw whether or not adopted by
them.
SPECIAL MEETINGS OF SHAREHOLDERS
Pursuant to the MGCL and the SunAmerica By-Laws, a special meeting of
shareholders may be called by the chairman of the board, the president or by a
majority of the board of directors, and shall be called by the Secretary of
SunAmerica at the written request of shareholders entitled to cast a majority of
all the votes entitled to be cast at the meeting. A request for a special
meeting must state the purpose of the meeting and the matters proposed to be
acted on. The costs of sending notice of such special meeting are to be borne by
the shareholders requesting it.
72
<PAGE> 83
Delaware law provides that special meetings of the shareholders of a
corporation may be called by the corporation's board of directors or by such
other persons as may be authorized in the corporation's certificate of
incorporation or bylaws. The AIG By-Laws provide that special meetings of
shareholders may be called by the Chairman, a Vice Chairman, if any, the
President, if any, the Secretary or the AIG Board and shall be called by the
Secretary upon the written request of shareholders who together own of record
25% or more of the outstanding shares of each class of stock entitled to vote at
such meeting.
VOTE ON EXTRAORDINARY CORPORATE TRANSACTIONS
The MGCL states that, with certain exceptions, a proposed consolidation,
merger, share exchange, transfer of assets or dissolution of the corporation
must be recommended by the board of directors and, with certain exceptions,
approved by the affirmative vote of two-thirds of all the votes entitled to be
cast on the matter. In addition, under the MGCL, if two or more classes of stock
are entitled to vote separately on any matter requiring approval of two-thirds
of all the votes entitled to be cast, the matter must be approved by two-thirds
of all the votes of each class unless the corporation's charter provides
otherwise. The SunAmerica Charter provides that SunAmerica may not effect a
merger or consolidation into any other corporation or a sale of all or
substantially all of SunAmerica's assets unless authorized by the vote required
by Maryland law and by a majority of the shares voting of SunAmerica Common
Stock and SunAmerica Class B Stock, each voting separately as a class, unless a
greater vote is required by Maryland law.
Delaware law provides that, unless otherwise specified in a corporation's
certificate of incorporation, a sale or other disposition of all or
substantially all of the corporation's assets, a merger or consolidation of the
corporation with another corporation or a dissolution of the corporation
requires the affirmative vote of the board of directors (except in certain
limited circumstances) plus, with certain exceptions, the affirmative vote of a
majority of the outstanding stock entitled to vote thereon. The AIG Certificate
does not contain vote requirements for extraordinary corporate transactions in
addition to or different from the approvals mandated by law.
INSPECTION OF DOCUMENTS
Under the MGCL, a shareholder is entitled to inspect and copy the bylaws,
minutes of proceedings of the shareholders, annual statements of affairs and
voting trust agreements on file at the corporation's principal office, during
regular business hours of the corporation. In addition, one or more shareholders
of a Maryland corporation who together are and for at least six months have been
shareholders of record or the holders of voting trust certificates of at least
five percent of the outstanding stock of the corporation may (i) inspect and
copy, on written request, the corporation's books of account and its stock
ledger; (ii) present a written request for a statement of its affairs; or (iii)
for a corporation that does not maintain a stock ledger at its principal office,
present a written request for a list of shareholders. Such statement of affairs
or stock ledger must be produced by the corporation within 20 days of the
request. In addition, the SunAmerica By-Laws require the Secretary of SunAmerica
to furnish a shareholder list at each meeting.
The DGCL allows any shareholder, upon written demand under oath stating the
purpose thereof, the right during the usual hours for business to inspect for
any proper purpose the corporation's stock ledger, a list of its shareholders,
and its other books and records, and to make copies or extracts therefrom. A
proper purpose means a purpose reasonably related to such person's interest as a
shareholder.
DIVIDENDS AND OTHER DISTRIBUTIONS
The MGCL permits a corporation to make a distribution, including dividends,
redemptions or stock repurchases, unless prohibited by its charter or if, after
giving effect to the distribution, the corporation would not be able to pay its
debts as they become due in the usual course of business or the corporation's
total assets would be less than the sum of its liabilities and, unless the
charter provides otherwise (which the SunAmerica Charter does not), senior
liquidation preferences. For purposes of determining whether a distribution is
lawful, the board of directors may base its determination on financial
statements prepared on the basis of accounting
73
<PAGE> 84
practices and principles that are reasonable in the circumstances or on a fair
valuation or any other method that is reasonable in the circumstances.
The SunAmerica Charter provides that the SunAmerica Board may declare
dividends or other distributions from time to time out of assets or funds of
SunAmerica legally available therefor. Holders of SunAmerica Series E Preferred
Shares are entitled to receive, when, as and if declared by the SunAmerica
Board, dividends at the rate of $155 per annum per share, which are fully
cumulative. No dividends or other distributions, other than stock dividends, may
be paid on shares of SunAmerica Common Stock or SunAmerica Class B Stock, unless
and until all accrued and unpaid dividends for outstanding SunAmerica Preferred
Stock for all dividend periods are paid or set aside and declared for payment.
Pursuant to the SunAmerica Charter, holders of SunAmerica Class B Stock are
entitled to receive dividends in an amount equal to 90 percent of the dividends
paid to holders of SunAmerica Common Stock.
Subject to any restrictions contained in a corporation's certificate of
incorporation, Delaware law generally provides that a corporation may declare
and pay dividends out of "surplus" (defined as the excess, if any, of net assets
(total assets less total liabilities) over capital) or, when no surplus exists,
out of net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year, except that dividends may not be paid out of net
profits if the capital of the corporation is less than the amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In accordance with the DGCL,
"capital" is determined by the board of directors and shall not be less than the
aggregate par value of the outstanding capital stock of the corporation having
par value.
The AIG By-Laws provide that the AIG Board may, out of funds legally
available and at any regular or special meeting, declare dividends upon the
capital stock of AIG as and when it deems expedient. All outstanding classes of
AIG Preferred Stock shall rank senior to the AIG Common Stock in respect of the
right to receive dividends.
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
Under the MGCL, a shareholder of a Maryland corporation has, subject to
certain limitations, the right to demand and receive the fair value of such
shareholder's stock from the corporation if: (i) the corporation consolidates or
merges with another corporation; (ii) the shareholder's stock is acquired in a
share exchange; (iii) the corporation transfers all or substantially all of its
assets in a manner that requires shareholder approval under the MGCL; (iv)
unless permitted to do so by its charter (which the SunAmerica Charter does
permit), the corporation amends its charter so as to alter the contract rights,
as expressly set forth in the charter, of outstanding stock and substantially
adversely affects the shareholder's rights; or (v) the transaction involves a
business combination between the corporation and an interested shareholder
(defined generally in the MGCL as any person that is the beneficial owner,
directly or indirectly, of 10% or more of the voting power of the outstanding
voting stock of the corporation). Unless the transaction involves a business
combination between the corporation and an interested shareholder, the right to
receive fair value for stock does not exist (A) if the stock of the corporation
is listed on a national securities exchange or is designated as a national
market system security on an interdealer quotation system by the NASD, or (B) if
such stock is that of a successor in a merger, unless, among other things, (i)
the merger alters the contract rights of the stock as expressly set forth in the
corporation's charter, without such charter reserving the right to do so, or
(ii) the stock is to be changed or converted into something other than either
the stock in the successor or cash, scrip, or other rights or interests arising
out of provisions for the treatment of fractional shares of stock in the
successor. Consequently, because SunAmerica Common Stock is listed on the NYSE,
appraisal rights are not available to holders of SunAmerica Common Stock. No
shares of SunAmerica Class B Stock or SunAmerica Series E Preferred Stock will
be outstanding at the Effective Time and, consequently, appraisal rights will
not be available to holders of SunAmerica Class B Stock or SunAmerica Series E
Preferred Stock.
Under Delaware law, in certain circumstances, a shareholder of a Delaware
corporation is entitled to demand appraisal and obtain payment of the judicially
determined fair value of his or her shares in the event of any plan of merger or
consolidation to which the corporation, the shares of which he or she holds, is
a party, provided such shareholder continuously holds such shares through the
effective date of the merger, otherwise
74
<PAGE> 85
complies with the requirements of Delaware law for the perfection of appraisal
rights and does not vote in favor of the merger. However, this right to demand
appraisal does not apply to shareholders if: (1) they are shareholders of a
surviving corporation and if a vote of the shareholders of such corporation is
not necessary to authorize the merger or consolidation; or (2) the shares held
by the shareholders are of a class or series listed on a national securities
exchange, designated as a national market system security on an interdealer
quotation system by the NASD or are held of record by more than 2,000
shareholders on the date set to determine the shareholders entitled to vote on
the merger or consolidation. Notwithstanding the above, appraisal rights are
available for the shares of any class or series of stock of a Delaware
corporation if the holders thereof are required by the terms of an agreement of
merger or consolidation to accept for their stock anything except: (i) shares of
stock of the corporation surviving or resulting from the merger or
consolidation; (ii) shares of stock of any other corporation which at the
effective date of the merger or consolidation will be listed on the NYSE or the
American Stock Exchange, designated as a national market system security on an
interdealer quotation system by the NASD or held of record by more than 2,000
shareholders; (iii) cash in lieu of fractional shares of the corporations
described in (i) and (ii); or (iv) any combination of the shares of stock and
cash in lieu of fractional shares described in (i), (ii) and (iii).
A Delaware corporation may provide in its certificate of incorporation that
appraisal rights shall be available for the shares of any class or series of its
stock as the result of an amendment to its certificate of incorporation, any
merger or consolidation to which the corporation is a party or a sale of all or
substantially all of the assets of the corporation. The AIG Certificate does not
contain any provision regarding appraisal rights. Consequently, because AIG
Common Stock is listed on the NYSE, appraisal rights are not available to
holders of shares of AIG Common Stock.
PREEMPTIVE RIGHTS
Under the MGCL as in effect at the time SunAmerica was incorporated,
subject to several statutory exceptions and the power of the corporation to deny
preemptive rights in its charter, shareholders had preemptive rights. Although
the MGCL was amended subsequent to SunAmerica's incorporation to deny preemptive
rights unless such rights are provided for in the charter, SunAmerica remains
subject to the provisions of the MGCL in respect of preemptive rights that
existed at the time of its incorporation. The SunAmerica Charter denies
preemptive rights to holders of any class of stock.
Delaware law does not provide (except in limited instances) for preemptive
rights to acquire a corporation's unissued stock. However, such right may be
expressly granted to the shareholders in a corporation's certificate of
incorporation. The AIG Certificate provides that holders of AIG Common Stock are
not entitled to preemptive rights.
SPECIAL REDEMPTION PROVISIONS
The MGCL permits a corporation to acquire its own shares subject to the
statutory requirements discussed above with respect to dividends and other
distributions. The SunAmerica Charter provides that shares of SunAmerica Common
Stock and SunAmerica Class B Stock are subject to purchase by SunAmerica in any
manner permitted by law or pursuant to an agreement. The SunAmerica Series E
Preferred Shares are subject to redemption by SunAmerica in accordance with
their terms and will be redeemed prior to the Effective Time pursuant to the
Merger Agreement as described under "The Merger Agreement -- Treatment of
SunAmerica Series E Preferred Shares, SunAmerica Depositary Shares and
SunAmerica Security Units".
Under the DGCL, a corporation may purchase or redeem shares of any class of
its capital stock, but subject generally to the availability of sufficient
lawful funds therefor and provided that at all times, at the time of any such
redemption, the corporation shall have outstanding shares of one or more classes
or series of capital stock which have full voting rights that are not subject to
redemption. The AIG Certificate contains no provision for special redemptions of
shares of its capital stock.
75
<PAGE> 86
ABSENCE OF RIGHTS PLAN
Delaware and Maryland law do not prohibit corporations from issuing stock
purchase rights. Neither SunAmerica nor AIG has adopted a shareholder rights
agreement.
STATE ANTITAKEOVER STATUTES
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person (other than the corporation or a subsidiary of the
corporation) who beneficially owns 10% or more of the voting power of the
corporation's shares or an affiliate or associate of the corporation who, at any
time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the voting power of the then-outstanding
voting stock of the corporation (an "MGCL Interested Stockholder") or an
affiliate of such an MGCL Interested Stockholder are prohibited for five years
after the most recent date on which the MGCL Interested Stockholder becomes an
MGCL Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of such corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by holders
of outstanding shares of voting stock of the corporation, voting together as a
single voting group, and (b) two-thirds of the votes entitled to be cast by
holders of voting stock of the corporation other than shares held by the MGCL
Interested Stockholder who will (or whose affiliate will) be a party to the
business combination or by an affiliate or associate of the MGCL Interested
Stockholder, voting together as a single voting group, unless, among other
conditions, the corporation's common shareholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in cash
or in the same form as previously paid by the MGCL Interested Stockholder for
its shares. These provisions of the MGCL do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the MGCL Interested Stockholder becomes an
MGCL Interested Stockholder. The SunAmerica Board approved a resolution
exempting the Merger Agreement, the Merger and the transactions contemplated
thereby from Section 3-602 of the MGCL.
Under the MGCL, "control shares" of a Maryland corporation acquired in a
"control share acquisition" have no voting rights except to the extent approved
by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquirer, by officers or by directors who
are employees of the corporation. "Control shares" are voting shares of stock
which, if aggregated with all other such shares of stock previously acquired by
the acquirer or in respect of which the acquirer is able to exercise or direct
the exercise of voting power (except solely by virtue of a revocable proxy),
would entitle the acquirer to exercise voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one third or more but less than a majority, or (iii) a majority
or more of all voting power. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained
shareholder approval. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of shareholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any shareholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the MGCL, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition by the acquirer or of any meeting of shareholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved at a shareholders meeting and the acquirer
becomes entitled to vote a majority of the shares entitled
76
<PAGE> 87
to vote, all other shareholders may exercise appraisal rights. The fair value of
the shares as determined for purposes of such appraisal rights may not be less
than the highest price per share paid by the acquirer in the control share
acquisition.
The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by a provision in
the charter or bylaws of the corporation adopted before the acquisition of the
shares.
Neither the SunAmerica Charter nor the SunAmerica By-Laws contain a
provision exempting from the control share acquisition statute any acquisitions
by any person of shares of stock of SunAmerica. In addition, the SunAmerica
By-Laws provide that Rule 13e-3 transactions by SunAmerica or an Affiliate of
SunAmerica (as defined for the purposes of Rule 13e-3 under the Exchange Act)
may not be consummated unless approved by a majority of Outside Directors.
"Outside Directors" are directors who are not employees of SunAmerica or any of
its subsidiaries (provided that Mr. Broad is expressly not an Outside Director).
This provision of the SunAmerica By-Laws may not be amended except with the vote
of the holders of not less than a majority of the total voting power held by
Unaffiliated Stockholders (as defined for the purposes of Rule 13e-3 under the
Exchange Act).
In general, Section 203 of the DGCL prevents an "Interested Stockholder"
(defined generally as a person with 15% or more of a corporation's outstanding
voting stock, with the exception of any person who owned and has continued to
own shares in excess of the 15% limitation since December 23, 1987) from
engaging in a Business Combination with a Delaware corporation for three years
following the date such person became an Interested Stockholder. The term
"Business Combination" includes mergers or consolidations with an Interested
Stockholder and certain other transactions with an Interested Stockholder,
including, without limitation: (i) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (except proportionately as a shareholder of such
corporation) to or with the Interested Stockholder of assets (except
proportionately as a shareholder of the corporation) having an aggregate market
value equal to 10% or more of the aggregate market value of all assets of the
corporation or of certain subsidiaries thereof determined on a consolidated
basis or the aggregate market value of all the outstanding stock of the
corporation; (ii) any transaction which results in the issuance or transfer by
the corporation or by certain subsidiaries thereof of stock of the corporation
or such subsidiary to the Interested Stockholder, except pursuant to certain
transfers in a conversion or exchange or pro rata distribution to all
shareholders of the corporation or certain other transactions, none of which
increase the Interested Stockholder's proportionate ownership of any class or
series of the corporation's or such subsidiary's stock; (iii) any transaction
involving the corporation or certain subsidiaries thereof which has the effect,
directly or indirectly, of increasing the proportionate share of the stock of
any class or series, or securities convertible into stock of the corporation or
any subsidiary which is owned by the Interested Stockholder (except as a result
of immaterial changes due to fractional share adjustments or as a result of any
purchase or redemption of any shares of stock not caused directly or indirectly
by the Interested Stockholder); or (iv) any receipt by the Interested
Stockholder of the benefit (except proportionately as a shareholder of such
corporation) of any loans, advances, guarantees, pledges, or other financial
benefits provided by or through the corporation or certain subsidiaries.
The three-year moratorium may be avoided if: (i) before such person became
an Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction in which the Interested
Stockholder became an Interested Stockholder, or (ii) upon consummation of the
transaction which resulted in the shareholder becoming an Interested
Stockholder, the shareholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding shares
held by directors who are also officers of the corporation and by employee stock
ownership plans that do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) on or following the date on which such
person became an Interested Stockholder, the Business Combination is approved by
the board of directors of the corporation and authorized at an annual or special
meeting of shareholders (not by written consent) by the affirmative vote of the
shareholders of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
77
<PAGE> 88
The Business Combination restrictions described above do not apply if,
among other things: (i) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by the statute; (ii)
the corporation by action by the holders of a majority of the voting stock of
the corporation approves an amendment to its certificate of incorporation or
bylaws expressly electing not to be governed by the statute (effective twelve
(12) months after the amendment's adoption), which amendment shall not be
applicable to any business combination with a person who was an Interested
Stockholder at or prior to the time of the amendment; or (iii) the corporation
does not have a class of voting stock that is (a) listed on a national
securities exchange, (b) authorized for quotation on Nasdaq or a similar
quotation system; or (c) held of record by more than 2,000 shareholders. The
statute also does not apply to certain Business Combinations with an Interested
Stockholder when such combination is proposed after the public announcement of,
and before the consummation or abandonment of, a merger or consolidation, a sale
of 50% or more of the aggregate market value of the assets of the corporation on
a consolidated basis or the aggregate market value of all outstanding shares of
the corporation, or a tender offer for 50% or more of the outstanding voting
shares of the corporation, if the triggering transaction is with or by a person
who either was not an Interested Stockholder during the previous three years or
who became an Interested Stockholder with the approval of the board, and if the
transaction is approved or not opposed by a majority of the current directors
who were also directors prior to any person becoming an Interested Stockholder
during the previous three years. The AIG Certificate does not contain a
provision electing not to be governed by the Business Combination restrictions.
Delaware does not have a control share acquisition statute.
TRANSACTIONS WITH INTERESTED DIRECTORS
Under both the DGCL and the MGCL, certain contracts or transactions with a
corporation's director (or a corporation, partnership or other organization in
which a corporation's director is a director or has a material financial
interest) are not void or voidable solely because of such interest, because the
director was present at a board or committee meeting at which the contract or
transaction was authorized or because such director's vote was counted for such
purpose, provided: (a) the material facts are disclosed or known to the board or
committee and a majority of disinterested members thereof approves the contract
or transaction; (b) the material facts are disclosed or known to the
shareholders entitled to vote thereon and the contract or transaction is
approved by a majority of shares held by such shareholders (with the exclusion,
in the case of the MGCL, of shares owned by interested directors); or (c) the
contract or transaction is fair (and, in the case of the MGCL, reasonable) to
the corporation (in the case of the DGCL, at the time it was approved). The DGCL
provision also applies to officers of the corporation. Both the SunAmerica
Charter and the AIG Charter provide that such contracts or transactions are not
invalidated, provided that the interests of directors therein are disclosed or
known to the board of directors or a majority thereof.
LEGAL MATTERS
The validity of the shares of AIG Common Stock to be issued in connection
with the Merger will be passed upon for AIG by Kathleen E. Shannon, Esq., Vice
President and Associate General Counsel of AIG.
Sullivan & Cromwell, counsel to AIG, and Wachtell, Lipton, Rosen & Katz,
counsel to SunAmerica, will deliver opinions concerning certain federal income
tax consequences of the Merger.
EXPERTS
The consolidated financial statements and schedules of AIG at December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997 incorporated by reference in this Joint Proxy Statement/Prospectus have
been audited by PricewaterhouseCoopers LLP, independent auditors, as set forth
in their report thereon included in AIG's Annual Report on Form 10-K for the
year ended December 31, 1997 and incorporated herein by reference. Such
consolidated financial statements and schedules are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
78
<PAGE> 89
The consolidated financial statements and schedules of SunAmerica at
September 30, 1997 and 1996 and for each of the three years in the period ended
September 30, 1997 incorporated by reference in this Joint Proxy
Statement/Prospectus have been audited by PricewaterhouseCoopers LLP,
independent auditors, as set forth in their report thereon included in
SunAmerica's Annual Report on Form 10-K for the fiscal year ended September 30,
1997 and incorporated herein by reference. Such consolidated financial
statements and schedules are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
FUTURE SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in next year's proxy statement
should be sent to the Secretary of AIG at 70 Pine Street, New York, New York
10270 and must be received by December 8, 1998. Under the AIG By-Laws, notice of
any shareholder proposal to be made at the 1999 annual meeting of shareholders
of AIG must be received no less than 60 days nor more than 90 days prior to the
date of the annual meeting of shareholders of AIG. If public notice of the 1999
annual meeting of shareholders of AIG is not given at least 70 days before the
meeting date, any shareholder proposal must be received by AIG within 10 days
after such public notice. A copy of the current AIG By-Laws may be obtained from
the Secretary of AIG. The provisions in the AIG By-Laws relevant to the
foregoing will be continued unchanged after the Merger.
SunAmerica expects to consummate the Merger prior to its annual meeting in
the first quarter of 1999. The Commission rules set forth standards as to what
shareholder proposals are required to be included in a proxy statement. All
proposals from SunAmerica Shareholders for inclusion in the proxy materials for
the 1999 annual meeting of SunAmerica were required to have been submitted to
the Secretary of SunAmerica by September 1, 1998.
WHERE YOU CAN FIND MORE INFORMATION
AIG has filed with the Commission a Registration Statement under the
Securities Act that registers the distribution to the SunAmerica Shareholders of
the AIG Common Stock to be issued in connection with the Merger. The
Registration Statement, including the attached exhibits and schedules, contains
additional relevant information about AIG and the AIG Common Stock. The rules
and regulations of the Commission allow us to omit certain information included
in the Registration Statement from this Joint Proxy Statement/ Prospectus.
In addition, AIG and SunAmerica file reports, proxy statements and other
information with the Commission under the Exchange Act. You may read and copy
this information at the following locations of the Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Further information on the
operation of the Commission's Public Reference Room in Washington, D.C. can be
obtained by calling the Commission at 1-800-SEC-0330.
The Commission also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, such as AIG and
SunAmerica, who file electronically with the Commission. The address of that
site is http://www.sec.gov.
79
<PAGE> 90
You can also inspect reports, proxy statements and other information about
AIG and SunAmerica at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Commission allows us to "incorporate by reference" information into
this Joint Proxy Statement/ Prospectus, which means that we can disclose
important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
deemed to be part of this Joint Proxy Statement/Prospectus, except for any
information superseded by information in this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus incorporates by reference the documents
set forth below that we have previously filed with the Commission. These
documents contain important information about our companies and their finances.
<TABLE>
<S> <C>
AIG COMMISSION FILINGS (FILE NO. 1-8787) PERIOD OR DATE FILED
Annual Report on Form 10-K Year ended December 31, 1997
Quarterly Reports on Form 10-Q Quarters ended March 31, 1998 and June 30,
1998
Current Reports on Form 8-K Filed on February 10, 1998, August 20, 1998
and August 24, 1998
Proxy Statement on Schedule 14A Filed on April 6, 1998
The description of the AIG Common Stock set Filed pursuant to Section 12 of the Exchange
forth in the AIG registration statement on Act on September 20, 1984, including any
Form 8-A amendment or report filed with the Commission
for the purpose of updating such description.
</TABLE>
<TABLE>
<S> <C>
SUNAMERICA COMMISSION FILINGS PERIOD OR DATE FILED
(FILE NO. 1-4618)
Annual Report on Form 10-K Year ended September 30, 1997
Quarterly Reports on Form 10-Q Quarters ended December 31, 1997, March 31,
1998 and June 30, 1998
Current Reports on Form 8-K Filed on December 2, 1997, July 17, 1998 and
August 24, 1998
The description of SunAmerica Common Stock Filed pursuant to Section 12 of the Exchange
set forth in the SunAmerica registration Act, dated October 25, 1995, including any
statement on Form 8-A. amendment or report filed with the Commission
for the purpose of updating such description.
</TABLE>
AIG and SunAmerica also incorporate by reference additional documents that
either company may file with the Commission between the date of this Joint Proxy
Statement/Prospectus and the date of the AIG Special Meeting or the SunAmerica
Special Meeting, as applicable. These documents include periodic reports, such
as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
AIG has supplied all information contained or incorporated by reference in
this Joint Proxy Statement/ Prospectus relating to AIG, and SunAmerica has
supplied all such information relating to SunAmerica.
80
<PAGE> 91
You can obtain any of the documents incorporated by reference in this
document from AIG or SunAmerica, as the case may be, or from the Commission
through the Commission's web site at the address described above. Documents
incorporated by reference are available from the companies without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this Joint Proxy
Statement/Prospectus. You can obtain documents incorporated by reference in this
Joint Proxy Statement/Prospectus by requesting them in writing or by telephone
from the appropriate company at the following addresses:
<TABLE>
<S> <C>
AMERICAN INTERNATIONAL GROUP, INC. SUNAMERICA INC.
70 Pine Street 1 SunAmerica Center
New York, New York 10270 Century City
(212) 770-7074 Los Angeles, California 90067-6022
Attention: Director of Investor (310) 772-6000
Relations E-mail: [email protected]
Attention: Vice President, Investor
Relations
</TABLE>
If you would like to request documents from us, please do so by November 9,
1998 to receive them before the AIG Special Meeting or the SunAmerica Special
Meeting, as the case may be.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT
PROXY STATEMENT/PROSPECTUS IS DATED OCTOBER 7, 1998. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THE JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THE JOINT PROXY
STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF AIG COMMON STOCK IN THE
MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
81
<PAGE> 92
APPENDIX A
<PAGE> 93
AGREEMENT AND PLAN OF MERGER
BETWEEN
SUNAMERICA INC.
AND
AMERICAN INTERNATIONAL GROUP, INC.
DATED AS OF AUGUST 19, 1998
<PAGE> 94
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
<TABLE>
<C> <S> <C>
RECITALS ............................................................ 1
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger.................................................. 1
1.2. Closing..................................................... 1
1.3. Effective Time.............................................. 1
ARTICLE II
CERTIFICATE OF INCORPORATION
AND BYLAWS
OF THE SURVIVING CORPORATION
2.1. The Certificate of Incorporation............................ 2
2.2. The Bylaws.................................................. 2
ARTICLE III
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
3.1. Directors................................................... 2
3.2. Officers.................................................... 2
ARTICLE IV
EFFECT OF THE MERGER ON STOCK;
EXCHANGE OF CERTIFICATES
4.1. Effect on Stock............................................. 2
(a) Merger Consideration.................................... 2
(b) Cancellation of Common Shares........................... 3
(c) Parent Capital Stock.................................... 3
4.2. Exchange of Certificates for Common Shares.................. 3
(a) Exchange Agent.......................................... 3
(b) Exchange Procedures..................................... 3
(c) Distributions with Respect to Unexchanged Common 4
Shares......................................................
(d) Transfers............................................... 4
(e) Fractional Shares....................................... 4
(f) Termination of Exchange Fund............................ 4
(g) Lost, Stolen or Destroyed Certificates.................. 4
(h) Affiliates.............................................. 5
4.3. Dissenters' Rights.......................................... 5
4.4. Adjustments to Prevent Dilution............................. 5
4.5. Treatment of Preferred Shares and Depositary Shares......... 5
4.6. Treatment of the Security Units............................. 5
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company............... 5
(a) Organization, Good Standing and Qualification.......... 5
(b) Capital Structure...................................... 6
(c) Corporate Authority; Approval and Fairness............. 7
(d) Governmental Filings; No Violations.................... 7
</TABLE>
i
<PAGE> 95
<TABLE>
<C> <S> <C>
(e) Company Reports; Financial Statements; Undisclosed 8
Liabilities; Statutory Statements....................
(f) Absence of Certain Changes............................. 9
(g) Litigation and Liabilities............................. 10
(h) Employee Benefits...................................... 10
(i) Compliance with Laws; Permits......................... 11
(j) Takeover Statutes..................................... 12
(k) Environmental Matters.................................. 12
(l) Taxes................................................. 13
(m) Intellectual Property................................... 14
(n) Brokers and Finders.................................... 14
(o) No Regulatory Disqualifications........................ 14
(p) Insurance Business..................................... 14
(q) Liabilities and Reserves............................... 16
(r) Separate Accounts...................................... 16
(s) Material Contracts..................................... 16
(t) Year 2000 Compliance................................... 17
(u) Investment Contracts, Funds and Clients................ 17
(v) Company Broker/Dealers................................. 18
(w) Pooling of Interests; Reorganization................... 18
(x) Derivatives............................................ 18
5.2. Representations and Warranties of Parent.................... 18
(a) Organization, Good Standing and Qualification.......... 19
(b) Capital Structure...................................... 19
(c) Corporate Authority.................................... 19
(d) Governmental Filings; No Violations.................... 19
(e) Parent Reports; Financial Statements; Undisclosed 20
Liabilities.................................................
(f) Absence of Certain Changes............................. 20
(g) Litigation and Liabilities............................. 21
(h) Compliance with Laws................................... 21
(i) Year 2000 Compliance.................................. 22
(j) Takeover Statutes..................................... 22
(k) Pooling of Interests; Reorganization................... 22
(l) Separate Operating Company............................ 22
ARTICLE VI
COVENANTS
6.1. Company Interim Operations.................................. 22
6.2. Acquisition Proposals....................................... 23
6.3. Information Supplied........................................ 24
6.4. Stockholders Meeting........................................ 24
6.5. Filings; Other Actions; Notification........................ 24
6.6. Pooling..................................................... 25
6.7. Access...................................................... 25
6.8. Affiliates.................................................. 26
6.9. Stock Exchange Listing and De-listing....................... 26
</TABLE>
ii
<PAGE> 96
<TABLE>
<C> <S> <C>
6.10. Publicity................................................... 26
6.11. Benefits.................................................... 26
(a) Stock Options and Other Awards.......................... 26
(b) Employee Benefits....................................... 27
6.12. Expenses.................................................... 28
6.13. Indemnification; Directors' and Officers' Insurance......... 28
6.14. Preferred Shares and Depositary Shares...................... 29
6.15. Security Units.............................................. 29
6.16. Other Actions by the Company and Parent..................... 29
(a) Takeover Statute........................................ 29
(b) Dividends............................................... 29
6.17. Compliance with 1940 Act Section 15......................... 29
6.18. Fund Client Contracts....................................... 30
6.19. Non-Fund Advisory Contracts................................. 30
6.20. Qualification of the Fund Clients; Fund Client Boards....... 30
6.21. Board of Directors of Parent................................ 30
6.22. Delivery of Disclosure Information.......................... 30
6.23. SunAmerica Inc.............................................. 30
6.24. Thrift Application.......................................... 30
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the 31
Merger......................................................
(a) Stockholder Approval.................................... 31
(b) NYSE Listing............................................ 31
(c) Regulatory Consents..................................... 31
(d) Litigation.............................................. 31
(e) S-4..................................................... 31
(f) Blue Sky Approvals...................................... 31
(g) Pooling of Interests.................................... 31
(h) Affiliates Letters...................................... 31
7.2. Conditions to Obligations of Parent......................... 31
(a) Representations and Warranties.......................... 31
(b) Performance of Obligations of the Company............... 32
(c) Consents................................................ 32
(d) Tax Opinion............................................. 32
(e) Client Approvals........................................ 32
7.3. Conditions to Obligation of the Company..................... 32
(a) Representations and Warranties.......................... 32
(b) Performance of Obligations of Parent.................... 32
(c) Consents Under Agreements............................... 32
(d) Tax Opinion............................................. 33
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent............................... 33
8.2. Termination by Either Parent or the Company................. 33
8.3. Termination by Parent....................................... 33
8.4. Effect of Termination and Abandonment....................... 33
</TABLE>
iii
<PAGE> 97
<TABLE>
<C> <S> <C>
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Survival.................................................... 34
9.2. Modification or Amendment................................... 34
9.3. Waiver of Conditions........................................ 34
9.4. Counterparts................................................ 34
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL............... 34
9.6. Notices..................................................... 35
9.7. Entire Agreement; No Other Representations.................. 35
9.8. No Third Party Beneficiaries................................ 36
9.9. Obligations of Parent and of the Company.................... 36
9.10. Severability................................................ 36
9.11. Interpretation.............................................. 36
9.12. Assignment.................................................. 36
9.13. Right to Revise Form of Merger.............................. 36
</TABLE>
Exhibit A -- Voting Agreement
Exhibit A-1 -- Form of Company Affiliate Letter
Exhibit A-2 -- Form of Parent Affiliate Letter
iv
<PAGE> 98
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of August 19, 1998, between SunAmerica Inc., a Maryland corporation (the
"Company"), and American International Group, Inc., a Delaware corporation
("Parent").
RECITALS
WHEREAS, the Boards of Directors of the Company and Parent have approved
this Agreement, declared that this Agreement is advisable, and adopted the plan
of merger set forth herein whereby the Company will merge with and into Parent
upon the terms and subject to the conditions set forth in this Agreement (the
"Merger");
WHEREAS, it is intended that, for federal income tax purposes, the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, it is intended that, for financial accounting purposes, the Merger
shall be accounted for as a "pooling of interests";
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, a certain stockholder of the Company has entered into a voting and
conversion agreement, dated as of the date hereof and attached hereto as Exhibit
A (the "Voting Agreement"), pursuant to which such stockholder has agreed, among
other things, to (i) vote all of his Common Shares and Class B Shares (both as
defined below) in favor of the Merger and (ii) elect to convert each Class B
Share held by him into one Common Share, such conversion to be effective
immediately prior to the Effective Time (as defined below) ; and
WHEREAS, the Company and Parent desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 1.3) the Company
shall be merged with and into Parent and the separate corporate existence of the
Company shall thereupon cease. Parent shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"), and
the separate corporate existence of Parent with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the Maryland General Corporation Law,
as amended (the "Maryland Code"), and the Delaware General Corporation Law (the
"DGCL").
1.2. Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York
at 9:00 a.m. New York City time on the tenth business day after which the last
to be fulfilled or waived of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions) shall be satisfied or
waived in accordance with this Agreement or (ii) at such other place and time
and/or on such other date as the Company and Parent may agree in writing (the
"Closing Date").
1.3. Effective Time. As soon as practicable following the Closing, Parent
will (i) cause Articles of Merger (the "Articles of Merger") to be executed,
acknowledged and filed with and accepted for record by the State Department of
Assessments and Taxation of Maryland (the "Department") pursuant to Maryland
Code Section 3-107 and (ii) cause a Certificate of Merger (the "Delaware
Certificate of Merger") to be
A-1
<PAGE> 99
executed, acknowledged and filed with the Secretary of State of Delaware as
provided in DGCL Section 251. The Merger shall become effective on the date on
which the latest of the following actions shall have been completed: (i) at the
time when the Articles of Merger are accepted for record by the Department, (ii)
the Delaware Certificate of Merger has been duly filed with the Secretary of
State of Delaware or (iii) such later time agreed to by the Company and Parent
and established under the Articles of Merger and the Delaware Certificate of
Merger but not later than 30 days after the date of its filing and acceptance
for record by the Department (the "Effective Time").
ARTICLE II
CERTIFICATE OF INCORPORATION
AND BYLAWS
OF THE SURVIVING CORPORATION
2.1. The Certificate of Incorporation. The Certificate of Incorporation
of Parent, as amended, as in effect immediately prior to the Effective Time
shall continue to be the certificate of incorporation of the Surviving
Corporation (the "Charter"), until duly amended as provided therein or by
applicable law.
2.2. The Bylaws. The bylaws of Parent in effect at the Effective Time
shall continue to be the bylaws of the Surviving Corporation (the "Bylaws"),
until thereafter amended as provided therein or by applicable law.
ARTICLE III
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
3.1. Directors. Except as contemplated by Section 6.21, the directors of
Parent at the Effective Time shall, from and after the Effective Time, continue
to be the directors of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and the Bylaws.
3.2. Officers. The officers of Parent at the Effective Time shall, from
and after the Effective Time, be the officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Charter and
the Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON STOCK;
EXCHANGE OF CERTIFICATES
4.1. Effect on Stock. At the Effective Time, as a result of the Merger
and without any action on the part of the holder of any stock of the Company:
(a) Merger Consideration. Subject to Section 4.2(e), each share of the
Common Stock, par value $1.00 per share, of the Company (a "Common Share" or,
collectively, the "Common Shares") issued and outstanding immediately prior to
the Effective Time (other than Shares owned by Parent or any Subsidiary (as
defined in Section 5.1) of Parent (collectively, the "Parent Companies") or
Common Shares that are owned by the Company or any Subsidiary of the Company
other than the 8,707,500 Non-Transferable Class B Shares held by the Company's
Subsidiary, Stanford Ranch, Inc. and in each case not held on behalf of third
parties (collectively, "Excluded Common Shares")) shall be converted into, and
become exchangeable for, 0.855 (the "Exchange Ratio") shares (the "Merger
Consideration") of Common Stock, par value $2.50 per share, of Parent ("Parent
Common Stock").
A-2
<PAGE> 100
(b) Cancellation of Common Shares.
(i) At the Effective Time, all Common Shares shall no longer be outstanding
and shall be cancelled and retired and shall cease to exist, and each
certificate (a "Certificate") formerly representing any of such Common Shares
(other than Excluded Common Shares) shall thereafter represent only the right to
receive the Merger Consideration and the right, if any, to receive pursuant to
Section 4.2(e) cash in lieu of fractional shares into which such Common Shares
have been converted pursuant to this Section 4.1(b) and any distribution or
dividend pursuant to Section 4.2(c).
(ii) Each Common Share issued and outstanding immediately prior to the
Effective Time and owned by any of the Parent Companies or owned by the Company
or any Subsidiary of the Company (in each case other than Common Shares that are
owned on behalf of third parties), shall, by virtue of the Merger and without
any action on the part of the holder thereof, cease to be outstanding, shall be
cancelled and retired without payment of any consideration therefor and shall
cease to exist.
(c) Parent Capital Stock. At and after the Effective Time, each share of
Parent Common Stock issued and outstanding immediately prior to the Effective
Time (except as set forth in the next sentence hereof) shall remain an issued
and outstanding share of capital stock of the Surviving Corporation and shall
not be affected by the Merger. At the Effective Time, each share of Parent
Common Stock owned by the Company or any Subsidiary of the Company (in each case
other than Common Shares that are owned on behalf of third parties), shall, by
virtue of the Merger and without any action on the part of the holder thereof,
become authorized but unissued stock of the Company.
4.2. Exchange of Certificates for Common Shares.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall
deposit, or shall cause to be deposited, with an exchange agent selected by
Parent with the Company's prior approval, which shall not be unreasonably
withheld, (the "Exchange Agent"), for the benefit of the holders of Common
Shares immediately prior to the Effective Time, certificates representing the
shares of Parent Common Stock and cash in lieu of fractional shares and, after
the Effective Time, if applicable, any cash, dividends or other distributions
with respect to the Parent Common Stock to be issued or paid pursuant to Section
4.2(c) in exchange for Common Shares outstanding immediately prior to the
Effective Time upon due surrender of the Certificates (or affidavits of loss in
lieu thereof) pursuant to the provisions of this Article IV (such certificates
for shares of Parent Common Stock, together with the amount of any dividends or
other distributions payable with respect thereto, being hereinafter referred to
as the "Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of record of
Common Shares (other than holders of Excluded Common Shares) (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu thereof) to the Exchange Agent, such letter of
transmittal to be in such form and have such other provisions as Parent and the
Company may reasonably agree, and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for (A) certificates representing
shares of Parent Common Stock or (B) if applicable, any cash, unpaid dividends
or other distributions and cash in lieu of fractional shares. Subject to Section
4.2(h), upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) a certificate
representing that number of whole shares of Parent Common Stock that such holder
is entitled to receive pursuant to this Article IV and (y) a check in the amount
(after giving effect to any required tax withholdings) of (A) any cash in lieu
of fractional shares plus (B) if applicable, any cash, unpaid non-stock
dividends and any other dividends or other distributions, that such holder has
the right to receive pursuant to the provisions of this Article IV, and the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on any amount payable upon due surrender of the Certificates. In
the event of a transfer of ownership of Common Shares that is not registered in
the transfer records of the Company, a certificate representing the proper
number of shares of Parent Common Stock, together with a check for any cash to
be paid upon due surrender of the Certificate and any other dividends or
distributions in respect thereof, may be issued and/or paid to such a transferee
if the Certificate formerly representing such Common
A-3
<PAGE> 101
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Person (as defined below) requesting such exchange shall pay
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock in a name other than that of the registered
holder of the Certificate surrendered, or shall establish to the satisfaction of
Parent or the Exchange Agent that such tax has been paid or is not applicable.
For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d)) or
other entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Common Shares. All shares of
Parent Common Stock to be issued pursuant to the Merger shall be deemed issued
and outstanding as of the Effective Time and whenever a dividend or other
distribution is declared by Parent in respect of the Parent Common Stock the
record date for which is at or after the Effective Time, that declaration shall
include dividends or other distributions in respect of all shares issuable
pursuant to this Agreement. No dividends or other distributions in respect of
the Parent Common Stock shall be paid to any holder of any unsurrendered
Certificate until such Certificate is surrendered for exchange in accordance
with this Article IV. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be issued and/or paid to the
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of Parent
Common Stock and not paid and (ii) at the appropriate payment date, the
dividends or other distributions payable with respect to such whole shares of
Parent Common Stock with a record date after the Effective Time but with a
payment date subsequent to surrender.
(d) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Common Shares that were
outstanding immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued and any
holder of Common Shares entitled to receive a fractional share of Parent Common
Stock but for this Section 4.2(e) shall be entitled to receive a cash payment in
lieu thereof, which payment shall represent such holder's proportionate interest
in the net proceeds from the sale by the Exchange Agent on behalf of such holder
of the aggregate fractional shares of Parent Common Stock that such holder
otherwise would be entitled to receive. Any such sale shall be made by the
Exchange Agent within five business days after the date upon which the
Certificate(s) (or affidavit(s) of loss in lieu thereof) that would otherwise
result in the issuance of such fractional shares of Parent Common Stock have
been received by the Exchange Agent.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Common Stock)
that remains unclaimed by the stockholders of the Company for 180 days after the
Effective Time shall be paid or transferred to Parent. Any stockholders of the
Company who have not theretofore complied with this Article IV shall thereafter
look only to Parent for payment of their shares of Parent Common Stock and any
cash, dividends and other distributions in respect thereof payable and/or
issuable pursuant to Section 4.1, Section 4.2(c) and Section 4.2(e) upon due
surrender of their Certificates (or affidavits of loss in lieu thereof), in each
case, without any interest thereon. Notwithstanding the foregoing, none of
Parent, the Surviving Corporation, the Exchange Agent or any other Person shall
be liable to any former holder of Common Shares for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. 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 Parent, the posting by such Person of a bond in
customary amount as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent
A-4
<PAGE> 102
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of Parent Common Stock and any cash payable and any unpaid dividends or other
distributions in respect thereof pursuant to Section 4.2(c) and Section 4.2(e)
upon due surrender of and deliverable in respect of the Common Shares
represented by such Certificate pursuant to this Agreement.
(h) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 6.8) of the Company shall not be exchanged until Parent has received
a written agreement from such Person as provided in Section 6.8 hereof.
4.3. Dissenters' Rights. In accordance with Section 3-202(c) of the
Maryland Code, no right to demand or receive fair value shall be available to
holders of Shares (as defined in Section 5.1(b)) in connection with the Merger.
4.4. Adjustments to Prevent Dilution. In the event that the Company
changes the number of Shares or securities convertible or exchangeable into or
exercisable for Shares (other than as permitted by this Agreement), or Parent
changes the number of shares of Parent Common Stock or securities convertible or
exchangeable into or exercisable for shares of Parent Common Stock, issued and
outstanding prior to the Effective Time as a result of a reclassification, stock
split (including a reverse split), stock dividend or distribution,
recapitalization, merger, subdivision, issuer tender or exchange offer, or other
similar transaction, the Merger Consideration shall be equitably adjusted.
4.5. Treatment of Preferred Shares and Depositary Shares. The Preferred
Shares and the Depositary Shares (as each term is defined in Section 5.1(b))
shall be treated as set forth in Section 6.14.
4.6. Treatment of the Security Units. The Security Units (as defined in
Section 5.1(b)) shall be treated as set forth in Section 6.15.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. Except as set forth
in the disclosure letter delivered to Parent by the Company on or prior to
entering into this Agreement, or in accordance with Section 6.22 hereof (the
"Company Disclosure Letter"), the Company hereby represents and warrants to
Parent that (it being understood that the words "to the Knowledge of the
Company" or "the Company's Knowledge" and any words of similar import shall mean
the actual knowledge of the persons whose names are set forth in Section
5.1(a)(i) of the Company Disclosure Letter; provided, however, when such
representations and warranties are given as of the Closing Date as conditions to
Closing, such words shall mean to the actual knowledge of such persons and Gary
Krat after reasonable inquiry of others within the Company and its
Subsidiaries):
(a) Organization, Good Standing and Qualification.
(i) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of organization and has all requisite corporate
or similar power and authority to own and operate its properties and assets and
to carry on its business as presently conducted and is qualified to do business
and is in good standing as a foreign corporation in each jurisdiction where the
ownership or operation of its properties or conduct of its business requires
such qualification, except where the failure to be so qualified or in good
standing, when taken together with all other such failures, is not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse Effect
(as defined below). The Company has made available to Parent a complete and
correct copy of the Company's charter and bylaws, and, promptly following the
date of this Agreement, the Company will make available the charter and bylaws
or other comparable governing instruments of its material Subsidiaries, each as
amended to date. The Company's and its material Subsidiaries' charter and bylaws
made available are in full force and effect. As promptly as practicable
following the date of this Agreement, the Company shall deliver to Parent
Section 5.1(a)(ii) of the Company Disclosure Letter which contains a correct and
complete list of each jurisdiction where the Company and each of its
Subsidiaries is organized and qualified to do
A-5
<PAGE> 103
business, and the jurisdictions where the transactions contemplated by this
Agreement will require Parent to obtain "change in control" approvals from
applicable regulators.
As used in this Agreement, the term (x) "Subsidiary" means, with respect to
the Company or Parent, as the case may be, any entity, whether incorporated or
unincorporated, of which at least a majority of the securities or ownership
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or other persons performing similar functions is directly or
indirectly owned or controlled by such party or by one or more of its respective
Subsidiaries or by such party and any one or more of its respective Subsidiaries
(other than voting securities as to which instructions are taken as to voting
and other than entities which do not conduct any activity relating to the
operations of the Company), (y) "Company Material Adverse Effect" means a
material adverse effect on the financial condition, operations, properties,
business or results of operations of the Company and its Subsidiaries taken as a
whole or an effect which is reasonably likely to prevent, materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(ii) The Company conducts its insurance operations through SunAmerica Life
Insurance Company of America, SunAmerica National Life Insurance Company, First
SunAmerica Life Insurance Company, Anchor National Life Insurance Company and
CalAmerica Life Insurance Company (collectively, the "Company Insurance
Companies"). As promptly as practicable following the date of this Agreement,
the Company will deliver to Parent Section 5.1(ii) of the Company Disclosure
Letter which sets forth the jurisdictions where the Company Insurance Companies
are domiciled or "commercially domiciled" and licensed to do an insurance
business for insurance regulatory purposes. Each of the Company Insurance
Companies is (A) duly licensed or authorized as an insurance company and, where
applicable, a reinsurer in its jurisdiction of incorporation, (B) duly licensed
or authorized as an insurance company and, where applicable, a reinsurer in each
other jurisdiction where it is required to be so licensed or authorized, and (C)
duly authorized in its jurisdiction of incorporation and each other applicable
jurisdiction to write each line of business reported as being written in the
Company SAP Statements (as defined in Section 5.1(e))), except, in each case,
where the failure to be so licensed or authorized is not reasonably likely to
have a Company Material Adverse Effect. The Company and each of the Company
Insurance Companies have made all required filings under applicable insurance
company statutes except where the failure to file is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect.
(b) Capital Structure. The authorized stock of the Company consists of
350,000,000 Common Shares, of which 179,469,132 Common Shares were outstanding
as of the close of business on July 31, 1998, 25,000,000 shares of
Non-Transferable Class B Stock, par value $1.00 per share (the "Non-Transferable
Class B Shares"), of which 16,272,702 Non-Transferable Class B Shares were
outstanding as of the date hereof and of which 8,707,500 Non-Transferable Class
B Shares were held by Stanford Ranch, Inc. (all such Non-Transferable Class B
Shares held by Stanford Ranch, Inc. being without voting rights), 15,000,000
shares of Transferable Class B Stock, par value $1.00 per share (the
"Transferable Class B Shares" and, together with the Non-Transferable Class B
Shares, the "Class B Shares"), none of which were outstanding as of the close of
business on the date hereof, and 20,000,000 shares of preferred stock, no par
value, of which 92,000 shares have been designated Series E Mandatory Conversion
Premium Dividend Preferred Stock (the "Preferred Shares" and together with the
Common Shares and Class B Shares, the "Shares"), and of which 80,000 Preferred
Shares were outstanding as of the date hereof. All of the outstanding Shares
have been duly authorized and are validly issued, fully paid and nonassessable.
As of October 31, 1998, there will be no Preferred Shares or Depository Shares
(as defined below) outstanding, and as of the Effective Time, there will be no
Class B Shares or Security Units (as defined below) outstanding. The Company has
no commitments to issue or deliver Shares except that, as of August 19, 1998,
there were 40,335,140 Common Shares reserved for issuance pursuant to the
Company's 1997 Employee Incentive Stock Plan, 1988 Employee Stock Plan, 1995
Performance Stock Plan Amended and Restated 1996, 1997 Long-Term Incentive Plan,
1998 Long-Term Performance-Based Incentive Plan for the Chief Executive Officer,
1997 Employee Stock Purchase Plan, Long-Term Performance Based Incentive Plan
Amended and Restated 1997, Non-Employee Directors' Stock Option Plan and 1987
Restricted Stock Plan (collectively, the "Stock Plans"), 13,340,591 Common
Shares subject to issuance upon conversion of the Non-Transferable Class B
Shares pursuant to the Voting
A-6
<PAGE> 104
Agreement, 18,000,000 Common Shares subject to issuance upon the conversion of
the Preferred Shares and the simultaneous conversion of the $3.10 Depositary
Shares (the "Depositary Shares") (plus additional Common Shares subject to
issuance pursuant to Section 3 of the Articles Supplementary dated October 30,
1995 governing the terms of the Preferred Shares in respect of accrued and
unpaid dividends) and 17,250,000 Common Shares subject to issuance on conversion
of the Company's 8 1/2% Premium Equity Redemption Cumulative Security Units (the
"Security Units") pursuant to the terms thereof. As promptly as practicable
following the date of this Agreement, the Company will deliver to Parent Section
5.1(b) of the Company Disclosure Letter which will contain a correct and
complete list of each outstanding option to purchase Shares under the Stock
Plans (each a "Company Option"), including the holder, date of grant, exercise
price and number of Shares subject thereto. Each of the outstanding shares of
capital stock or other securities of each of the Company's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or by a direct or indirect wholly-owned subsidiary of the Company, free
and clear of any lien, pledge, security interest, claim or other encumbrance.
Except as set forth above, there are no Shares authorized, reserved, issued or
outstanding and there are no preemptive or other outstanding rights,
subscriptions, options, warrants, stock appreciation rights, redemption rights,
repurchase rights, convertible securities or other agreements, arrangements or
commitments of any character relating to the issued or unissued share capital or
other ownership interest of the Company or any of its Subsidiaries or any other
securities or obligations convertible or exchangeable into or exercisable for,
or giving any Person a right to subscribe for or acquire, any securities of the
Company or its Subsidiaries, and no securities evidencing such rights are
authorized, issued or outstanding. The Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or, except as referred to in this subsection (b), convertible
into or exercisable for securities having the right to vote) with the
stockholders of the Company on any matter ("Voting Debt").
(c) Corporate Authority; Approval and Fairness.
(i) The Company has all requisite corporate power and authority and has
taken all corporate action necessary in order to execute, deliver and perform
its obligations under this Agreement and to consummate, subject only to approval
of the Merger by the holders of at least two-thirds of the outstanding Common
Shares and Class B Shares (each voting separately as a class), respectively,
entitled to vote on the matter (the "Company Requisite Vote"), the Merger. This
Agreement is a valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (the "Bankruptcy and Equity Exception").
(ii) The Board of Directors of the Company (A) has unanimously adopted the
plan of merger set forth herein and approved this Agreement and the other
transactions contemplated hereby, (B) has declared that the Merger and this
Agreement and the other transactions contemplated hereby are advisable, and (C)
has received the opinions of its financial advisors, Goldman, Sachs & Co. and
Wasserstein Perella & Co., Inc., to the effect that as of the date hereof, the
Exchange Ratio to be received by the holders of the Common Shares in the Merger
is fair to such holders from a financial point of view.
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Section 1.3, (B)
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Investment Company Act of 1940 (the "1940 Act") and the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), (C) to comply with state securities or
"blue-sky" laws, (D) required to be made with the New York Stock Exchange, Inc.
(the "NYSE"), the National Association of Securities Dealers, Inc. ("NASD") and
the Pacific Exchange, Inc., and other applicable self-regulatory organizations,
applicable state banking authorities and applicable federal regulatory agencies
including the Federal Deposit Insurance Corporation and the Office of Thrift
Supervision, and (E) the filing of appropriate documents with, and, to the
extent necessary, approval of, the respective Commissioners of Insurance of the
states of Arizona, California, New York and the insurance authorities of the
Cayman Islands and such notices and consents as may be
A-7
<PAGE> 105
required under the insurance laws of any jurisdiction in which the Company,
Parent or any of their respective subsidiaries is domiciled or does business, no
filings, reports or notices are required to be made by the Company with, nor are
any consents, registrations, approvals, permits or authorizations required to be
obtained by the Company from, any governmental or regulatory authority, agency,
commission, body or other governmental entity ("Governmental Entity"), in
connection with the execution and delivery of this Agreement by the Company and
the consummation by the Company of the Merger and the other transactions
contemplated hereby, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
(ii) The execution, delivery and performance of this Agreement by the
Company do not, and the consummation by the Company of the Merger and the other
transactions contemplated hereby will not, constitute or result in (A) a breach
or violation of, or a default under, the charter or bylaws of the Company or the
comparable governing instruments of any of its Subsidiaries, (B) a breach or
violation of, or a default under, the acceleration of any obligations or the
creation of a lien, pledge, security interest or other encumbrance on the assets
of the Company or any of its Subsidiaries (with or without notice, lapse of time
or both) pursuant to, any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation, whether written or oral ("Contracts" and
individually, a "Contract"), binding upon the Company or any of its Subsidiaries
(provided, as to consummation, the filings, reports and notices are made, and
approvals are obtained, as referred to in Section 5.1(d)(i) or Section 6.18) or
any Law (as defined in Section 5.1(i)) or governmental or non-governmental
permit, registration, authorization or license to which the Company or any of
its Subsidiaries is subject or (C) any change in the rights or obligations of
any party under any Contract, except, in the case of clause (B) or (C) above,
for any breach, violation, default, acceleration, creation or change that is
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. As promptly as practicable following the date of this
Agreement, the Company will deliver to Parent Section 5.1(d) of the Company
Disclosure Letter which sets forth, to the Knowledge of the Company, a correct
and complete list in all material respects of Contracts of the Company and its
Subsidiaries pursuant to which consents or waivers are or may be required prior
to consummation of the transactions contemplated by this Agreement (whether or
not subject to the exception set forth with respect to clauses (B) and (C)
above).
(e) Company Reports; Financial Statements; Undisclosed Liabilities;
Statutory Statements.
(i) The Company has delivered or made available to Parent each registration
statement, report, proxy statement or information statement prepared by it since
September 30, 1995, including (A) the Company's Annual Report on Form 10-K for
the year ended September 30, 1997 (the "Audit Date," and such report on Form
10-K, the "1997 10-K") and (B) the Company's Quarterly Report on Form 10-Q for
the periods ended December 31, 1997, March 31, 1998 and June 30, 1998, each in
the form (including exhibits, annexes and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including any such
reports filed with the SEC subsequent to the date hereof, the "Company
Reports"). As of their respective dates, the Company Reports did not, and any
Company Reports filed with the SEC subsequent to the date hereof will not,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading. Each of
the consolidated balance sheets included in or incorporated by reference into
the Company Reports (including the related notes and schedules) fairly presents,
or will fairly present, the consolidated financial position of the Company and
its Subsidiaries as of its date and each of the consolidated statements of
income and of changes in stockholders' equity included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly presents, or will fairly present, the results of operations, retained
earnings and changes in financial position, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that will
not be material in amount or effect), in each case in accordance with accounting
principles generally accepted in the United States ("U.S. GAAP") consistently
applied during the periods involved, except as may be noted therein.
(ii) Except for those liabilities that are fully reflected or reserved
against on the consolidated balance sheet of the Company included in the
Company's Quarterly Report on Form 10-Q for the period ended June 30, 1998, and
for liabilities incurred in the ordinary course of business consistent with past
practice, since
A-8
<PAGE> 106
June 30, 1998, neither the Company nor any of its Subsidiaries has incurred any
liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due) that, individually or in the
aggregate, has had or is reasonably likely to have a Company Material Adverse
Effect.
(iii) Each of the Company Insurance Companies has filed all annual and
quarterly statements, together with all exhibits, interrogatories, notes,
schedules and any actuarial opinions, affirmations or certifications or other
supporting documents in connection therewith, required to be filed with or
submitted to the appropriate regulatory authorities of the jurisdiction in which
it is domiciled or commercially domiciled on forms prescribed or permitted by
such authority (collectively, the "Company SAP Statements"). The Company has
delivered or made available to Parent all Company SAP Statements for each
Company Insurance Company for the period ended December 31, 1995, each in the
form (including exhibits, annexes and any amendments thereto) filed with the
applicable state insurance regulatory agency. Financial statements included in
the Company SAP Statements and prepared on a statutory basis, including the
notes thereto, were prepared in conformity with statutory accounting practices
prescribed or permitted by the applicable insurance regulatory authority
consistently applied for the periods covered thereby and present fairly the
statutory financial position of such Company Insurance Companies as at the
respective dates thereof and the results of operations of such Company Insurance
Companies for the respective periods then ended. The Company SAP Statements
complied in all material respects with all applicable laws, rules and
regulations when filed, and no material deficiency has been asserted with
respect to any Company SAP Statements by the applicable insurance regulatory
body or any other governmental agency or body. Except as indicated therein, all
assets that are reflected on the Company SAP Statements comply with applicable
Insurance Laws with respect to admitted assets and are in an amount at least
equal to the minimum amounts required by applicable Insurance Laws. The
statutory balance sheets and income statements included in the Company SAP
Statements have been audited by PricewaterhouseCoopers LLP and the Company has
delivered or made available to Parent true and complete copies of all audit
opinions related thereto. As promptly as practicable following the date of this
Agreement, the Company will deliver or make available to Parent true and
complete copies of all examination reports of insurance departments and any
insurance regulatory agencies since January 1, 1995 relating to the Company
Insurance Companies.
(f) Absence of Certain Changes. Except as disclosed in the Company Reports
filed prior to the date hereof, since the Audit Date the Company and its
Subsidiaries have conducted their respective businesses only in, and have not
engaged in any material transaction other than according to, the ordinary and
usual course of such businesses consistent with past practice and there has not
been (i) any change in the financial condition, operations, properties, business
or results of operations of the Company and its Subsidiaries or any development
or combination of developments of which the Company has Knowledge, that,
individually or in the aggregate, has had or is reasonably likely to have a
Company Material Adverse Effect; (ii) any damage, destruction or other casualty
loss with respect to any material asset or property owned, leased or otherwise
used by the Company or any of its Subsidiaries, whether or not covered by
insurance, except for such damage, destruction or other casualty loss which is
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect; (iii) any change by the Company in accounting
principles, practices or methods other than as required by U.S. GAAP or as
disclosed in the Company Reports or Company SAP Statements filed prior to the
date hereof; (iv) any declaration, setting aside or payment of any dividend or
other distribution in respect of the stock of the Company, except for cash
dividends on its capital stock publicly announced prior to the date hereof; (v)
any addition, or any development involving a prospective material addition, to
the Company's consolidated reserves for future policy benefits or other policy
claims and benefits, except for such additions or developments which are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect; or (vi) any change in the accounting, actuarial, investment,
reserving, underwriting or claims administration policies, practices,
procedures, methods, assumptions or principles of the Company or any Company
Insurance Company not disclosed in the Company Reports or Company SAP Statements
filed prior to the date hereof except as required by U.S. GAAP. Since the Audit
Date, except as provided for herein or as disclosed in the Company Reports filed
prior to the date hereof, there has not been any increase in the compensation
payable or that could become payable by the Company or any of its Subsidiaries
to officers or key employees or any amendment of any of the
A-9
<PAGE> 107
Compensation and Benefit Plans (as defined in Section 5.1(h)) other than
increases or amendments in the ordinary course consistent with past practice.
(g) Litigation and Liabilities. Except as disclosed in the Company Reports
filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations, inquiries or
proceedings pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries or (ii) obligations or liabilities of any
nature, whether or not accrued, contingent or otherwise and whether or not
required to be disclosed, including those relating to matters involving any
Environmental Law (as defined in Section 5.1(k)) and occupational safety and
health matters, or any other facts or circumstances of which the Company has
Knowledge that is reasonably likely to result in any claims against, or
obligations or liabilities of, the Company or any of its Subsidiaries, except
for those that are not, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect.
(h) Employee Benefits.
(i) A copy of each material bonus, incentive, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, employment,
termination, severance, compensation, medical, health, welfare, fringe benefits
or other plan, agreement, policy or arrangement that covers employees,
directors, former employees or former directors of the Company and its
Subsidiaries (the "Compensation and Benefit Plans") and any trust agreement or
insurance contract forming a part of such Compensation and Benefit Plans has
been made available to Parent prior to the date hereof. The Compensation and
Benefit Plans are listed in Section 5.1(h) of the Company Disclosure Letter and
any Compensation and Benefit Plan containing a "change of control" or similar
provision is identified in Section 5.1(h) of the Company Disclosure Letter.
Neither the Company nor any of its Subsidiaries has any commitment, oral or
written, to create any additional material Compensation and Benefit Plan or to
modify or change any existing Compensation and Benefit Plan in a material
respect.
(ii) All Compensation and Benefit Plans are in substantial compliance with
all applicable law, including the Code and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any regulations and rules
promulgated thereunder, and all required filings and disclosures with respect to
any Compensation and Benefit Plan have been made. Each Compensation and Benefit
Plan that is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA (a "Pension Plan") and that is intended to be qualified under
Section 401(a) of the Code has received all required favorable determination
letters (including a determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under Section 501(a) of the
Code) from the Internal Revenue Service (the "IRS"), including with respect to
"TRA" (as defined in Rev. Proc. 93-39), and the Company is not aware of any
circumstances reasonably likely to result in revocation of any such favorable
determination letter. There is no pending or, to the Knowledge of the Company,
threatened legal action, suit, claim or governmental investigation relating to
any of the Compensation and Benefit Plans. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any Compensation and
Benefit Plan that, assuming the taxable period of such transaction expired as of
the date hereof, would be reasonably likely to subject the Company or any of its
Subsidiaries to a material tax or penalty imposed by either Section 4975 of the
Code or Section 502 of ERISA.
(iii) No liability (other than for payment of premiums to Pension Benefit
Guaranty Corporation ("PBGC")), under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any Subsidiary with respect
to any ongoing, frozen or terminated "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity (an "ERISA Affiliate") which is
considered one employer with the Company under Section 4001 of ERISA or Section
414 of the Code (an "ERISA Affiliate Plan"). The Company and its Subsidiaries
have not contributed, or been obligated to contribute, to a multiemployer plan
under Subtitle E of Title IV of ERISA at any time since September 26, 1980. No
notice of a "reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived, has been required to
be filed for any Pension Plan or any ERISA Affiliate Plan within the 12-month
period ending on the date hereof.
A-10
<PAGE> 108
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan as of the date hereof have
been made or have been reflected on the Company's most recent financial
statements. Neither any Pension Plan nor any ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries (A) has provided, or is required to provide, security to any
Pension Plan or to any ERISA Affiliate Plan pursuant to Section 401(a)(29) of
the Code or (B) has taken any action, or omitted to take any action, that has
resulted, or would reasonably be expected to result, in the imposition of a lien
under Section 412(n) of the Code or pursuant to ERISA.
(v) Under each Pension Plan which is a single-employer plan and each ERISA
Affiliate Plan, as of the last day of the most recent plan year ended prior to
the date hereof, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as determined
on the basis of the actuarial assumptions contained in the most recent actuarial
valuation of such Pension Plan and ERISA Affiliate Plan), did not exceed the
then current value of the assets of such Pension Plan or ERISA Affiliate Plan,
and to the Knowledge of the Company, since such date there has been neither an
adverse change in the financial condition of such Pension Plan or ERISA
Affiliate Plan nor any amendment or other change to such Pension Plan or ERISA
Affiliate Plan that would increase the amount of benefits thereunder which
reasonably could be expected to change such result.
(vi) Neither the Company nor any of its Subsidiaries have any obligations
for retiree health and life benefits under any Compensation and Benefit Plan
(other than benefits mandated under Section 4980B of the Code). The Company or
its Subsidiaries may amend or terminate any such plan under the terms of such
plan at any time without incurring any material liability thereunder.
(vii) Except as set forth in the Company Disclosure Letter, the
consummation of the Merger and the other transactions contemplated by this
Agreement (including, without limitation, as a result of any termination of
employment prior to or following the Effective Time) will not (A) entitle any
employee, consultant or director of the Company or any of its Subsidiaries to
any payment (including severance pay or similar compensation) or any increase in
compensation, (B) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of the Compensation and
Benefit Plans, (C) result in any breach or violation of, or a default under, any
of the Compensation and Benefit Plans or (D) result in any of Parent, the
Company or the Surviving Corporation being obligated to make a payment that
would be reasonably likely to be characterized as an "excess parachute payment"
to an individual who is a "disqualified individual" (as such terms are defined
in Section 280G of the Code), without regard to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future.
(viii) Neither the Company nor any Subsidiary maintains any Compensation
and Benefit Plan covering foreign employees.
(ix) With respect to each Compensation and Benefit Plan, if applicable, the
Company has provided, made available, or will make available upon request, to
the Parent, true and complete copies of existing: (A) the two most recent Forms
5500 filed with the IRS; (B) the most recent actuarial report and financial
statement; (C) the most recent summary plan description; (D) the forms filed
with the PBGC (other than for premium payments); (E) the most recent
determination letter issued by the IRS; and (F) any Form 5310 or Form 5330 filed
with the IRS.
(i) Compliance with Laws; Permits.
(i) The business and operations of the Company Insurance Companies have
been conducted in compliance with all applicable foreign, federal, state and
local statutes and regulations regulating the business and products of insurance
and all applicable orders and directives of insurance regulatory authorities
(collectively, "Insurance Laws"), except where the failure to so conduct such
business and operations would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect. Notwithstanding the
generality of the foregoing, except where the failure to do so would not,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect, each Company Insurance
A-11
<PAGE> 109
Company and, to the Company's Knowledge, its agents have marketed, sold and
issued insurance and annuity and guaranteed investment products in compliance,
in all material respects, with all Insurance Laws applicable to the business of
such Company Insurance Company and such activities and in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with (A) all applicable prohibitions against
withdrawal of business lines, (B) all applicable requirements relating to the
disclosure of the nature of insurance products as policies of insurance, (C) all
applicable requirements relating to insurance product projections and
illustrations, and (D) all applicable requirements relating to the advertising,
sales and marketing of insurance and annuity products and guaranteed investment
contracts. In addition, (X) there is no pending or, to the Knowledge of the
Company, threatened charge by any insurance regulatory authority that any of the
Company Insurance Companies has violated, nor any pending or, to the Knowledge
of the Company threatened investigation by any insurance regulatory authority
with respect to possible violations of, any applicable Insurance Laws where such
violations would, individually or in the aggregate, be reasonably like to have a
Company Material Adverse Effect; (Y) none of the Company Insurance Companies is
subject to any order or decree of any insurance regulatory authority relating
specifically to such Company Insurance Company (as opposed to insurance
companies generally) which would, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect; and (Z) the Company
Insurance Companies have filed all reports required to be filed with any
insurance regulatory authority on or before the date hereof as to which the
failure to file such reports would, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect.
(ii) In addition to Insurance Laws, except as set forth in the Company
Reports filed prior to the date hereof or as would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect, the
businesses of each of the Company and its Subsidiaries have not been, and are
not being, conducted in violation of any federal, state, local or foreign law,
statute, ordinance, rule, regulation, judgment, order, injunction, decree,
arbitration award, agency requirement, license or permit of any Governmental
Entity (collectively with Insurance Laws, "Laws"). Except as set forth in the
Company Reports filed prior to the date hereof or as would not, individually or
in the aggregate, be reasonably likely to have a Company Material Adverse
Effect, no investigation or review by any Governmental Entity with respect to
the Company or any of its Subsidiaries is pending or, to the Knowledge of the
Company, threatened, nor has any Governmental Entity indicated an intention to
conduct the same. To the Knowledge of the Company, no material change is
required in the Company's or any of its Subsidiaries' processes, properties or
procedures in connection with any such Laws, and the Company has not received
any written notice or communication of any material noncompliance with any such
Laws that has not been cured as of the date hereof. The Company and its
Subsidiaries each has all permits, licenses, trademarks, patents, tradenames,
copyrights, servicemarks, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct its
business as presently conducted except those the absence of which is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
(iii) Except as would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect, with respect to every
syndication of property that was intended to allow investors to claim a low
income housing tax credit or similar tax credit, the property so syndicated is
eligible for the relevant credit in an amount no less than the amount that it
was intended to produce.
(j) Takeover Statutes. No restrictive provision of any "fair price,"
"moratorium," "control share acquisition," "interested shareholder" or other
similar anti-takeover statute or regulation (each a "Takeover Statute")
(including Sections 3-602 and 3-702 of the Maryland Code) or any restrictive
provision of any applicable anti-takeover provision in the Company's charter and
bylaws is, or at the Effective Time will be, applicable to the Company, Parent,
the Shares, the Merger, the Voting Agreement or the other transactions
contemplated by this Agreement.
(k) Environmental Matters. Except as disclosed in the Company Reports
filed prior to the date hereof: (i) the Company and its Subsidiaries have
materially complied with all applicable Environmental Laws; (ii) the properties
currently owned or operated by the Company (including soils, groundwater,
surface water, buildings or other structures) are not contaminated with any
Hazardous Substance which is reasonably likely to require remediation under any
applicable Environmental Law; (iii) the properties formerly owned or
A-12
<PAGE> 110
operated by the Company or any of its Subsidiaries were not contaminated with
any Hazardous Substance which could reasonably be expected to require
remediation under any applicable Environmental Law during the period of
ownership or operation by the Company or any of its Subsidiaries; (iv) neither
the Company nor any of its Subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property which
is reasonably likely to require remediation under applicable Environmental Laws;
(v) neither the Company nor any of its Subsidiaries has received any notice,
demand, letter, claim or request for information indicating that the Company or
any of its Subsidiaries may be in material violation of or subject to liability
under any Environmental Law; (vi) neither the Company nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or any material indemnity or other
material agreement with any third party relating to any Environmental Law or
Hazardous Substances; and (vii) there are no other circumstances or conditions
involving the Company or any of its Subsidiaries that could reasonably be
expected to result in any material claims, liability, investigations, costs or
restrictions on the ownership, use, or transfer of any property of the Company
pursuant to any Environmental Law.
As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, regulation, judgment, order, decree,
arbitration award, agency requirement, license, permit, authorization or common
law, relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used herein, the term "Hazardous Substance" means any substance that is:
(A) listed, classified or regulated pursuant to any Environmental Law; (B) any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or
(C) any other substance which may be the subject of regulatory action by any
Government Authority pursuant to any Environmental Law.
(l) Taxes. The Company, and each of its Subsidiaries (which, for the
purposes of this Section 5.1(l) shall include any predecessor of any Subsidiary)
(i) have prepared in good faith and duly and timely filed (taking into account
any extension of time within which to file) all material Tax Returns (as defined
below) required to be filed by any of them and all such filed Tax Returns are
complete and accurate in all material respects; (ii) have paid all Taxes that
are shown as due and payable on such filed Tax Returns or that the Company or
any of its Subsidiaries are obligated to pay without the filing of a Tax Return;
(iii) have paid all other charges, claims and assessments received to date in
respect of Taxes other than those being contested in good faith for which
provision has been made in accordance with U.S. GAAP on the most recent balance
sheet included in the Company Reports; (iv) have withheld from amounts owing to
any employee, creditor or other person all material Taxes required by law to be
withheld and have paid over to the proper governmental authority in a timely
manner all such withheld amounts to the extent due and payable; (v) as of the
date hereof, have neither extended nor waived any applicable statute of
limitations with respect to United States federal or state income or franchise
Taxes and have not otherwise agreed to any extension of time with respect to a
United States federal or state income or franchise Tax assessment or deficiency;
(vi) have never been members of any consolidated group for income tax purposes
other than the consolidated group of which the Company is the common parent; and
(vii) are not parties to any tax sharing agreement or arrangement other than
with each other. As of the date hereof, there are not pending or threatened in
writing any audits, examinations, investigations, litigation, or other
proceedings in respect of Taxes of the Company or any Subsidiary. There are not
any unresolved questions or claims concerning the Company's or any of its
Subsidiaries' Tax liability that are reasonably likely to have a Company
Material Adverse Effect. No liens for Taxes exist with respect to any of the
assets or properties of the Company or its Subsidiaries, except for statutory
liens for Taxes not yet due or payable or that are being contested in good
faith. Except as would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect, the assets of each Company
Separate Account are adequately diversified within the meaning of Section 817(h)
of the Code. Each of the Company Insurance Companies is treated for federal tax
purposes, as the owner of the assets underlying the respective life insurance
contracts and annuity contracts that such insurer has issued,
A-13
<PAGE> 111
entered into or sold. The Company has made available to Parent true and correct
copies of the United States federal income Tax Returns filed by the Company and
its Subsidiaries for each of the fiscal years ended September 30, 1997, 1996 and
1995.
As used in this Agreement, (i) the term "Tax" (including, with correlative
meaning, the terms "Taxes", and "Taxable") includes all federal, state, local
and foreign income, profits, premium, franchise, gross receipts, environmental,
customs duty, capital stock, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or governmental levies of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect of such penalties and
additions, and (ii) the term "Tax Return" includes all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating to
Taxes.
(m) Intellectual Property.
(i) Except as disclosed in Company Reports filed prior to the date hereof
or as is not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect: the Company does not have Knowledge of any
valid grounds for any bona fide claims (A) to the effect that the manufacture,
sale, licensing or use of any product as now used, sold or licensed or proposed
for use, sale or license by the Company or any of its Subsidiaries, infringes on
any copyright, patent, trademark, trade name, service mark or trade secret; (B)
against the use by the Company or any of its Subsidiaries, of any copyrights,
patents, trademarks, trade names, service marks, trade secrets, technology,
know-how or computer software programs and applications used in the business of
the Company or any of its Subsidiaries as currently conducted or as proposed to
be conducted; (C) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property Rights or other trade secret material to the
Company; or (D) challenging the license or legally enforceable right to use of
the Third-Party Intellectual Rights by the Company or any of its Subsidiaries.
(ii) As used in this Agreement, the term (x) "Intellectual Property" means
all patents, trademarks, trade names, service marks, copyrights and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or materials;
(y) "Third-Party Intellectual Property Rights" means any third-party patents,
trademarks, trade names, service marks and copyrights; and (z) "Company
Intellectual Property Rights" means the patents, registered and material
unregistered trademarks, trade names and service marks, registered copyrights,
and any applications therefor owned by the Company or any of its Subsidiaries.
(n) Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that the Company has employed Goldman, Sachs & Co. and Wasserstein Perella &
Co., Inc. as its financial advisors, the arrangements with which have been
disclosed to Parent prior to the date hereof.
(o) No Regulatory Disqualifications. To the Knowledge of the Company, no
event has occurred or condition exists or, to the extent it is within the
reasonable control of the Company, will occur or exist with respect to the
Company that, in connection with obtaining any regulatory Consents required for
the Merger, would cause the Company to fail to satisfy on its face any
applicable statute or written regulation of any applicable insurance regulatory
authority, that is, individually or in the aggregate, reasonably likely to have
a Company Material Adverse Effect.
(p) Insurance Business.
(i) Except as otherwise would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect, all policies,
binders, slips, certificates, guaranteed insurance contracts, annuity contracts
and participation agreements and other agreements of insurance, whether
individual or group, in effect as of the date hereof (including all
applications, supplements, endorsements, riders and ancillary agreements in
connection therewith) that are issued by the Company Insurance Companies (the
"Company Insurance Contracts") and any and all marketing materials, are, to the
extent required under
A-14
<PAGE> 112
applicable law, on forms approved by applicable insurance regulatory authorities
or which have been filed and not objected to by such authorities within the
period provided for objection, and such forms and marketing materials comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto. As promptly as practicable following the date of this
Agreement, the Company will deliver to Parent Section 5.1(p)(i) of the Company
Disclosure Letter which contains a true and complete list of all forms of
Company Insurance Contracts that (A) are currently used by any Company Insurance
Company or (B) have been used by any Company Insurance Company for business
which is still in force.
(ii) Each insurance agent, third party administrator, manager, broker and
distributor (each an "Agent"), at the time such Agent wrote, sold, produced or
managed business for the Company Insurance Companies was duly licensed (for the
type of business written, sold, produced or managed) and no such Agent violated
(or with or without notice or lapse of time or both, would have violated) any
term or provision of any Law applicable to the writing, sale, production or
management of business for any Company Insurance Company, except for such
failures to be licensed or such violations which have been cured, which have
been resolved or settled through agreements with applicable Governmental
Entities or which are barred by an applicable statute of limitations, or that,
individually or in the aggregate, have not had or are not reasonably likely to
have a Company Material Adverse Effect.
(iii) As promptly as practicable following the date of this Agreement, the
Company will deliver or make available to Parent a true and complete copy of all
actuarial reports prepared by the Company's actuaries, and any actuarial reports
prepared by other actuaries, independent or otherwise, with respect to any
Company Insurance Company since December 31, 1995, and all attachments, addenda,
supplements and modifications thereto (the "Company Actuarial Analyses"). To the
Knowledge of the Company, the information and data furnished by the Company or
any Company Insurance Company to its independent actuaries in connection with
the preparation of the Company Actuarial Analyses were accurate in all material
respects. Furthermore, each Company Actuarial Analysis was based upon an
accurate inventory of policies in force for the Company Insurance Companies, at
the relevant time of preparation, was prepared using appropriate modeling
procedures accurately applied and in conformity with generally accepted
actuarial standards consistently applied, and the projections contained therein
were properly prepared in accordance with the assumptions stated therein.
(iv) To the Knowledge of the Company, except as set forth in Section
5.1(p)(iv) of the Company Disclosure Letter or as reserved for or disclosed in
the Company Reports, or as is not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect all amounts recoverable under
reinsurance, coinsurance or other similar Contracts to which any Company
Insurance Company is a party (including, but not limited to, amounts based on
paid and unpaid losses) are fully collectible.
(v) Promptly following the date of this Agreement, the Company will deliver
to Parent true and complete copies of all analyses, reports and other data
prepared by the Company or any Company Insurance Company or submitted by the
Company or any Company Insurance Company to any insurance regulatory authority
or received by the Company or any Company Insurance Company relating to
risk-based capital calculations or IRIS ratios for the years ended December 31,
1997 and 1996.
(vi) Promptly following the date of this Agreement, the Company will
deliver to Parent a true and correct list on a per risk and aggregate basis of
the maximum underlying retentions (net of all reinsurance maintained) on all
insurance and reinsurance policies written or entered into by any Company
Insurance Company since December 31, 1995.
(vii) Except as would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect, all annuity contracts and life
insurance policies issued by a Company Insurance Company meet all definitional
or other requirements for qualification under the Code section applicable (or
intended to be applicable) to such annuity contracts or life insurance policies.
Except as set forth in Section 5.1(p)(vii) of the Company Disclosure Letter,
which the Company will deliver to Parent promptly following the date of this
Agreement, there are no material "hold harmless" indemnification agreements
respecting the tax qualification or treatment of any product or plan sold,
issued, entered into or administered by the Company Insurance Companies, and
there have been no claims asserted by any Person under such
A-15
<PAGE> 113
"hold harmless" indemnification agreements set forth in Section 5.1(p)(vii) of
the Company Disclosure Letter.
(q) Liabilities and Reserves.
(i) The reserves carried on the books of each Company Insurance Company for
future insurance policy benefits, losses, claims and similar purposes were, as
of the respective dates of such Company SAP Statements, in compliance in all
material respects with the requirements for reserves established by the
insurance departments of the state of domicile of such Company Insurance
Company, were determined in all material respects in accordance with generally
accepted actuarial standards consistently applied, and were fairly stated in all
material respects in accordance with sound actuarial and statutory accounting
principles. Promptly following the date of this Agreement, the Company will
deliver or make available to Parent true, correct and complete copies of the
actuarial valuation reports delivered to the insurance department of the
domiciliary state of each Company Insurance Company for the years ended December
31, 1997 and 1996. Promptly following the date of this Agreement, the Company
will deliver or make available to Parent copies of all work papers used as the
basis for establishing the reserves for the Company and the Company Insurance
Companies at December 31, 1997 and December 31, 1996, respectively, as well as
all reports with respect to the adequacy of such reserves.
(ii) Except for regular periodic assessments in the ordinary course of
business or as reserved for or disclosed in the Company Reports, no claim or
assessment is pending nor, to the Knowledge of the Company, threatened against
any Company Insurance Company by any state insurance guaranty associations in
connection with such association's fund relating to insolvent insurers which if
determined adversely, would, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect.
(r) Separate Accounts.
(i) Except as otherwise would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect, each separate
account maintained by a Company Insurance Company (a "Company Separate Account")
is duly and validly established and maintained under the laws of its state of
formation and is either excluded from the definition of an investment company
pursuant to Section 3(c)(11) of the 1940 Act or is duly registered as an
investment company under the 1940 Act. Except as otherwise would not,
individually or in the aggregate, have a Company Material Adverse Effect, each
such Company Separate Account, if registered, is operated in compliance with the
1940 Act, has filed all reports and amendments of its registration statement
required to be filed, and has been granted all exemptive relief necessary for
its operations as presently conducted. Except as otherwise would not,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect, the Company Insurance Contracts under which the Company
Separate Accounts assets are held are duly and validly issued and are either
exempt from registration under the Securities Act pursuant to Section 3(a)(2) of
the Securities Act or were sold pursuant to an effective registration statement
under the Securities Act, and any such registration statement is currently in
effect to the extent necessary to allow the appropriate Company Insurance
Company to receive contributions under such policies. Such registration
statements, at the time that each become effective, contained no untrue
statement of a material fact, and did not omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. Each prospectus, statement of additional information, or
private placement memorandum, as amended or supplemented, relating to any
registered separate account and all supplemental advertising material relating
to any registered separate account since January 1, 1995, as of their respective
mailing dates or dates of use (A) contained no untrue statement of material fact
and did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, and (B)
complied with applicable law including but not limited to, state insurance laws,
state securities laws, rules of the NASD, the Securities Act and the 1940 Act,
except for such instances of non-compliance which are not, individually or in
the aggregate, reasonably likely to have a Company Material Adverse Effect.
(s) Material Contracts. All of the material Contracts of the Company and
its Subsidiaries that are required to be described in the Company Reports or to
be filed as exhibits thereto are described in the Company Reports or filed as
exhibits thereto, respectively, and are in full force and effect. Promptly
following
A-16
<PAGE> 114
the date of this Agreement, true and complete copies of all such material
Contracts will be delivered or made available by the Company to Parent. Neither
the Company nor any of its Subsidiaries nor, to the Knowledge of the Company,
any other party is in breach of or in default under any such Contract except for
such breaches and defaults as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect. Except as would
not, individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect, neither the Company nor any of its Subsidiaries is
party to any Contract containing any provision or covenant limiting in any
material respect the ability of the Company or any of its Subsidiaries or,
except as specifically identified on Section 5.1(s) of the Company Disclosure
Letter, assuming the consummation of the transactions contemplated by this
Agreement, Parent or any of its Subsidiaries to (A) sell any products or
services of or to any other person, (B) engage in any line of business or (C)
compete with or to obtain products or services from any person or limiting the
ability of any person to provide products or services to the Company or any of
its Subsidiaries.
(t) Year 2000 Compliance. The software and hardware operated by the
Company and the Company Insurance Companies are capable of providing or are
being adapted or replaced to provide uninterrupted millennium functionality to
record, store, process and present calendar dates falling on or after January 1,
2000 and date-dependent data in substantially the same manner and with the same
functionality as such software records, stores, processes and presents such
calendar dates and date-dependent data as of the date hereof, except for the
failure to have such capability which would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect.
(u) Investment Contracts, Funds and Clients.
(i) Certain of the Company's Subsidiaries provide investment management,
investment advisory, sub-advisory, administration, distribution or certain other
services (each Contract for such services being referred to as an "Investment
Contract", each other party thereto being referred to as a "Client", and each
Client which is registered as an investment company under the 1940 Act being
referred to as a "Fund Client") to the Fund Clients, a complete list of which
has previously been made available by the Company to Parent. Each of the Fund
Clients (or the trust of which it is a series) is duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
organization. The Boards of Trustees or Directors of the Fund Clients operate in
all material respects in conformity with the requirements and restrictions of
Sections 9, 10 and 16 of the 1940 Act.
(ii) Except as would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect, each of the Fund Clients is in
compliance with all applicable laws of the SEC, the NASD, the IRS and any other
governmental agency or self-regulatory body having jurisdiction over such Fund
Client or its distributor or investment adviser and of any state in which such
Fund Client is registered, qualified or sold and with its Prospectus and
Statement of Additional Information. Except as would not be, individually or in
the aggregate, reasonably likely to have a Company Material Adverse Effect, each
Fund Client has elected to be treated as, and has qualified as, a "regulated
investment company" under subchapter M of Chapter 1 of Subtitle A of the Code.
Except as would not be, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect, each Fund Client that is intended to be
a tax-exempt municipal bond fund has satisfied the requirements of Section
852(b)(5) of the Code and is qualified to pay exempt interest dividends as
defined therein.
(iii) Each of the Company's Subsidiaries (each an "Advisory Entity" and,
collectively "Advisory Entities"), a complete list of which has previously been
made available by the Company to the Parent, that provides investment
management, investment advisory or sub-advisory services to any Fund Client or
any other Person (each an "Advisory Client") is duly registered with the SEC as
an investment adviser and is not subject to state regulation. The Company is not
an Advisory Entity. No Advisory Client is exempt from registration under the
1940 Act by virtue of Sections 3(c)(1), 3(c)(7) or (except Company Separate
Accounts) 3(c)(11).
(iv) Each Fund Client and Advisory Entity has operated and is currently
operating in compliance with all laws, rules, regulations and orders applicable
to it or its business except for such noncompliance as would not, individually
or in the aggregate, be reasonably likely to have a Company Material Adverse
Effect. Each
A-17
<PAGE> 115
Advisory Entity has been and is in compliance with each Investment Contract to
which it is a party, except as would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect.
(v) The accounts of each Advisory Client subject to ERISA have been managed
by the applicable Company Subsidiary in compliance in all material respects with
the applicable requirements of ERISA.
(v) Company Broker/Dealers.
(i) The Company operates its broker/dealer operations exclusively through
Advantage Capital Corporation, Royal Alliance Associates, Inc., SunAmerica
Securities, Inc., Sentra Securities Corporation, SunAmerica Capital Services,
Inc., Spelman & Co., Inc. and FSC Securities Corporation (collectively, the
"Company Broker/Dealers"). Each Company Broker/Dealer that is required to be
registered as a broker-dealer with the SEC or under applicable state laws, is so
registered and is registered with each other Governmental Entity with which it
is required to register in order to conduct its business as now conducted, and
is and has been since January 1, 1995 in full compliance with all applicable
Laws thereunder, except for any failures to register or comply which are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect. Each Company Broker/Dealer is a member organization in good
standing of the NASD and such other organizations in which its membership is
required in order to conduct its business as now conducted except such failures
to be in good standing or such memberships the failure to have or maintain which
are not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect.
(ii) Except as would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect, no Company Broker/Dealer is,
nor is any "associated person" of it, subject to a "statutory disqualification"
(as such terms are defined in the Exchange Act) or subject to a disqualification
that would be a basis for censure, limitations on the activities, functions or
operations of, or suspension or revocation of the registration of the Company as
broker-dealer, municipal securities dealer, government securities broker or
government securities dealer under Section 15, Section 15B or Section 15C of the
Exchange Act and, to the Company's Knowledge, there are no proceedings or
investigations pending by any Governmental Entity or self-regulatory
organization that is reasonably likely to result in any such censure,
limitations, suspension or revocation.
(iii) Except as would not, individually or in the aggregate, be reasonably
likely to have a Company Material Adverse Effect, since its inception, each
Company Broker/Dealer has had net capital (as such term is defined in Rule
15c3-1 under the Exchange Act) that satisfies the minimum net capital
requirements of the Exchange Act and of the laws of any jurisdiction in which
such company conducts business.
(w) Pooling of Interests; Reorganization. As of the date of this
Agreement, the Company has no reason to believe that the Merger will not qualify
as a "pooling of interests" for accounting purposes or as a "reorganization"
under Section 368(a) of the Code.
(x) Derivatives. If the Company and its Subsidiaries had adopted Statement
of Financial Accounting Standards No. 133 ("SFAS 133") as of the date of this
Agreement, each financial instrument or other financial contract held by the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries is a party and that would constitute a "derivative instrument" for
the purposes of SFAS 133 would properly be accounted for by the Company under
SFAS 133 as a "fair value hedge", "cash flow hedge" or "foreign currency hedge"
with respect to the assets or liabilities of the Company or one of its
Subsidiaries.
5.2. Representations and Warranties of Parent. Except as set forth in the
disclosure letter delivered to the Company by Parent on or prior to entering
into this Agreement (the "Parent Disclosure Letter"), Parent hereby represents
and warrants to the Company that (it being understood that the words "to the
Knowledge of Parent" or "Parent's Knowledge" and any words of similar import
shall mean the actual knowledge of the persons whose names are set forth in
Section 5.2(a) of the Parent Disclosure Letter; provided, however, when such
representations and warranties are given as of the Closing Date as conditions to
Closing, such words shall
A-18
<PAGE> 116
mean to the actual knowledge of such persons after reasonable inquiry of others
within Parent and its Subsidiaries):
(a) Organization, Good Standing and Qualification. Each of Parent and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified or in such good standing, when taken together with all other such
failures, is not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect (as defined below). Parent has made available to
the Company a complete and correct copy of the certificate of incorporation and
bylaws or other comparable governing instruments of Parent, each as amended to
date. Parent's certificate of incorporation and bylaws so delivered are in full
force and effect.
As used in this Agreement, the term "Parent Material Adverse Effect" means
a material adverse effect on the financial condition, operations, properties,
business or results of operations of Parent and its Subsidiaries taken as a
whole or an effect which is reasonably likely to prevent, materially delay or
materially impair the ability of Parent to consummate the transactions
contemplated by this Agreement.
(b) Capital Structure. The authorized capital stock of Parent consists of
2,000,000,000 shares of Parent Common Stock, of which 1,050,001,900 shares
outstanding as of the close of business on June 30, 1998 (as adjusted to reflect
the stock split effected as a stock dividend paid July 31, 1998), and 6,000,000
shares of Serial Preferred Stock, par value $5.00 per share (the "Parent
Preferred Stock"), none of which was outstanding as of the close of business on
July 31, 1998. All of the outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable.
(c) Corporate Authority.
(i) Parent has all requisite corporate power and authority and has taken
all corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement and to consummate, subject only to approval of
the Merger by the holders of at least a majority of the outstanding shares of
Parent Common Stock (the "Parent Requisite Vote"), the Merger. This Agreement is
a valid and binding agreement of Parent enforceable against Parent in accordance
with its terms, subject to the Bankruptcy and Equity Exception.
(ii) The Board of Directors of Parent (A) has unanimously adopted the plan
of merger set forth herein and approved this Agreement and the other
transactions contemplated hereby, (B) has declared that the Merger and this
Agreement and the other transactions contemplated hereby are advisable, and (C)
has received the opinion of its financial advisor, Morgan Stanley & Co.,
Incorporated, to the effect that as of the date hereof, the Exchange Ratio is
fair to Parent from a financial point of view.
(iii) Prior to the Effective Time, Parent will have taken all necessary
action to permit it to issue the number of shares of Parent Common Stock
required to be issued pursuant to Article IV. The Parent Common Stock, when
issued, will be validly issued, fully paid and nonassessable, and no shareholder
of Parent will have any preemptive right of subscription or purchase in respect
thereof. The Parent Common Stock, when issued, will be registered under the
Securities Act and Exchange Act and registered or exempt from registration under
any applicable state securities or "blue sky" laws.
(d) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) pursuant to Section 1.3, (B)
under the HSR Act, the Securities Act, the Exchange Act and the Advisers Act,
(C) to comply with state securities or "blue sky" laws, (D) required to be made
with the NYSE, the NASD, the Pacific Exchange, Inc. and other applicable
self-regulatory organizations, applicable state banking authorities and
applicable federal agencies including the Federal Deposit Insurance Corporation
and the Office of Thrift Supervision, and (E) the filing of appropriate
documents with, and, to the extent necessary, approval of, the respective
Commissioners of Insurance of the states of Arizona, California, New York and
the insurance authorities of the Cayman Islands and such notices
A-19
<PAGE> 117
and consents as may be required under the insurance laws of any jurisdiction in
which the Company, Parent or any of their respective subsidiaries is domiciled
or does business, no filings, reports or notices are required to be made by
Parent with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Parent from, any Governmental Entity,
in connection with the execution and delivery of this Agreement by Parent and
the consummation by Parent of the Merger and the other transactions contemplated
hereby, except those that the failure to make or obtain are not, individually or
in the aggregate, reasonably likely to have a Parent Material Adverse Effect.
(ii) The execution, delivery and performance of this Agreement by Parent do
not, and the consummation by Parent of the Merger and the other transactions
contemplated hereby will not, constitute or result in (A) a breach or violation
of, or a default under, the certificate of incorporation or bylaws of Parent or
the comparable governing instruments of any of Parent's Subsidiaries, (B) a
breach or violation of, or a default under, the acceleration of any obligations
or the creation of a lien, pledge, security interest or other encumbrance on the
assets of Parent or any of its Subsidiaries (with or without notice, lapse of
time or both) pursuant to, any Contract binding upon Parent or any of its
Subsidiaries (provided, as to consummation, the filings, reports and notices are
made, and approvals are obtained, as referred to in Section 5.2(e)(i)) or any
Law or governmental or non-governmental permit or license to which Parent or any
of its Subsidiaries is subject or (C) any change in the rights or obligations of
any party under any Contract, except, in the case of clause (B) or (C) above,
for breach, violation, default, acceleration, creation or change that,
individually or in the aggregate, is not reasonably likely to have a Parent
Material Adverse Effect.
(e) Parent Reports; Financial Statements; Undisclosed Liabilities.
(i) Parent has delivered or made available to the Company each registration
statement, report, proxy statement or information statement prepared by it since
December 31, 1995, including (A) Parent's Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Parent Audit Date"), and (B) Parent's
Quarterly Reports on Form 10-Q for the periods ended March 31, 1998 and June 30,
1998, each in the form (including exhibits, annexes and any amendments thereto)
filed with the SEC (collectively, including any such reports filed subsequent to
the date hereof, the "Parent Reports"). As of their respective dates, the Parent
Reports did not, and any Parent Reports filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of Parent and its Subsidiaries as of its date and each of the
consolidated statements of income and of changes in financial position included
in or incorporated by reference into the Parent Reports (including any related
notes and schedules) fairly presents, or will fairly present, the results of
operations, retained earnings and changes in financial position, as the case may
be, of Parent and its Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to notes and normal year-end audit
adjustments that will not be material in amount or effect), in each case in
accordance with U.S. GAAP consistently applied during the periods involved,
except as may be noted therein.
(ii) Except for those liabilities that are fully reflected or reserved
against on the consolidated balance sheet of Parent included in the Parent's
Quarterly Report on Form 10-Q for the period ended June 30, 1998, and for
liabilities incurred in the ordinary course of business consistent with past
practice since June 30, 1998, neither Parent nor any of its Subsidiaries has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that individually or
in the aggregate, has had or is reasonably likely to have a Parent Material
Adverse Effect.
(f) Absence of Certain Changes. Except as disclosed in the Parent Reports
filed prior to the date hereof, since the Parent Audit Date Parent and its
Subsidiaries have conducted the business of Parent and its Subsidiaries, taken
as a whole, only in, and have not engaged in any transaction material to the
Company and its Subsidiaries, taken as a whole, other than according to, the
ordinary and usual course of such business, consistent with past practice and
there has not been (i) any change in the financial condition, operations,
properties, business or results of operations of Parent and its Subsidiaries or
any development or combination
A-20
<PAGE> 118
of developments of which Parent has Knowledge that, individually or in the
aggregate, has had or is reasonably likely to have a Parent Material Adverse
Effect; (ii) any damage, destruction or other casualty loss with respect to any
material asset or property owned, leased or otherwise used by Parent or any of
its Subsidiaries, whether or not covered by insurance or that, individually or
in the aggregate, has had or is reasonably likely to have a Parent Material
Adverse Effect; or (iii) any material change by Parent in accounting principles,
practices or methods other than as required by U.S. GAAP or as disclosed in the
Parent Reports filed prior to the date hereof.
(g) Litigation and Liabilities. Except as disclosed in the Parent Reports
filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations, inquiries or
proceedings pending or, to the Knowledge of Parent, threatened against Parent or
any of its Subsidiaries or (ii) obligations or liabilities of any nature,
whether or not accrued, contingent or otherwise and whether or not required to
be disclosed, including those relating to environmental and occupational safety
and health matters, or any other facts or circumstances of which Parent has
Knowledge that is reasonably likely to result in any claims against, or
obligations or liabilities of, Parent or any of its affiliates, except for those
that are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect.
(h) Compliance with Laws.
(i) The business and operations of each Subsidiary of Parent through which
Parent conducts its insurance operations (collectively, the "Parent Insurance
Subsidiaries") have been conducted in compliance with all applicable Insurance
Laws, except where the failure to so conduct such business and operations would
not individually or in the aggregate have a Parent Material Adverse Effect.
Notwithstanding the generality of the foregoing, except where the failure to do
so would not, individually or in the aggregate, be reasonably likely to have a
Parent Material Adverse Effect, each Parent Insurance Subsidiary and, to
Parent's Knowledge, its agents have marketed, sold and issued insurance products
in compliance, in all material respects, with all Insurance Laws applicable to
the business of such Parent Insurance Subsidiary and such activities and in the
respective jurisdictions in which such products have been sold, including,
without limitation, in compliance with (A) all applicable prohibitions against
withdrawal of business lines, (B) all applicable requirements relating to the
disclosure of the nature of insurance products as policies of insurance and (C)
all applicable requirements relating to insurance product projections and
illustrations. In addition, (X) there is no pending or, to the Knowledge of
Parent, threatened charge by any insurance regulatory authority that any of the
Parent Insurance Subsidiaries has violated, nor any pending or, to the Knowledge
of Parent, threatened investigation by any insurance regulatory authority with
respect to possible violations of, any applicable Insurance Laws where such
violations would, individually or in the aggregate, be reasonably likely to have
a Parent Material Adverse Effect; (Y) none of the Parent Insurance Subsidiaries
is subject to any order or decree of any insurance regulatory authority relating
specifically to such Parent Insurance Subsidiary (as opposed to insurance
companies generally) which would, individually or in the aggregate, be
reasonably likely to have a Parent Material Adverse Effect; and (Z) the Parent
Insurance Subsidiaries have filed all reports required to be filed with any
insurance regulatory authority on or before the date hereof as to which the
failure to file such reports would, individually or in the aggregate, be
reasonably likely to have a Parent Material Adverse Effect.
(ii) Except in each case as is not, individually or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect: (A) In addition to
Insurance Laws, except as set forth in the Parent Reports filed prior to the
date hereof, the businesses of each of Parent and its Subsidiaries have not
been, and are not being, conducted in violation of any Laws; (B) Except as set
forth in the Parent Reports filed prior to the date hereof, no investigation or
review by any Governmental Entity with respect to Parent or any of its
Subsidiaries is pending or, to the Knowledge of Parent, threatened, nor has any
Governmental Entity indicated an intention to conduct the same; (C) To the
Knowledge of Parent, no material change is required in Parent's or any of its
Subsidiaries' processes, properties or procedures in connection with any such
Laws, and Parent has not received any written notice or communication of any
material noncompliance with any such Laws that has not been cured as of the date
hereof; and (D) Parent and its Subsidiaries each has all permits, licenses,
trademarks, patents, trade names, copyrights, service marks, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct its business as presently conducted.
A-21
<PAGE> 119
(i) Year 2000 Compliance. The software and hardware operated by Parent and
the Parent Insurance Subsidiaries are capable of providing or are being adapted
or replaced to provide uninterrupted millennium functionality to record, store,
process and present calendar dates falling on or after January 1, 2000 and date-
dependent data in substantially the same manner and with the same functionality
as such software records, stores, processes and presents such calendar dates and
date-dependent data as of the date hereof, except for the failure to have such
capability which would not, individually or in the aggregate, be reasonably
likely to have a Parent Material Adverse Effect.
(j) Takeover Statutes. No Takeover Statute or any restrictive provision of
any applicable anti-takeover provision in Parent's certificate of incorporation
and bylaws is, or at the Effective Time will be, applicable to Parent, the
Merger or the other transactions contemplated by this Agreement.
(k) Pooling of Interests; Reorganization. As of the date of this
Agreement, Parent has no reason to believe that the Merger will not qualify as a
"pooling of interests" for accounting purposes or as a "reorganization" under
Section 368(a) of the Code.
(l) Separate Operating Company. As of the date hereof, Parent intends to
cause the business of the Company (as operated immediately prior to the
Effective Time) to be operated separately from other Subsidiaries of Parent
following the Effective Time.
ARTICLE VI
COVENANTS
6.1. Company Interim Operations. The Company covenants and agrees as to
itself and each of its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless Parent shall otherwise approve in writing and except as
otherwise expressly contemplated by this Agreement) or as disclosed in Section
6.1 of the Company Disclosure Letter:
(a) its and its Subsidiaries' business shall be conducted in the
ordinary and usual course, consistent with past practice (it being
understood and agreed that nothing contained herein shall permit the
Company to enter into or engage in (through acquisition, product extension
or otherwise) the business of selling any products or services materially
different from existing products or services of the Company and its
Subsidiaries or entering into or engaging in new lines of business without
Parent's prior written approval), and, to the extent consistent therewith,
it and its Subsidiaries shall use their respective best efforts to preserve
its business organization intact and maintain its existing relations and
goodwill with customers, suppliers, reinsurers, distributors, agents,
regulators, creditors, lessors, employees and business associates;
(b) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries except in connection
with the conversion of (x) the Preferred Shares (and the simultaneous
conversion of the Depositary Shares), (y) the Security Units and (z) the
Class B Shares, as described in Section 6.14, Section 6.15, and the Voting
Agreement, respectively; (ii) amend its charter or bylaws or comparable
governing instruments; (iii) split, combine or reclassify its outstanding
shares of stock; (iv) authorize, declare, set aside or pay any dividend
payable in cash, stock or property in respect of any capital stock other
than dividends from its direct or indirect wholly-owned Subsidiaries and
other than regular quarterly cash dividends paid by the Company not in
excess of $0.15 per share and regular dividends and distributions on the
Preferred Shares and the Security Units pursuant to the terms thereof; or
(v) repurchase, redeem or otherwise acquire, except in connection with the
Stock Plans and the conversions referred to in clause (i) of this Section
6.1(b), or permit any of its Subsidiaries to purchase or otherwise acquire,
any shares of its stock or any securities convertible into or exchangeable
or exercisable for any shares of its stock;
(c) neither it nor its Subsidiaries shall (i) issue, sell, pledge,
dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments
or rights or agreements of any kind to acquire, any shares of its capital
stock of any class or any Voting
A-22
<PAGE> 120
Debt or any other property or assets (other than Shares issuable pursuant
to options outstanding on the date hereof under the Stock Plans or upon
conversion of the Preferred Shares (and the simultaneous conversion of the
Depositary Shares), the Security Units or the Class B Shares, as described
in Section 6.14, Section 6.15 and the Voting Agreement, respectively; or
(ii) other than in the ordinary and usual course of business, transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber
any other property or assets (including capital stock of any of its
Subsidiaries) or incur or modify any material indebtedness or other
liability; or (iii) incur any long-term indebtedness (other than
replacement debt as it matures) in excess of $250 million, incur any
short-term indebtedness which is reflected on the Company's balance sheet
(as determined in accordance with U.S. GAAP) at the end of the financial
quarter in which such short-term indebtedness was incurred; or (iv) make or
authorize or commit for any capital expenditures other than in amounts less
than $25 million in the aggregate or, by any means, make any acquisition
of, or investment in, assets or stock of any other Person or entity (other
than in the ordinary course of business) in excess of $50 million;
provided, however, that no such acquisition shall be of a controlling
interest in any other Person;
(d) neither it nor any of its Subsidiaries shall terminate, establish,
adopt, enter into, make any new, or accelerate the vesting or payment of
any existing, grants or awards under, amend or otherwise modify, any
Compensation and Benefit Plans except in the ordinary course of business
consistent with past practice or as may be required by law, or contractual
obligations in effect as of the date of this Agreement, or as contemplated
by this Agreement, or increase the salary, wage, bonus or other
compensation of any employees other than normal base wage and base salary
increases in the ordinary and usual course of business;
(e) neither it nor any of its Subsidiaries shall (i) settle or
compromise any material claims or litigation; (ii) pay, discharge, settle
or satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of claims, liabilities or obligations in
the ordinary and usual course of business and within the amounts reflected
or reserved on the most recent consolidated financial statements contained
in the Company Reports prior to the date hereof; or (iii) except in the
ordinary and usual course of business, modify, amend or terminate any of
its material Contracts or waive, release or assign any material rights or
claims;
(f) neither it nor any of its Subsidiaries shall make any material Tax
election or permit any insurance policy naming it as a beneficiary or
loss-payable payee to be canceled or terminated except in the ordinary and
usual course of business;
(g) neither it nor any of its Subsidiaries shall enter into any
agreement containing any provision or covenant limiting in any material
respect the ability of the Company or any Subsidiary or affiliate to (i)
sell any products or services of or to any other person, (ii) engage in any
line of business or (iii) compete with or to obtain products or services
from any person or limiting the ability of any person to provide products
or services to the Company or any of its Subsidiaries or affiliates;
(h) neither it nor any of its Subsidiaries shall take any action that
would cause any representation or warranty of the Company herein to become
untrue in any material respect; and
(i) neither it nor any of its Subsidiaries shall authorize or enter
into an agreement to do any of the foregoing.
6.2. Acquisition Proposals. The Company will not, and will not permit or
cause any of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to, and shall direct and cause its and its Subsidiaries' employees,
agents and representatives (including any advisor, investment banker, attorney
or accountant retained by it or any of its Subsidiaries) ("Representatives") not
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction involving,
or any purchase of 50% or more of the assets or voting securities of, the
Company and its Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"). The Company will not, and will not
permit or cause any
A-23
<PAGE> 121
of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to and shall direct and cause its and its Subsidiaries' employees,
agents and Representatives not to, directly or indirectly, engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any Person relating to an Acquisition Proposal,
whether made before or after the date of this Agreement, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal; provided,
however, that the Company may, and may authorize and permit its employees,
agents and Representatives to, furnish or cause to be furnished confidential
information and may participate in such negotiations and discussions if the
Board of Directors of the Company determines in good faith (after having
consulted with and considered the advice of outside legal counsel) that such
action is necessary in order for its directors to comply with their respective
fiduciary duties under applicable law. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing. The
Company agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.2 and in the Confidentiality Agreement.
The Company will notify Parent immediately if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
discussions or negotiations are sought to be initiated or continued with, any of
its officers, directors or its Representatives indicating, in connection with
such notice, the name of such Person and the material terms and conditions of
any proposals or offers. The Company also will promptly request each Person that
has heretofore executed a confidentiality agreement in connection with its
consideration of an Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of it or any of its
Subsidiaries.
6.3. Information Supplied. The Company and Parent each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock in the Merger
(including the joint proxy statement and prospectus (the "Joint Proxy
Statement/Prospectus") constituting a part thereof) (the "S-4 Registration
Statement") will, at the time the S-4 Registration Statement becomes effective
under the Securities Act or (ii) the Joint Proxy Statement/Prospectus and any
amendment or supplement thereto will, at the date of mailing to stockholders and
at the times of the meetings of stockholders of Parent and the Company to be
held in connection with the Merger, in either such case 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.
6.4. Stockholders Meeting. Each of Parent and the Company will take, in
accordance with applicable law and its charter and bylaws, all action necessary
to convene a meeting of its respective stockholders (the "Stockholders Meeting")
as promptly as practicable after the S-4 Registration Statement is declared
effective to consider and vote upon the approval of the Merger. Subject to
fiduciary obligations under applicable Law, the Board of Directors of each of
Parent and the Company shall recommend such approval and shall take all lawful
action to solicit such approval.
6.5. Filings; Other Actions; Notification.
(a) Parent and the Company shall promptly prepare and file with the SEC the
Joint Proxy Statement/ Prospectus, and Parent shall prepare and file with the
SEC the S-4 Registration Statement as promptly as practicable. Parent and the
Company each shall use all reasonable efforts to have the S-4 Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing, and promptly thereafter mail the Joint Proxy
Statement/Prospectus to its respective stockholders. Parent shall also use all
reasonable efforts to obtain prior to the effective date of the S-4 Registration
Statement all necessary state securities law or "blue sky" permits and approvals
required in connection with the Merger and to consummate the other transactions
contemplated by this Agreement and will pay all expenses incident thereto.
(b) The Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all reasonable efforts to take
or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on its part under this Agreement and applicable
Laws to consummate
A-24
<PAGE> 122
and make effective the Merger and the other transactions contemplated by this
Agreement and as soon as practicable, including preparing and filing as promptly
as practicable all documentation to effect all necessary notices, reports,
applications and other filings and to obtain as promptly as practicable all
consents, registrations, approvals, permits and authorizations necessary or
advisable to be obtained from any third party and/or any Governmental Entity in
order to consummate the Merger or any of the other transactions contemplated by
this Agreement; provided, however, that nothing in this Section 6.5 shall
require, or be construed to require, Parent or the Company, in connection with
the receipt of any regulatory approval, to proffer to, or agree to (i) sell or
hold separate and agree to sell, divest or to discontinue to or limit, before or
after the Effective Time, any assets, businesses, or interest in any assets or
businesses of Parent, the Company or any of their respective affiliates (or to
consent to any sale, or agreement to sell, or discontinuance or limitation by
Parent or the Company, as the case may be, of any of its assets or businesses)
or (ii) agree to any conditions relating to, or changes or restriction in, the
operations of any such asset or businesses which, in either case, is reasonably
likely to materially and adversely impact the economic or business benefits to
such party of the transactions contemplated by this Agreement. Subject to
applicable Laws relating to the exchange of information, Parent and the Company
shall have the right to review in advance, and to the extent practicable each
will consult the other with respect to all the information relating to Parent or
the Company, as the case may be, and any of their respective Subsidiaries, that
appear in any filing made with, or written materials submitted to, any third
party and/or any Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the Company and Parent shall act reasonably and as promptly as
practicable.
(c) The Company and Parent each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Joint Proxy Statement/Prospectus, the S-4
Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Merger and the transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notice or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Merger and the other transactions contemplated by this Agreement.
The Company and Parent each shall give prompt notice to the other of any change
that, individually or in the aggregate, is reasonably likely to result in a
Company Material Adverse Effect or Parent Material Adverse Effect, respectively.
6.6. Pooling. From and after the date hereof and until the Effective
Time, none of Parent, the Company, or any of their respective Subsidiaries or
other affiliates over which they exercise control, shall knowingly take any
action, or knowingly fail to take any action, that is reasonably likely to
jeopardize the treatment of the Merger as a "pooling of interests" for
accounting purposes.
6.7. Access. Upon reasonable notice, and except as may otherwise be
required by applicable law, the Company shall (and shall cause its Subsidiaries
to) afford Parent's officers, directors or Representatives access, during normal
business hours throughout the period prior to the Effective Time, to the
Company's and its Subsidiaries' properties, books, contracts and records and,
during such period, shall (and shall cause its Subsidiaries to) furnish promptly
to the other all information concerning the Company's and its Subsidiaries'
business, properties and personnel as may reasonably be requested, provided that
no investigation pursuant to this Section shall affect or be deemed to modify
any representation or warranty made by the Company and provided, further, that
the foregoing shall not require the Company to permit any inspection, or to
disclose any information, that in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third parties or violate any of
its obligations with respect to confidentiality if the Company shall have used
all reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant to this
Section shall be directed to an executive officer of the Company or such Person
as may be designated by either of the Company's officers. All such information
shall be governed by the terms of the Confidentiality Agreement (as defined in
Section 9.7).
A-25
<PAGE> 123
6.8. Affiliates. Not later than the fifteenth day prior to the mailing of
the Joint Proxy Statement/ Prospectus, (i) the Company shall deliver to Parent a
list of names and addresses of those Persons who are, in the opinion of the
Company, as of the time of the Stockholders Meeting referred to in Section 6.4,
"affiliates" of the Company within the meaning of Rule 145 under the Securities
Act and for the purposes of applicable interpretations regarding the pooling of
interests method of accounting, and (ii) Parent shall deliver to the Company a
list of names and addresses of those Persons who are, in the opinion of Parent,
as of the time of the Stockholders Meeting referred to in Section 6.4,
"affiliates" of Parent for the purposes of applicable interpretations regarding
the pooling of interests method of accounting. There shall be added to such list
the names and addresses of any other Person subsequently identified by either
Parent or the Company, as the case may be, as a Person who may be deemed to be
such an affiliate; provided, however, that no such Person identified by Parent
or the Company, as the case may be, shall remain on such list of affiliates if
Parent or the Company, as the case may be, shall receive from the other party,
on or before the date of the Stockholders Meeting, an opinion of counsel
reasonably satisfactory to Parent or the Company, as the case may be, to the
effect that such Person is not such an affiliate. Parent or the Company, as the
case may be, shall exercise its best efforts to deliver or cause to be delivered
to the other party, prior to the date of the Stockholders Meeting, from each
such affiliate identified in the foregoing lists (as the same may be
supplemented as aforesaid) a letter dated as of the Stockholders Meeting
substantially in the form attached as Exhibit A-1 in the case of clause (i)
above and in the form attached as Exhibit A-2 in the case of clause (ii) above
(collectively, the "Affiliates Letter"). Parent shall use its reasonable best
efforts to publish, not later than 45 days after the end of the month in which
the Effective Time occurs, financial results covering at least 30 days of
post-Merger combined operations as contemplated by and in accordance with the
terms of SEC Accounting Series Release 135. Parent shall not be required to
maintain the effectiveness of the S-4 Registration Statement or any other
registration statement under the Securities Act for the purposes of resale of
Parent Common Stock by such affiliates received in the Merger and the
certificates representing Parent Common Stock received by such affiliates shall
bear a customary legend regarding applicable Securities Act restrictions and the
provisions of this Section.
6.9. Stock Exchange Listing and De-listing. Parent shall use its best
efforts to cause the shares of Parent Common Stock to be issued in the Merger to
be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date. The Surviving Corporation shall use its best efforts
to cause the Common Shares, the Depositary Shares and the Security Units to be
de-listed from the NYSE and the Pacific Exchange, Inc. and de-registered under
the Exchange Act as soon as practicable following the Effective Time.
6.10. Publicity. The initial press release shall be a joint press release
and thereafter the Company and Parent each shall consult with each other prior
to issuing any press releases or otherwise making public announcements with
respect to the Merger and the other transactions contemplated by this Agreement
and prior to making any filings with any third party and/or any Governmental
Entity (including any national securities exchange) with respect thereto, except
as may be required by law or by obligations pursuant to any listing agreement
with or rules of any national securities exchange.
6.11. Benefits.
(a) Stock Options and Other Awards.
(i) At the Effective Time, each Company Option whether vested or unvested,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Option, the same number of
shares of Parent Common Stock as the holder of such Company Option would have
been entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time (rounded to the nearest
whole number), at a price per share (rounded to the nearest whole cent) equal to
(y) the aggregate exercise price for the Common Shares otherwise purchasable
pursuant to such Company Option divided by (z) the number of full shares of
Parent Common Stock deemed purchasable pursuant to such Company Option in
accordance with the foregoing; provided, however, that in the case of any
Company Option to which Section 422 of the Code applies, the option price, the
number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in accordance with the
foregoing, subject to such adjustments as are necessary in order to satisfy
A-26
<PAGE> 124
the requirements of Section 424(a) of the Code. At or prior to the Effective
Time, the Company shall make all necessary arrangements with respect to the
Stock Plans to permit the assumption of the unexercised Company Options by
Parent pursuant to this Section.
(ii) Effective at the Effective Time, Parent shall assume each Company
Option in accordance with the terms of the relevant Stock Plan under which it
was issued and the stock option agreement by which it is evidenced. At or prior
to the Effective Time, Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Company Options assumed by it in accordance with this
Section. As soon as practicable after the Effective Time, Parent shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form (or shall
cause such Company Option to be deemed to be an option issued pursuant to a
Parent Stock Plan for which shares of Parent Common Stock have previously been
registered pursuant to an appropriate registration form) with respect to the
Parent Common Stock subject to such Company Options, and shall use its best
efforts to maintain the effectiveness of such registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such Company Options remain outstanding.
(iii) At the Effective Time, each other right with respect to the Common
Shares (a "Company Award"), whether vested or unvested, shall be deemed to
constitute a right to receive or acquire, on the same terms and conditions as
were applicable under the Company Award, the same number of shares of Parent
Common Stock as the holder of such Company Award would have been entitled to
receive pursuant to the Merger had such holder received such Company Award in
full immediately prior to the Effective Time (rounded to the nearest whole
number). Effective at the Effective Time, Parent shall assume each Company Award
in accordance with the terms of the relevant Stock Plan under which it was
issued and the award agreement by which it is evidenced. At or prior to the
Effective Time, Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock with respect to
the Company Awards assumed by it in accordance with this Section 6.11(a).
(b) Employee Benefits.
(i) Parent agrees that, during the period commencing at the Effective Time
and ending on the first anniversary thereof, the employees of the Company and
its Subsidiaries (the "Company Employees") will continue to be provided with
benefits under employee benefit plans (other than plans involving the issuance
of Shares) that are substantially similar in the aggregate than those currently
provided by the Company and its Subsidiaries to such employees.
(ii) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, recognize each Company Employee's service with the
Company and any of its Subsidiaries, including any service credit with other
entities acquired by the Company and its Subsidiaries (to the extent recognized
under the Compensation and Benefit Plans), prior to the Effective Time, as
service with the Surviving Corporation in connection with (A) any welfare
benefit plan for all purposes (other than benefit levels or amounts) and (B) any
pension plan for purposes of eligibility, vesting and benefit entitlement (but
not benefit accruals or the amount or level of employer contributions), in which
such Company Employee is eligible to participate following the Effective Time.
From and after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, (Y) cause any pre-existing condition or limitation and any
eligibility waiting periods (to the extent such limitations or waiting periods
did not apply to the Company Employees under the Compensation and Benefit Plans)
under any group health plans of Parent or any of its Subsidiaries to be waived
with respect to Company Employees and their eligible dependents and (Z) to give
each Company Employee credit for the plan year in which the Effective Time
occurs towards applicable deductibles and annual out-of-pocket limits for
expenses incurred prior to the Effective Time (or such later date on which
participation commences) during the applicable plan year.
(iii) Parent shall, and shall cause the Surviving Corporation to, honor all
employee benefit obligations to current and former employees under the
Compensation and Benefit Plans and all employee severance plans (or policies) in
existence on the date hereof, all employment or severance agreements entered
into by the Company or adopted by the Board of Directors of the Company prior to
the date hereof and all employment
A-27
<PAGE> 125
agreements and amendments thereto authorized by the Board of Directors on or
prior to the date hereof and set forth on Section 5.1(h) of the Company
Disclosure Letter and the other actions set forth on or permitted by Section
5.1(h) of the Company Disclosure Letter. Nothing herein shall prevent Parent
from terminating any Compensation and Benefit Plan (other than any Company
severance plan or policy prior to the first anniversary of the Effective Time)
in accordance with their terms and subject to applicable law.
(iv) Prior to the Effective Time, the Company shall take such actions as
may be necessary such that each outstanding limited stock appreciation right
under the Stock Plans does not become exercisable with respect to the
transactions contemplated by this Agreement.
(v) The Company agrees to take such actions as may be necessary to provide
that the exercise date in respect of the offering period under the Company's
1997 Employee Stock Purchase Plan (the "1997 ESPP") in which falls the Effective
Time shall be accelerated, and all unexercised options granted in respect of
such offering period shall be exercised immediately prior to the Effective Time.
The Company further agrees to take all such actions as may be necessary to
terminate the 1997 ESPP as of the Effective Time and in connection therewith
cease all further offerings and payroll deductions under the 1997 ESPP.
6.12. Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV. Except as otherwise provided in Section
8.4(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense, except that expenses incurred in connection with the filing fee
for the S-4 Registration Statement and printing and mailing the Joint Proxy
Statement/Prospectus and the S-4 Registration Statement shall be shared equally
by Parent and the Company.
6.13. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent agrees that it will (to the
fullest extent permitted by Delaware law and the Charter) indemnify and hold
harmless each present and former director and officer of the Company (when
acting in such capacity) determined as of the Effective Time (the "Indemnified
Parties") against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted under Maryland law and its
charter or bylaws in effect on the date hereof to indemnify such Person (and
Parent shall also advance expenses as incurred to the fullest extent permitted
under applicable law, provided the Person to whom expenses are advanced provides
(i) a written affirmation of his or her good faith belief that the standard of
conduct necessary for indemnification has been met, and (ii) an undertaking to
repay such advances if it is ultimately determined that such Person is not
entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.13, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
or the Surviving Corporation shall have the right to assume the defense thereof
and Parent shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
Parent or the Surviving Corporation elects not to assume such defense or counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Parent or the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that Parent shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (ii) the
A-28
<PAGE> 126
Indemnified Parties will cooperate in the defense of any such matter and (iii)
Parent shall not be liable for any settlement effected without its prior written
consent, which Parent will not unreasonably withhold; and provided, further,
that Parent shall not have any obligation hereunder to any Indemnified Party if
and when a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(c) The Surviving Corporation shall maintain a policy of officers' and
directors' liability insurance for acts and omissions occurring prior to the
Effective Time with coverage in amount and scope at least as favorable as the
Company's existing directors' and officers' liability insurance coverage ("D&O
Insurance") for a period of four years after the Effective Time so long as the
annual premium therefor is not in excess of 150% of the last annual premium paid
prior to the date hereof (the "Current Premium"); provided, however, if the
existing D&O Insurance expires, is terminated or cancelled during such four year
period, the Surviving Corporation will use all reasonable efforts to obtain D&O
Insurance for the remainder of such period for a premium not in excess (on an
annualized basis) of 150% of the Current Premium.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
6.14. Preferred Shares and Depositary Shares. The Company shall take all
necessary action to call for redemption all of the outstanding Preferred Shares
and Depositary Shares (and shall comply with all provisions relating thereto,
including the notice provisions thereof) so that such securities are redeemed
prior to or on October 31, 1998 and shall deliver to the holders thereof in
exchange therefor Common Shares in accordance with the terms thereof.
6.15. Security Units. The Company shall take all necessary action to call
for redemption all of the outstanding Security Units (and shall comply with all
provisions relating thereto, including the notice provisions thereof) so that
such securities are redeemed prior to or on the day prior to the Effective Time
and shall deliver to the holders thereof in exchange therefor Common Shares in
accordance with the terms thereof.
6.16. Other Actions by the Company and Parent.
(a) Takeover Statute. If any Takeover Statute is or may become applicable
to the Merger or the other transactions contemplated by this Agreement or the
Voting Agreement, each of Parent and the Company and its Board of Directors
shall grant such approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement, or the Voting Agreement or by the Merger, as the
case may be, and otherwise act to eliminate or minimize the effects of such
statute or regulation on such transactions.
(b) Dividends. The Company shall coordinate with Parent the declaration,
setting of record dates and payment dates of dividends on Common Shares so that
holders of Common Shares do not receive dividends on both Common Shares and
Parent Common Stock received in the Merger in respect of any calendar quarter or
fail to receive a dividend on either Common Shares or Parent Common Stock
received in the Merger in respect of any calendar quarter.
6.17. Compliance with 1940 Act Section 15.
(a) Prior to the Closing, the Company shall use all commercially reasonable
efforts to ensure compliance with Section 15(f) of the 1940 Act, so that the
transactions contemplated by this Agreement will be in compliance at the Closing
with Section 15(f) of the 1940 Act, including, to assure that at the time of the
Closing at least 75% of the Board of Directors or Trustees of each Fund Client
are not "interested persons" (as such term is defined in the 1940 Act) of the
Surviving Corporation or the Company.
(b) Parent will use all commercially reasonable efforts to assure
compliance with the conditions of Section 15(f) of the 1940 Act as it applies to
the transactions contemplated by the Agreement. From and after
A-29
<PAGE> 127
the Closing, Parent shall conduct the business of the Surviving Corporation, so
as to assure that, insofar as within the control of Parent:
(i) for a period of three years after the Closing Date, at least 75%
of the members of the Board of Directors or Trustees of each Fund Client
which enters into a replacement Investment Contract with an Advisory Entity
that constitutes an investment advisory agreement are not (A) "interested
persons" of the Surviving Corporation, or (B) "interested persons" of the
Company; and
(ii) there is not imposed on any Fund Client an "unfair burden"
(within the meaning of Section 15(f) of the 1940 Act) as a result of the
transactions contemplated by this Agreement, or any express or implied
terms, conditions or understandings applicable thereto.
6.18. Fund Client Contracts. The Company shall use its best efforts to
cause (a) the consideration and due approval by the Board of Directors of each
Fund Client, (b) to the extent required by the 1940 Act, the consideration and
due approval by such Fund Client's securityholder, of a new Investment Contract
(or, where permitted, approval of continuation of the existing Investment
Contract) with the same Advisory Entity (or in the case of the Company, the
Surviving Corporation) to become effective upon the Closing, in each case, on
the same material terms as in effect on the date hereof under such Investment
Contract for the performance by the relevant Advisory Entity of investment
management, investment advisory, investment subadvisory, distribution or
administration services and (c) to the extent necessary, the preparation and
filing of an application with the SEC for exemptive relief under Section 15(a)
of the 1940 Act to permit each Fund Client to operate under such new Investment
Contract prior to such securityholder approval.
6.19. Non-Fund Advisory Contracts. The Company or relevant Advisory
Entity shall notify each Client other than Fund Clients (an "Advisory Client")
of the transactions contemplated by this Agreement and use its best efforts to
obtain, prior to the Closing, the consent of each Advisory Client to the
"assignment" (as such term is used in the Advisers Act) of its Investment
Contract involving investment advisory services as a result of the transactions
contemplated hereby in a form reasonably satisfactory to Parent. The Company and
Advisory Entity shall consult with Parent regarding all written communications
with Advisory Clients concerning the obtaining of such assignments.
6.20. Qualification of the Fund Clients; Fund Client Boards. Subject to
applicable fiduciary duties to the Fund Clients, the Company will use its best
efforts to cause the Fund Clients to take no action (i) that would prevent any
Fund Client from qualifying as a "regulated investment company", within the
meaning of Section 851 of the Code, or (ii) that would be inconsistent with any
Fund Client's prospectus and other offering, advertising and marketing
materials.
6.21. Board of Directors of Parent. At the Effective Time, Parent shall
cause to be elected to the Board of Directors of Parent two (2) persons to be
designated by the Company and reasonably acceptable to Parent.
6.22. Delivery of Disclosure Information. As promptly as practicable
following the date of this Agreement, the Company will deliver to Parent those
Sections of the Company Disclosure Letter as contemplated in Section 5.1 and, in
each case, such disclosure shall be identified by the corresponding sections or
subsections of Section 5.1 to which such disclosure relates, it being hereby
agreed by the parties hereto that such disclosure information shall not modify
any of the Company's representations set forth in Section 5.1 and shall not be
taken into account for purposes of determining whether Section 7.2(a) has been
satisfied.
6.23. SunAmerica Inc. The Company shall cooperate with Parent and take
all steps reasonably necessary to protect and if necessary to assign to Parent,
all of the Company's right, title and interest in and to, the Intellectual
Property associated with SunAmerica Inc.
6.24. Thrift Application. At the request of Parent, the Company shall
promptly withdraw any applications made to any applicable regulatory authority
to convert Resources Trust Company to a thrift.
A-30
<PAGE> 128
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted and
the Merger shall have been duly approved by the holders of Common Shares
and Class B Shares constituting the Company Requisite Vote and by the
holders of Parent Common Stock constituting the Parent Requisite Vote.
(b) NYSE Listing. The shares of Parent Common Stock issuable to the
Company stockholders pursuant to this Agreement shall have been authorized
for listing on the NYSE upon official notice of issuance.
(c) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act and applicable Insurance Laws
shall have expired or been terminated, and, other than the filing provided
for in Section 1.3, all notices, reports and other filings required to be
made prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries with, and all consents, registrations, approvals,
permits and authorizations required to be obtained prior to the Effective
Time by the Company or Parent or any of their respective Subsidiaries or
affiliates (as such term is defined in the Exchange Act) from any
Governmental Entity (collectively, "Governmental Consents"), in connection
with the execution and delivery of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby shall have been
made or obtained (as the case may be).
(d) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any law, statute, ordinance, rule, regulation, judgment, decree, injunction
or other order (whether temporary, preliminary or permanent) that is in
effect and restrains, enjoins or otherwise prohibits consummation of the
Merger (collectively, an "Order"), and no Governmental Entity shall have
instituted any proceeding or threatened to institute any proceeding seeking
any such Order.
(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the
S-4 Registration Statement shall have been issued, and no proceeding for
that purpose shall have been initiated or be threatened, by the SEC.
(f) Blue Sky Approvals. Parent shall have received all state
securities and "blue sky" permits and approvals, if any, necessary to
consummate the transactions contemplated hereby.
(g) Pooling of Interests. The Company and Parent shall each have
received a letter from their respective independent accountants addressed
to the Company or Parent, as the case may be, to the effect that the Merger
will qualify for "pooling of interests" accounting treatment.
(h) Affiliates Letters. Each of Parent and the Company shall have
received an Affiliates Letter from each Person identified as an affiliate
of the other pursuant to Section 6.8.
7.2. Conditions to Obligations of Parent. The obligations of Parent to
effect the Merger are also subject to the satisfaction or waiver by Parent at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct (without giving effect to any qualifications as to "Company
Material Adverse Effect", "material" or similar qualifications) as of the
date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date (except to the extent any such representation or
warranty expressly speaks as of an earlier date) except, in either case,
where the failure of such representations and warranties to be so true and
correct (without giving effect to any qualifications as to "Company
Material Adverse Effect", "material" or similar qualifications) would not,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect, and
A-31
<PAGE> 129
Parent shall have received a certificate signed on behalf of the Company by
the Chairman and Chief Executive Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the
Chairman, President and Chief Executive Officer of the Company to such
effect.
(c) Consents. The Company shall have obtained the consent or approval
of each Person whose consent or approval shall be required under any
Contract to which the Company or any of its Subsidiaries is a party, except
those for which the failure to obtain such consents or approvals, is not,
individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect; and no such consent or approval, and no
Governmental Consent shall impose any condition or conditions relating to,
or requiring changes or restrictions in, the operations of any asset or
businesses of the Company, Parent or their respective Subsidiaries which is
reasonably likely to materially and adversely impact the economic or
business benefits to Parent and its Subsidiaries of the transactions
contemplated by this Agreement.
(d) Tax Opinion. Parent shall have received the opinion of Sullivan &
Cromwell, counsel to Parent, dated the Closing Date, to the effect that (i)
the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) each
of Parent and the Company will be a party to that reorganization within the
meaning of Section 368(b) of the Code, and (iii) no gain or loss will be
recognized by the stockholders of the Company who exchange all of their
Common Shares solely for shares of Parent Common Stock pursuant to the
Merger (except with respect to any cash received in lieu of a fractional
share interest in Parent Common Stock). In rendering such opinion, Sullivan
& Cromwell may rely upon and require such certificates of the Company and
Parent and/or their officers or principal stockholders as are customary for
such opinions.
(e) Client Approvals. The approvals contemplated in Sections 6.18 and
6.19 shall have been obtained for Fund Clients and Advisory Clients
representing at least 80% of the total assets, as of the date hereof,
subject to Investment Contracts with all of the Company's Fund Clients and
Advisory Clients.
7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent set forth in this Agreement shall be true and correct
(without giving effect to any qualifications as to "Parent Material Adverse
Effect", "material" or similar qualifications) as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent any such representation or warranty
expressly speaks as of an earlier date) except, in either case, where the
failure of such representations and warranties to be so true and correct
(without giving effect to any qualifications as to "Parent Material Adverse
Effect", "material" or similar qualifications) would not, individually or
in the aggregate, be reasonably likely to have a Parent Material Adverse
Effect, and the Company shall have received a certificate signed on behalf
of Parent by an executive officer of Parent to such effect.
(b) Performance of Obligations of Parent. Parent shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Parent by an executive
officer of Parent to such effect.
(c) Consents Under Agreements. Parent shall have obtained the consent
or approval of each Person whose consent or approval shall be required in
order to consummate the transactions contemplated by this Agreement under
any Contract to which Parent or any of its Subsidiaries is a party, except
those for which failure to obtain such consents or approvals is not,
individually or in the aggregate, reasonably likely to have a Parent
Material Adverse Effect.
A-32
<PAGE> 130
(d) Tax Opinion. The Company shall have received the opinion of
Wachtell, Lipton, Rosen & Katz, counsel to the Company, dated the Closing
Date, to the effect that (i) the Merger will be treated for Federal income
tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, (ii) each of Parent and the Company will be a party to that
reorganization within the meaning of Section 368(b) of the Code, and (iii)
no gain or loss will be recognized by the stockholders of the Company who
exchange all of their Common Shares solely for shares of Parent Common
Stock pursuant to the Merger (except with respect to any cash received in
lieu of a fractional share interest in Parent Common Stock). In rendering
such opinion, Watchell, Lipton, Rosen & Katz may rely upon and require such
certificates of the Company and Parent and/or their officers or principal
stockholders as are customary for such opinions.
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent referred
to in Section 7.1(a), by mutual written consent of the Company and Parent by
action of their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned (i) by action of the Board of
Directors of either Parent or the Company if the Merger shall not have been
consummated by June 30, 1999, whether such date is before or after the date of
approval by the stockholders of the Company (the "Termination Date"), (ii) by
action of the Board of Directors of either Parent or the Company if the Company
Requisite Vote shall not have been obtained at a meeting duly convened therefor
or at any adjournment or postponement thereof, (iii) by action of the Board of
Directors of either Parent or the Company if the Parent Requisite Vote shall not
have been obtained at a meeting duly convened therefore or at any adjournment or
postponement thereof, (iv) at any time prior to the Effective Time (provided
that the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein), by action of the Board
of Directors of either Parent or the Company, as the case may be, in the event
of any of (A) a breach by the other party of any representation or warranty
contained herein (subject to the standard set forth in Section 7.2(a) or 7.3(a),
as the case may be), which breach cannot be or has not been cured within 20 days
after the giving of written notice to the breaching party of such breach; (B) a
material breach by the other party of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within 20 days
after the giving of written notice to the breaching party of such breach; or (C)
a Company Material Adverse Effect exists (in which case Parent may terminate
this Agreement) or a Parent Material Adverse Effect exists (in which case the
Company may terminate this Agreement), or (v) by action of the Board of
Directors of either Parent or the Company if any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger shall become final
and non-appealable (whether before or after the approval by the stockholders of
the Company or Parent); provided, that the right to terminate this Agreement
pursuant to clause (i) above shall not be available to any party that has
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of the Merger to be consummated.
8.3. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by the stockholders of Parent referred to in Section
7.1(a), by action of the Board of Directors of Parent if the Board of Directors
of the Company shall have withdrawn or adversely modified its approval or
recommendation of this Agreement contemplated by Section 6.4 or failed to
reconfirm such recommendation of this Agreement within five business days after
a written request by Parent to do so.
8.4. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VIII, this Agreement (other than as set
forth in Section 9.1) shall become void and of no effect with
A-33
<PAGE> 131
no liability on the part of any party hereto (or of any of its directors,
officers, employees, agents, legal and financial advisors or other
representatives); provided, however, except as otherwise provided herein, no
such termination shall relieve any party hereto of any liability or damages
resulting from any breach of this Agreement.
(b) In the event that this Agreement is terminated by Parent or the Company
pursuant to Section 8.2(i), Section 8.2(ii) or Section 8.3 and, prior to the
date of such termination, any Person (other than Parent) has made to the Company
or any of its Subsidiaries a bona fide Acquisition Proposal or shall have
publicly announced an intention (whether or not conditional) to make a proposal
or offer relating to an Acquisition Proposal, then the Company shall pay Parent,
no later than two days after the earlier to occur of (i) the date of entrance by
the Company or any of its Subsidiaries into an agreement concerning a
transaction that constitutes an Acquisition Proposal or (ii) the date any Person
(other than Parent) purchases 50% or more of the assets or any voting securities
of the Company and its Subsidiaries (provided that the entering of any
definitive agreement referred to in clauses (i) and (ii) of this sentence is
entered into by the Company or any of its Subsidiaries, or if there is no such
agreement with respect to a purchase contemplated by clause (ii), any tender,
exchange or other offer or arrangement for the Company's voting securities is
first publicly disclosed, within 18 months of such termination of this
Agreement), a termination fee of $500 million. In the event that this Agreement
is terminated by Parent or the Company pursuant to Section 8.2(iii), then Parent
shall pay the Company, no later than two days after this Agreement has been
terminated, a termination fee of $500 million.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Survival. This Article IX and the agreements of the Company and
Parent contained in Sections 6.9 (Stock Exchange Listing and De-listing), 6.11
(Benefits) and 6.13 (Indemnification; Directors' and Officers' Insurance) shall
survive the consummation of the Merger. This Article IX, the agreements of the
Company and Parent contained in Section 6.12 (Expenses), Section 8.4 (Effect of
Termination and Abandonment) and the Confidentiality Agreement shall survive the
termination of this Agreement. All other representations, warranties, covenants
and agreements in this Agreement shall not survive the consummation of the
Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of the
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties
hereby irrevocably submit to the jurisdiction of the courts of the State of New
York and the Federal courts of the United States of America located in the State
of New York solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby, and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such
A-34
<PAGE> 132
action or proceeding shall be heard and determined in such a New York State or
Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 9.6 or in such other
manner as may be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
9.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent
70 Pine Street,
New York, New York 10270.
Attention: General Counsel
facsimile: (212) 514-6894
(with a copy to Neil T. Anderson, Esq.,
Sullivan & Cromwell,
125 Broad Street, New York, NY 10004.
facsimile: (212) 558-3588.)
if to the Company
1999 Avenue of the Stars, 38th Floor,
Los Angeles, California 90067.
Attention: General Counsel
facsimile: (310) 772-6565
(with a copy to Craig Wasserman, Esq.,
Wachtell, Lipton, Rosen & Katz,
51 West 52nd Street,
New York, New York 10019.
facsimile: (212) 403-2000)
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. Entire Agreement; No Other Representations. This Agreement
(including any exhibits hereto), the Company Disclosure Letter, the Parent
Disclosure Letter, the Confidentiality Agreement, dated July 27, 1998, between
Parent and the Company (the "Confidentiality Agreement") constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
A-35
<PAGE> 133
9.8. No Third Party Beneficiaries. Except as provided in Section 6.13
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.12. Assignment. This Agreement shall not be assignable by operation of
law or otherwise.
9.13. Right to Revise Form of Merger. Notwithstanding anything to the
contrary contained in this Agreement, the parties may mutually agree to revise
the form of the Merger to the extent they determine such a change to be
desirable to provide for a forward or reverse merger of the Company with a newly
formed wholly owned subsidiary of Parent, provided any such change does not
affect the consideration to be received by holders of the Common Shares, cause
any material delay in the consummation of the Merger or adversely affect the
ability of the Merger to qualify as a reorganization under the provisions of
Section 368(a) of the Code.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
SUNAMERICA INC.
By: /s/ ELI BROAD
------------------------------------
Name: Eli Broad
Title: Chairman, President and Chief
Executive Officer
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ M. R. GREENBERG
------------------------------------
Name: M. R. Greenberg
Title: Chairman and Chief Executive
Officer
A-36
<PAGE> 134
APPENDIX B
<PAGE> 135
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is entered into as of August 19,
1998, between the undersigned stockholder (the "Stockholder") of SunAmerica
Inc., a Maryland corporation (the "Company"), and American International Group,
Inc., a Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company and Parent have entered into an Agreement and Plan of Merger dated
as of August 19, 1998 (the "Merger Agreement"), providing for the merger of the
Company with and into Parent (the "Merger") pursuant to the terms and conditions
of the Merger Agreement, and setting forth certain representations, warranties,
covenants and agreements of the parties thereto in connection with the Merger;
and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which the Stockholder will receive the Merger
Consideration (as defined in the Merger Agreement) in exchange for each share of
Common Stock, par value $1.00 per share, of the Company (the "Common Stock")
owned by him, the Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. Representations of Stockholder. The Stockholder represents that such
Stockholder:
(a) is the beneficial owner of that number of shares of Common Stock
and that number of shares of Non-Transferable Class B Stock, par value
$1.00 per share, of the Company (together with the Transferable Class B
Stock, par value $1.00 per share, of the Company (the "Transferable Class B
Stock"), the "Class B Stock") set forth opposite such Stockholder's name on
Exhibit A (such Stockholder's "Shares");
(b) does not beneficially own (as such term is defined in the
Securities Exchange Act of 1934, as amended (the "1934 Act")) any shares of
Common Stock or Class B Stock for which such Stockholder has the sole
authority to vote other than his Shares, but excluding any shares of Common
Stock or Class B Stock which such Stockholder has the right to obtain upon
the exercise of stock options outstanding on the date hereof; and
(c) has the right, power and authority to execute and deliver this
Agreement and to perform his obligations under this Agreement, and this
Agreement has been duly executed and delivered by such Stockholder and
constitutes a valid and legally binding agreement of such Stockholder,
enforceable in accordance with its terms; and such execution, delivery and
performance by Shareholder of this Agreement will not (i) conflict with,
require a consent, waiver or approval under, or result in a breach of or
default under, any of the terms of any contract, commitment or other
obligation (written or oral) to which such Stockholder is a party or by
which such Stockholder is bound; (ii) violate any order, writ, injunction,
decree or statute, or any rule or regulation, applicable to Stockholder or
any of the properties or assets of Stockholder; or (iii) result in the
creation of, or impose any obligation on such Stockholder to create, any
lien, charge or other encumbrance of any nature whatsoever upon the Shares.
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated or this Agreement is terminated in accordance
with its terms.
2. Agreement to Convert Class B Shares; Agreement to Vote Shares.
(a) The Stockholder shall convert immediately prior to the Effective
Time (as defined in the Merger Agreement) each share of Class B Stock held
by him into one fully paid and nonassessable share of Common Stock, in
accordance with the terms of the Class B Stock as set forth in the Articles
of Restated Charter, dated October 3, 1991, as amended, of the Company.
(b) The Stockholder shall vote his Shares and any New Shares (as
defined in Section 6 hereof), and shall cause any holder of record of his
Shares or New Shares to vote, in favor of adoption and approval of the
Merger Agreement and the Merger (and each other action and transaction
contemplated by the
B-1
<PAGE> 136
Merger Agreement or by this Agreement) at every meeting of the stockholders
of the Company at which any such matters are considered and at every
adjournment thereof. Any such vote shall be cast or consent shall be given
in accordance with such procedures relating thereto as shall ensure that it
is duly counted for purposes of determining that a quorum is present and
for purposes of recording the results of such vote or consent. The
Stockholder shall deliver to Parent upon request a proxy substantially in
the form attached hereto as Exhibit B, which proxy shall be coupled with an
interest and irrevocable to the extent permitted under Maryland law, with
the total number of such Stockholder's Shares and any New Shares correctly
indicated thereon. The Stockholder shall also use his reasonable efforts to
take, or cause to be taken, all action, and do, or cause to be done, all
things necessary or advisable in order to consummate and make effective the
transactions contemplated by this Agreement.
3. No Voting Trusts. After the date hereof, the Stockholder agrees that
he will not, nor will he permit any entity under his control to, deposit any
Shares in a voting trust or subject any Shares to any agreement, arrangement or
understanding with respect to the voting of such Shares other than agreements
entered into with Parent.
4. Additional Purchases. The Stockholder agrees that in the event (a) of
any stock dividend, stock split, recapitalization, reclassification, combination
or exchange of shares of stock of the Company on, of or affecting the Shares of
such Stockholder, (b) such Stockholder purchases or otherwise acquires
beneficial ownership of any shares of Common Stock or Class B Stock after the
execution of this Agreement (including by conversion), or (c) such Stockholder
voluntarily acquires the right to vote or share in the voting of any shares of
Common Stock or Class B Stock other than the Shares (collectively, "New
Shares"), such Stockholder shall deliver promptly to Parent upon request an
irrevocable proxy substantially in the form attached hereto as Exhibit B with
respect to such New Shares. The Stockholder also agrees that any New Shares
acquired or purchased by him shall be subject to the terms of this Agreement and
shall constitute Shares to the same extent as if they were owned by such
Stockholder on the date hereof.
5. Affiliates Letter. The Stockholder shall execute and deliver on a
timely basis a letter agreement in the form of Exhibit A-1 to the Merger
Agreement, when and if requested by Parent prior to the Effective Time (as
defined in the Merger Agreement).
6. Specific Performance. Each party hereto severally acknowledges that it
will be impossible to measure in money the damage to the other party if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other party will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that the other party has an adequate remedy at law. Each
party hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
7. Heirs, Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns and shall not be assignable without the written consent
of all other parties hereto.
8. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by all the parties hereto. No waiver of any
provisions hereof by any party shall be deemed a waiver of any other provisions
hereof by any such party, nor shall any such waiver be deemed a continuing
waiver of any provision hereof by such party.
9. Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of New
York.
B-2
<PAGE> 137
(b) If any provision of this Agreement or the application of such provision
to any person or circumstances shall be held invalid by a court of competent
jurisdiction, the remainder of the provision held invalid and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, shall not be affected.
(c) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(d) This Agreement shall terminate upon the earlier to occur of (i) the
Effective Time (as defined in the Merger Agreement) or (ii) termination of the
Merger Agreement in accordance with its terms.
(e) All Section headings herein are for convenience of reference only and
are not part of this Agreement, and no construction or reference shall be
derived therefrom.
(f) The obligations of the Stockholder set forth in this Agreement shall
not be effective or binding upon such Stockholder until after such time as the
Merger Agreement is executed and delivered by the Company and Parent.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ M. R. GREENBERG
------------------------------------
Name: M. R. Greenberg
Title: Chairman and Chief Executive
Officer
THE STOCKHOLDER:
/s/ ELI BROAD
--------------------------------------
ELI BROAD
B-3
<PAGE> 138
EXHIBIT A
STOCKHOLDER
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OF SHARES OF TYPE OF
NAME COMMON STOCK CLASS B STOCK OWNERSHIP
---- ------------ ------------- ---------
<S> <C> <C> <C> <C>
1. Eli Broad....................................... 3,634,605 13,340,591
</TABLE>
B-4
<PAGE> 139
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received, hereby appoints
[PARENT DESIGNEES] and each of them as my proxies, with full power of
substitution in each of them, to cast on behalf of the undersigned all votes
entitled to be cast by the holder of the shares of Common Stock, par value $1.00
per share, of SunAmerica Inc., a Maryland corporation (the "Company"), all
shares of Nontransferable Class B Stock, par value $1.00 per share, of the
Company, and all shares of Transferable Class B Stock, par value $1.00 per
share, of the Company, owned by the undersigned at the Special Meeting of
Shareholders of the Company to be held [DATE, TIME AND PLACE] and at any
adjournment thereof FOR approval and adoption of the Agreement and Plan of
Merger, dated as of August 19, 1998, between the Company and American
International Group, Inc., a Delaware corporation ("Parent"), providing for the
merger (the "Merger") of the Company with and into Parent, and the Merger. This
proxy is coupled with an interest and is irrevocable until such time as the
Voting Agreement, dated as of August 19, 1998, between a certain stockholder of
the Company, the undersigned, and Parent terminates in accordance with its
terms.
Dated , 1998
--------------------------------------
(Signature of Stockholder)
B-5
<PAGE> 140
APPENDIX C
<PAGE> 141
MORGAN STANLEY DEAN WITTER
1585 Broadway
New York, New York 10036
(212) 761-4000
August 19, 1998
Board of Directors
American International Group, Inc.
70 Pine Street
New York, New York 10270
Members of the Board
We understand that SunAmerica Inc. ("SunAmerica" or the "Company") and
American International Group, Inc. ("AIG"), have entered into an Agreement and
Plan of Merger, dated as of August 19, 1998 (the "Merger Agreement"), which
provides, among other things, for the merger (the "Merger") of SunAmerica with
and into AIG. Pursuant to the Merger, each issued and outstanding share of
common stock, par value $1.00 per share (the "SunAmerica Common Stock") of
SunAmerica, other than shares held in treasury or held by AIG or any affiliate
of AIG, will be converted into the right to receive 0.855 shares (the "Exchange
Ratio") of common stock, par value $2.50 per share, of AIG (the "AIG Common
Stock"). The terms and conditions of the Merger are more fully set forth in the
Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to
the Merger Agreement is fair from a financial point of view to AIG.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and AIG, respectively;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
(iv) discussed the past and current operations and financial condition and
the prospects of the Company with senior executives of the Company;
(v) discussed the past and current operations and financial condition and
the prospects of AIG with senior executives of AIG;
(vi) discussed with the senior managements of the Company and AIG the
strategic objectives of the Merger and their estimates of the
synergies, cost savings and other benefits expected to result from
the Merger;
(vii) analyzed the pro forma impact of the Merger on AIG's earnings per
share;
(viii) reviewed the reported prices and trading activity for the SunAmerica
Common Stock and AIG Common Stock;
(ix) compared the financial performance of the Company and AIG and the
prices and trading activity of the SunAmerica Common Stock and the
AIG Common Stock with that of certain other comparable
publicly-traded companies and their securities;
C-1
<PAGE> 142
MORGAN STANLEY
(x) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xi) participated in discussions and negotiations among representatives of
the Company and AIG and their financial and legal advisors;
(xii) reviewed the Merger Agreement and certain related documents; and
(xiii) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections of SunAmerica and the
estimates of the synergies, cost savings and other benefits expected to result
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company and AIG. As you are aware, we have
had limited access to internal financial or other operating data regarding AIG,
and therefore the financial and other information regarding AIG reviewed by
Morgan Stanley in connection with the rendering of this opinion was limited to
publicly available information and certain discussions with AIG's senior
management regarding AIG's financial condition and prospects and their strategic
objectives of the Merger and their estimates of the synergies, cost savings and
other benefits expected to result from the Merger. In addition, we have assumed
that the Merger will be consummated in accordance with the terms set forth in
the Merger Agreement, including, among other things, that the Merger will be
accounted for as a "pooling-of-interests" business combination in accordance
with U.S. Generally Accepted Accounting Principles and the Merger will be
treated as a tax-free reorganization and/or exchange, each pursuant to the
Internal Revenue Code of 1986. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of AIG in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for SunAmerica and AIG and their
affiliates and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of AIG, except that this opinion may be included in its entirety in
any filing made by AIG with the Securities and Exchange Commission with respect
to the Merger. In addition, this opinion does not in any manner address the
prices at which AIG's Common Stock will trade following consummation of the
Merger, and Morgan Stanley expresses no opinion or recommendation as to how the
shareholders of AIG should vote at its shareholder's meeting held in connection
with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to AIG.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/DOUGLAS L. BROWN
----------------------------------
Douglas L. Brown
Managing Director
C-2
<PAGE> 143
APPENDIX D
<PAGE> 144
[GOLDMAN, SACHS & CO. ADDRESS]
[GOLDMAN SACHS LOGO]
PERSONAL AND CONFIDENTIAL
August 19, 1998
Board of Directors
SunAmerica Inc.
1 SunAmerica Center
Los Angeles, CA 90067
Gentlemen and Madame:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $1.00
per share (the "Shares"), of SunAmerica Inc. (the "Company") of the exchange
ratio of 0.855 shares of Common Stock, par value $2.50 per share ("AIG Common
Stock"), of American International Group, Inc. ("AIG") to be received for each
Share (the "Exchange Ratio") pursuant to the merger (the "Merger") contemplated
by the Agreement and Plan of Merger, dated as of August 19, 1998, between the
Company and AIG (the "Agreement").
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 provided certain investment banking services
to the Company from time to time, including having advised the Company in its
acquisition of the annuity operations of John Alden Financial Corporation in
1997, having acted as co-manager of its offering of 10 million 8.50% Premium
Equity Redemption Cumulative Security Units in 1996, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We also have provided certain investment
banking services to AIG from time to time, including having acted as financial
advisor in AIG's acquisition of 20(th) Century Industries in 1994 and having
acted as financial advisor in its bid for American Bankers Insurance Group Inc.
in 1997, and we may provide investment banking services to AIG, including acting
as financial advisor, in the future. Goldman, Sachs & Co. provides a full range
of financial advisory and securities services and, in the course of its normal
trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of the Company or AIG for its own
account and for the accounts of customers and may hold, at any time, a long or
short position in such securities. As of August 19, 1998, Goldman, Sachs & Co.
and its wholly-owned subsidiaries held for their accounts and for the accounts
of their customers a long position of 1,499,361 Shares of the Company and a
short position of 651,056 Shares of the Company.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended September 30, 1997; Annual Reports to
Stockholders and Annual Reports on Form 10-K of AIG for the five years ended
December 31, 1997; certain interim reports to stockholders and Quarterly Reports
on Form 10-Q of the Company and AIG; selected Statutory Annual Statements filed
by certain insurance subsidiaries of the Company and AIG with the insurance
departments of the states under the laws of which they are respectively
organized; certain other communications from the Company and AIG to their
respective stockholders; certain
New York / London / Tokyo / Boston / Chicago / Dallas / Frankfurt / George
Town / Hong Kong / Houston / Los Angeles / Memphis
Miami / Milan / Montreal / Osaka / Paris / Philadelphia / San
Francisco / Singapore / Sydney / Toronto / Vancouver / Zurich
D-1
<PAGE> 145
SunAmerica Inc.
August 19, 1998
Page Two
internal financial and actuarial analyses for the Company and AIG and financial
forecasts for the Company, each prepared by their respective managements and
provided to us for purposes of our analysis; and estimates of certain cost
savings and operating synergies that the management of the Company expects will
result from the Merger. We also have held discussions with members of the senior
managements of the Company and AIG regarding 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 AIG Common Stock, compared certain financial and stock market
information for the Company and AIG with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the insurance industry
specifically and in other industries generally and performed such other studies
and analyses and reviewed such other information as we considered appropriate.
As you know, we requested but did not receive financial forecasts of AIG. Our
review of such matters was limited to a discussion with AIG management of
certain publicly available estimates of AIG's future financial performance
provided by I/B/E/S International Inc.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us, and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed and relied upon, with your consent, the reasonableness and accuracy of
the financial forecasts of the Company, including, without limitation, the
projected estimates of cost savings and operating synergies expected to result
from the Merger. We are not actuaries and our services did not include actuarial
determinations or evaluations by us or an attempt to evaluate actuarial
assumptions. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or AIG or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We were not requested to, and did not, solicit third party
indications of interest in acquiring all or part of the Company or investigate
any alternative transactions that might be available to the Company. We have
assumed with your consent that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles. We also have assumed
with your consent that obtaining all regulatory and other approvals and third
party consents required for consummation of the Merger will not have an adverse
impact on the Company or AIG or on the anticipated benefits of the Merger.
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
Exchange Ratio to be received by the holders of Shares pursuant to the Agreement
is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
New York / London / Tokyo / Boston / Chicago / Dallas / Frankfurt / George
Town / Hong Kong / Houston / Los Angeles / Memphis
Miami / Milan / Montreal / Osaka / Paris / Philadelphia / San
Francisco / Singapore / Sydney / Toronto / Vancouver / Zurich
D-2
<PAGE> 146
APPENDIX E
<PAGE> 147
[WASSERSTEIN LOGO] [WASSERSTEIN PERELLA & CO., INC. ADDRESS]
August 19, 1998
Board of Directors
SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, CA 90067
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding shares of Common Stock, par value
$1.00 per share (the "Shares"), of SunAmerica, Inc. (the "Company") of the
exchange ratio of 0.855 shares of Common Stock, par value $2.50 per share, of
American International Group, Inc. ("AIG") to be received for each Share (the
"Exchange Ratio") pursuant to the merger (the "Merger") contemplated by the
Agreement and Plan of Merger, dated as of August 19, 1998, between the Company
and AIG (the "Agreement"). The terms and conditions of the Merger are set forth
in more detail in the Agreement.
In connection with rendering our opinion, we have reviewed, among other
things, the Agreement. We have also reviewed Annual Reports to Stockholders and
Annual Reports on Form 10-K of the Company for the five fiscal years ended
September 30, 1997; Annual Reports to Stockholders and Annual Reports on Form
10-K of AIG for the five years ended December 31, 1997; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company and AIG;
Statutory Annual Statements filed by certain insurance subsidiaries of the
Company and AIG with the Insurance Departments of the States under the laws of
which they are respectively organized for the five years ended December 31,
1997; certain other communications from the Company and AIG to their respective
stockholders; certain internal financial and actuarial analyses for the Company
and AIG and certain financial forecasts for the Company, in each case prepared
by their respective managements and provided to us for purposes of our analysis;
and estimates of certain cost savings and operating synergies that the
management of the Company expects will result from the Merger. We also have held
discussions with members of the senior managements of the Company and AIG
regarding 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 AIG's Common Stock,
compared certain financial and stock market information for the Company and AIG
with similar information for certain other companies, the securities of which
are publicly traded, that we believe may be relevant or comparable in certain
respects to the Company and AIG or one or more of their businesses or assets,
and we have reviewed the financial terms of certain recent business combinations
in the insurance industry specifically, and in other industries generally, that
we believe to be reasonably comparable to the Merger or otherwise relevant to
our inquiry. We have also performed such other financial studies, analyses, and
investigations and reviewed such other information as we considered appropriate
for purposes of this opinion. As you know, we requested but did not receive
financial forecasts of AIG. Our review of such matters was limited to a
discussion with AIG management of certain publicly available estimates of AIG's
future financial performance provided by I/B/E/S International Inc.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. In that regard, we have assumed and relied upon, with your consent,
the reasonableness and accuracy of the financial forecasts of the Company,
including, without limitation, the projected estimates of certain cost
New York Chicago Dallas Frankfurt Houston London Los Angeles Paris San
Francisco Tokyo
E-1
<PAGE> 148
SunAmerica Inc.
August 19, 1998
Page 2
savings and operating synergies expected to result from the Merger, and we have
assumed that such forecasts, projections and estimates were reasonably prepared
in good faith and on bases reflecting the best currently available judgments of
the management of the Company and that such estimates will be realized in the
amounts and the times contemplated thereby. We express no opinion with respect
to such forecasts, projections and estimates or the assumptions upon which they
are based. We are not actuaries and our advisory services did not include
actuarial determinations or evaluations by us or an attempt to evaluate
actuarial assumptions. In addition, we have not reviewed any of the books and
records of the Company or AIG, or assumed any responsibility for conducting a
physical inspection of the properties or facilities of the Company or AIG, or
for making or obtaining an independent evaluation or appraisal of the assets and
liabilities of the Company or AIG or any of their subsidiaries and we have not
been furnished with any such evaluation or appraisal. We were not requested to,
and did not, solicit third party indications of interest in acquiring all or
part of the Company or investigate any alternative transactions that may be
available to the Company. You have informed us, and we have assumed with your
consent, that the Merger will qualify as a tax-free "reorganization" under the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended,
and will be accounted for as a pooling-of-interests under generally accepted
accounting principles. We also have assumed that obtaining all regulatory and
other approvals and third party consents required for consummation of the Merger
will not have an adverse impact on the Company or AIG or on the anticipated
benefits of the Merger, and we have assumed that the transactions described in
the Agreement will be consummated without waiver or modification of any of the
material terms or conditions contained therein by any party thereto. Our opinion
is necessarily based on economic and market conditions and other circumstances
as they exist and can be evaluated by us as of the date hereof. We are not
expressing any opinion herein as to the prices at which any securities of AIG or
the Company will actually trade at any time.
We are acting as financial advisor to the Company in connection with the
proposed Merger. In addition, we have performed various investment banking
services for the Company and AIG from time to time in the past, and may provide
such services to the Company and AIG in the future. In the ordinary course of
our business, we may actively trade the debt and equity securities of the
Company and AIG for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Our opinion addresses only the fairness from a financial point of view to
the holders of Shares of the Exchange Ratio to be received by such holders
pursuant to the Agreement, and we do not express any views on any other terms of
the Merger. Specifically, our opinion does not address the Company's underlying
business decision to effect the transactions contemplated by the Agreement.
Our advisory services and the opinion expressed herein are provided for the
benefit and use of the Board of Directors of the Company in connection with its
consideration of the Merger and may not be used, circulated, quoted, or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document without our prior written consent. This
opinion does not constitute a recommendation to any holder of Shares as to how
such holder should vote with respect to the Merger, and should not be relied
upon by any holder as such.
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
Exchange Ratio to be received by the holders of Shares pursuant to the Agreement
is fair from a financial point of view to such holders.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
E-2
<PAGE> 149
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Certificate of Incorporation of the Registrant (the
"Certificate") provides that the Registrant shall indemnify to the full extent
permitted by law any person made, or threatened to be made, a party to any
action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he, his testator or intestate is or
was a director, officer or employee of the Registrant or serves or served any
other enterprise at the request of the Registrant. Section 6.4 of the
Registrant's By-Laws contains a similar provision.
The Certificate also provides that a director will not be personally liable
to the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that such an exemption from
liability or limitation thereof is not permitted by the Delaware General
Corporation Law (the "DGCL").
Section 145 of the DGCL permits a corporation to indemnify its directors
and officers against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties, if such
directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reason to believe
their conduct was unlawful. In a derivative action, i.e., one by or in the right
of the corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors and officers in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they will have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification will be made if such person will have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought will determine upon application that the defendant
officers or directors are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
2 Agreement and Plan of Merger, dated as of August 19, 1998,
between SunAmerica Inc. and American International Group,
Inc. (included as Annex A to the Joint Proxy Statement/
Prospectus contained in this Registration Statement).
3(i)(a) Restated Certificate of Incorporation of American
International Group, Inc., dated June 2, 1995, (incorporated
herein by reference to Exhibit 3(i) to American
International Group, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1996 (File No. 1-8787)).
3(i)(b) Certificate of Restated Amendment of Certificate of
Incorporation of American International Group, Inc., filed
June 3, 1998 (incorporated herein by reference to Exhibit
3(i) of American International Group, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 1-8787)).
3(ii) By-Laws of American International Group, Inc. (incorporated
herein by reference to Exhibit 3(ii) to American
International Group, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 (File No. 1-8787)).
</TABLE>
II-1
<PAGE> 150
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
4 See Exhibits 3(i)(a), 3(i)(b) and 3(ii) for provisions of
the Restated Certificate of Incorporation, Certificate of
Amendment of Restated Certificate of Incorporation and
By-Laws of American International Group, Inc. defining
rights of holders of common stock of American International
Group, Inc.
5 Opinion of Kathleen E. Shannon, Esq., Vice President and
Associate General Counsel of American International Group,
Inc., regarding the validity of securities being registered.
8.1 Opinion of Sullivan & Cromwell dated October 7, 1998
regarding certain federal income tax matters.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz dated October 7,
1998 regarding certain federal income tax matters.
10.1 Voting Agreement, dated as of August 19, 1998, between Eli
Broad and American International Group, Inc. (included as
Annex B to the Joint Proxy Statement/Prospectus contained in
this Registration Statement).
10.2 American International Group, Inc.'s 1996 Employee Stock
Purchase Plan (incorporated herein by reference to exhibit
to American International Group, Inc.'s Definitive Proxy
Statement dated April 4, 1997 (File No. 1-8787)).
10.3 American International Group, Inc.'s 1987 Employee Stock
Option Plan (incorporated herein by reference to exhibit to
American International Group, Inc.'s Definitive Proxy
Statement dated April 6, 1987 (File No. 0-4652)).
10.4 Amended and Restated American International Group, Inc.'s
1991 Employee Stock Option Plan (incorporated herein by
reference to exhibit to American International Group, Inc.'s
Definitive Proxy Statement dated April 4, 1997 (File No.
1-8787)).
11 Statement re computation of per share earnings (incorporated
herein by reference to Exhibit 11 to American International
Group, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 (File No. 1-8787)).
12 Statements re computation of ratios (incorporated herein by
reference to Exhibit 12 to American International Group,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 (File No. 1-8787)).
21 List of Subsidiaries of American International Group, Inc.
(incorporated herein by reference to Exhibit 21 to American
International Group, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1997 (File No. 1-8787)).
23.1 Consent of PricewaterhouseCoopers LLP (New York).
23.2 Consent of PricewaterhouseCoopers LLP (Los Angeles).
23.3 Consent of Kathleen E. Shannon, Esq., Vice President and
Associate General Counsel of American International Group,
Inc. (included in the opinion filed as Exhibit 5 to this
Registration Statement and incorporated herein by
reference).
23.4 Consent of Sullivan & Cromwell (included in the opinion
filed as Exhibit 8.1 to this Registration Statement and
incorporated herein by reference).
23.5 Consent of Wachtell, Lipton, Rosen & Katz (included in the
opinion filed as Exhibit 8.2 to this Registration Statement
and incorporated herein by reference).
23.6 Consent of Morgan Stanley & Co. Incorporated.
23.7 Consent of Goldman, Sachs & Co.
23.8 Consent of Wasserstein Perella & Co., Inc.
23.9 Consent of Eli Broad.
23.10 Consent of Jay S. Wintrob.
24 Powers of Attorney (included in signature page to this
Registration Statement).
</TABLE>
II-2
<PAGE> 151
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
99.1 Form of Proxy Cards of SunAmerica Inc.
99.2 Form of Proxy Card of American International Group, Inc.
99.3 Opinion of Morgan Stanley & Co. Incorporated (included as
Annex C to the Joint Proxy Statement/Prospectus contained in
this Registration Statement).
99.4 Opinion of Goldman, Sachs & Co. (included as Annex D to the
Joint Proxy Statement/ Prospectus contained in this
Registration Statement).
99.5 Opinion of Wasserstein Perella & Co., Inc. (included as
Annex E to the Joint Proxy Statement/ Prospectus contained
in this Registration Statement).
</TABLE>
(b) Financial Statement Schedules
All financial statement schedules of the Registrant and SunAmerica which
are required to be included herein are included in the Annual Report of the
Registrant on Form 10-K for the fiscal year ended December 31, 1997 (File No.
1-8787) or the Annual Report of SunAmerica on Form 10-K for the year ended
September 30, 1997 (File No. 1-4618), respectively, which are incorporated
herein by reference.
ITEM 22. UNDERTAKINGS.
(a) 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 by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
a 20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(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 (i) and (ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Securities and Exchange Commission by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that are incorporated by reference in
the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment will be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time will be deemed to be the
initial bona fide offering thereof; and
(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.
II-3
<PAGE> 152
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows:
(1) 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;
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities 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, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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 Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
(e) The undersigned Registrant hereby undertakes 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.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
SunAmerica, the company being acquired involved therein, that was not the
subject of and included in the Registration Statement when it became effective.
II-4
<PAGE> 153
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 New York,
State of New York, on the 7th day of October, 1998.
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ M. R. GREENBERG
------------------------------------
(M. R. Greenberg, Chairman)
------------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: that each person whose signature appears
below constitutes and appoints M.R. Greenberg, Edward E. Matthews and Howard I.
Smith, and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing required and necessary to be done in
and about the foregoing, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
------------------------
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ M. R. GREENBERG Chairman and Director October 7, 1998
- --------------------------------------------------- (Principal Executive Officer)
(M. R. Greenberg)
/s/ HOWARD I. SMITH Executive Vice President October 7, 1998
- --------------------------------------------------- and Director
(Howard I. Smith) (Principal Financial and
Accounting Officer)
/s/ M. BERNARD AIDINOFF Director October 7, 1998
- ---------------------------------------------------
(M. Bernard Aidinoff)
Director
- ---------------------------------------------------
(Lloyd M. Bentsen)
/s/ PEI-YUAN CHIA Director October 7, 1998
- ---------------------------------------------------
(Pei-yuan Chia)
/s/ MARSHALL A. COHEN Director October 7, 1998
- ---------------------------------------------------
(Marshall A. Cohen)
/s/ BARBER B. CONABLE, JR. Director October 7, 1998
- ---------------------------------------------------
(Barber B. Conable, Jr.)
</TABLE>
II-5
<PAGE> 154
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ MARTIN S. FELDSTEIN Director October 7, 1998
- ---------------------------------------------------
(Martin S. Feldstein)
/s/ LESLIE L. GONDA Director October 7, 1998
- ---------------------------------------------------
(Leslie L. Gonda)
/s/ EVAN G. GREENBERG Director October 7, 1998
- ---------------------------------------------------
(Evan G. Greenberg)
/s/ CARLA A. HILLS Director October 7, 1998
- ---------------------------------------------------
(Carla A. Hills)
/s/ FRANK J. HOENEMEYER Director October 7, 1998
- ---------------------------------------------------
(Frank J. Hoenemeyer)
/s/ EDWARD E. MATTHEWS Director October 7, 1998
- ---------------------------------------------------
(Edward E. Matthews)
/s/ DEAN P. PHYPERS Director October 7, 1998
- ---------------------------------------------------
(Dean P. Phypers)
/s/ THOMAS R. TIZZIO Director October 7, 1998
- ---------------------------------------------------
(Thomas R. Tizzio)
/s/ EDMUND S. W. TSE Director October 7, 1998
- ---------------------------------------------------
(Edmund S. W. Tse)
/s/ FRANK G. WISNER Director October 7, 1998
- ---------------------------------------------------
(Frank G. Wisner)
</TABLE>
II-6
<PAGE> 155
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
- ------- ----------- ----
<C> <S> <C>
2 Agreement and Plan of Merger, dated as of August 19, 1998,
between SunAmerica Inc. and American International Group,
Inc. (included as Annex A to the Joint Proxy
Statement/Prospectus contained in this Registration
Statement).
3(i)(a) Restated Certificate of Incorporation of American
International Group, Inc., dated June 2, 1995, (incorporated
herein by reference to Exhibit 3(i) to American
International Group, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1996 (File No. 1-8787)).
3(i)(b) Certificate of Restated Amendment of Certificate of
Incorporation of American International Group, Inc., filed
June 3, 1998 (incorporated herein by reference to Exhibit
3(i) of American International Group, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 1-8787)).
3(ii) By-Laws of American International Group, Inc. (incorporated
herein by reference to Exhibit 3(ii) to American
International Group, Inc.'s Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997 (File No. 1-8787)).
4 See Exhibits 3(i)(a), 3(i)(b) and 3(ii) for provisions of
the Restated Certificate of Incorporation, Certificate of
Amendment of Restated Certificate of Incorporation and By-
Laws of American International Group, Inc. defining rights
of holders of common stock of American International Group,
Inc.
5 Opinion of Kathleen E. Shannon, Esq., Vice President and
Associate General Counsel of American International Group,
Inc., regarding the validity of securities being registered.
8.1 Opinion of Sullivan & Cromwell dated October 7, 1998
regarding certain federal income tax matters.
8.2 Opinion of Wachtell, Lipton, Rosen & Katz dated October 7,
1998 regarding certain federal income tax matters.
10.1 Voting Agreement, dated as of August 19, 1998, between Eli
Broad and American International Group, Inc. (included as
Annex B to the Joint Proxy Statement/Prospectus contained in
this Registration Statement).
10.2 American International Group, Inc.'s 1996 Employee Stock
Purchase Plan (incorporated herein by reference to exhibit
to American International Group, Inc.'s Definitive Proxy
Statement dated April 4, 1997 (File No. 1-8787)).
10.3 American International Group, Inc.'s 1987 Employee Stock
Option Plan (incorporated herein by reference to exhibit to
American International Group, Inc.'s Definitive Proxy
Statement dated April 6, 1987 (File No. 0-4652)).
10.4 Amended and Restated American International Group, Inc.'s
1991 Employee Stock Option Plan (incorporated herein by
reference to exhibit to American International Group, Inc.'s
Definitive Proxy Statement dated April 4, 1997 (File No.
1-8787)).
11 Statement re computation of per share earnings (incorporated
herein by reference to Exhibit 11 to American International
Group, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 (File No. 1-8787)).
12 Statements re computation of ratios (incorporated herein by
reference to Exhibit 12 to American International Group,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998 (File No. 1-8787)).
21 List of Subsidiaries of American International Group, Inc.
(incorporated herein by reference to Exhibit 21 to American
International Group, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1997 (File No. 1-8787)).
</TABLE>
<PAGE> 156
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
- ------- ----------- ----
<C> <S> <C>
23.1 Consent of PricewaterhouseCoopers LLP (New York).
23.2 Consent of PricewaterhouseCoopers LLP (Los Angeles).
23.3 Consent of Kathleen E. Shannon, Esq., Vice President and
Associate General Counsel of American International Group,
Inc. (included in the opinion filed as Exhibit 5 to this
Registration Statement and incorporated herein by
reference).
23.4 Consent of Sullivan & Cromwell (included in the opinion
filed as Exhibit 8.1 to this Registration Statement and
incorporated herein by reference).
23.5 Consent of Wachtell, Lipton, Rosen & Katz (included in the
opinion filed as Exhibit 8.2 to this Registration Statement
and incorporated herein by reference).
23.6 Consent of Morgan Stanley & Co. Incorporated.
23.7 Consent of Goldman, Sachs & Co.
23.8 Consent of Wasserstein Perella & Co., Inc.
23.9 Consent of Eli Broad.
23.10 Consent of Jay S. Wintrob.
24 Powers of Attorney (included in signature page to this
Registration Statement).
99.1 Form of Proxy Cards of SunAmerica Inc.
99.2 Form of Proxy Card of American International Group, Inc.
99.3 Opinion of Morgan Stanley & Co. Incorporated (included as
Annex C to the Joint Proxy Statement/Prospectus contained in
this Registration Statement).
99.4 Opinion of Goldman, Sachs & Co. (included as Annex D to the
Joint Proxy Statement/ Prospectus contained in this
Registration Statement).
99.5 Opinion of Wasserstein Perella & Co., Inc. (included as
Annex E to the Joint Proxy Statement/Prospectus contained in
this Registration Statement).
</TABLE>
<PAGE> 1
[LETTERHEAD OF KATHLEEN E. SHANNON, VICE PRESIDENT AND
ASSOCIATE GENERAL COUNSEL OF AMERICAN INTERNATIONAL GROUP, INC.]
October 7, 1998
American International Group, Inc.
70 Pine Street
New York, New York 10270
Dear Sirs:
In connection with the registration under the Securities Act of 1933, as
amended (the "Act"), by American International Group, Inc., a Delaware
corporation (the "Company"), of 206,249,985 shares of Common Stock, par value
$2.50 per share, of the Company (the "Securities"), issuable in connection with
the Merger (the "Merger") contemplated by the Agreement and Plan of Merger,
dated as of August 19, 1998 (the "Merger Agreement") between SunAmerica Inc., a
Maryland corporation ("SunAmerica"), and the Company, I, as Vice President and
Associate General Counsel of the Company, have examined the Merger Agreement and
such corporate records, certificates and other documents, and such questions of
law, as I have considered necessary or appropriate for the purposes of this
opinion. Upon the basis of such examination, I advise you that, in my opinion,
assuming that the Merger Agreement has been duly authorized, executed and
delivered by SunAmerica, when the registration statement relating to the
Securities (the "Registration Statement") has become effective under the Act,
the Merger Agreement and the principal terms of the Merger have been duly
approved by the holders of the outstanding shares of the Securities, the Common
Stock, par value $1.00 per share, of SunAmerica and the Nontransferable Class B
Stock, par value $1.00 per share, of SunAmerica, each other condition to the
Company's and SunAmerica's respective obligations to consummate the Merger has
been satisfied or waived, the Merger has become effective pursuant to Section
3-107 of the Maryland General Corporation Law and Section 251 of the Delaware
General Corporation Law, and the Securities have been duly issued as
contemplated by the Registration Statement and the Merger Agreement, the
Securities will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United States
and the General Corporation Law of the State of Delaware, and I am expressing no
opinion as to the effect of the laws of any other jurisdiction.
I have relied as to certain matters on information obtained from public
officials, officers of the Company and other sources believed by me to be
responsible.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the heading "Legal
Matters" in the Joint Proxy Statement/Prospectus which forms a part of the
Registration Statement. In giving such consent, I do not thereby admit that I am
in the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ KATHLEEN E. SHANNON
--------------------------
Kathleen E. Shannon
<PAGE> 1
[Letterhead of Sullivan & Cromwell]
October 7, 1998
American International Group, Inc.,
70 Pine Street,
New York, New York 10270.
Ladies and Gentlemen:
We have acted as counsel to American International Group, Inc., a Delaware
corporation (the "Company"), in connection with the planned merger of
SunAmerica, Inc., a Maryland Corporation ("SunAmerica") with and into the
Company, pursuant to the Agreement and Plan of Merger, dated as of August 19,
1998, by and between SunAmerica and the Company (the "Agreement"). We render
this opinion to you, in part, in connection with the registration of the AIG
Common Stock to be issued in connection with the Merger. All capitalized terms
used and not otherwise defined herein shall have the meanings provided in the
Agreement.
For purposes of this opinion, we have reviewed the Agreement and such other
documents and matters of law and fact as we have considered necessary or
appropriate, and we have assumed, with your consent, the following:
(i) The Merger will be completed in the manner set forth in the
Agreement and the Joint Proxy Statement/Prospectus of the Company and
SunAmerica (the "Proxy/Prospectus").
(ii) The representations contained in the letters of representation
from the Company and SunAmerica to us and Wachtell, Lipton, Rosen & Katz,
counsel to SunAmerica, both dated October 7, 1998, will be true and
complete at the Effective Time.
On the basis of the foregoing, and our consideration of such other matters
of fact and law as we have deemed necessary or appropriate, it is our opinion,
under presently applicable federal income tax law, that:
(1) The Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986;
(2) Each of the Company and SunAmerica will be a party to the
reorganization within the meaning of Section 368(b) of the Internal Revenue
Code of 1986; and
(3) No gain or loss will be recognized by stockholders of SunAmerica
who exchange all of their Common Shares solely for shares of AIG Common
Stock pursuant to the Merger (except with respect to cash received in lieu
of a fractional share interest in AIG Common Stock).
The tax consequences described above may not be applicable to SunAmerica
stockholders that hold Company stock as part of a "straddle" or "conversion"
transaction, that are traders in securities that elect to mark to market, that
are dealers in securities, or that are foreign persons.
This opinion is limited to the federal income tax laws of the United States
and does not purport to discuss the consequences or effectiveness of the Merger
under any other laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to us under the headings "The
Merger -- Certain Federal Income Tax Consequences of the Merger" in the
Proxy/Prospectus. In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ SULLIVAN & CROMWELL
<PAGE> 1
[Letterhead of Wachtell, Lipton, Rosen & Katz]
October 7, 1998
SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Ladies/Gentlemen:
We have acted as special counsel to SunAmerica Inc., a Maryland corporation
("SunAmerica"), in connection with the proposed merger (the "Merger") of
SunAmerica with and into American International Group, Inc., a Delaware
corporation ("AIG"), pursuant to the Agreement and Plan of Merger, dated as of
August 19, 1998, between SunAmerica and AIG (the "Merger Agreement"). At your
request, in connection with the filing of the Registration Statement on Form S-4
filed with the Securities Exchange Commission in connection with the Merger (the
"Registration Statement"), we are rendering our opinion concerning certain
federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of AIG and the consent of SunAmerica, upon the accuracy and completeness
of the statements and representations (which statements and representations we
have neither investigated nor verified) contained, respectively, in the
representation letters of AIG and SunAmerica dated the date hereof, and have
assumed that such statements and representations will be complete and accurate
as of the Effective Time. We have also relied upon the accuracy of the
Registration Statement and the Joint Proxy Statement/Prospectus of AIG and
SunAmerica (the "Joint Proxy Statement/ Prospectus") included therein. Any
capitalized term used and not defined herein has the meaning given to it in the
Joint Proxy Statement/Prospectus or the appendices thereto (including the Merger
Agreement).
We have also assumed that (i) the transactions contemplated by the Merger
Agreement will be consummated in accordance therewith and as described in the
Joint Proxy Statement/Prospectus and (ii) the Merger will qualify as a statutory
merger under the applicable laws of the States of Delaware and Maryland.
Based upon and subject to the foregoing, it is our opinion, under currently
applicable United States federal income tax law, that (i) 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"),
(ii) each of AIG and SunAmerica will be a party to that reorganization within
the meaning of Section 368(b) of the Code, and (iii) no gain or loss will be
recognized by the stockholders of SunAmerica who exchange all of their
SunAmerica Common Stock solely for shares of AIG Common Stock pursuant to the
Merger (except with respect to any cash received in lieu of a fractional share
interest in AIG Common Stock).
We express no opinion as to the United States federal income tax
consequences of the Merger to stockholders subject to special treatment under
United States federal income tax law, such as foreign persons, dealers in
securities, traders in securities that elect to use a mark-to-market method of
accounting, tax-exempt organizations, shareholders who acquired shares of
SunAmerica Common Stock through the exercise of options, grants of performance
shares under SunAmerica's equity-based compensation plans or otherwise as
compensation or through a tax-qualified retirement plan, or holders that hold
SunAmerica Common Stock as part of a straddle or conversion transaction. In
addition, no opinion is expressed with respect to the tax consequences of the
Merger under applicable foreign, state or local laws or under any federal tax
laws other than those pertaining to the income tax.
<PAGE> 2
SunAmerica Inc.
Page 2
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "THE MERGER -- Certain Federal Income Tax
Consequences of the Merger" and elsewhere in the Joint Proxy Statement/
Prospectus. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended.
Very truly yours,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
2
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of our report, dated February 10, 1998, on our audits of the consolidated
financial statements and financial statement schedules of American International
Group, Inc. and subsidiaries as of December 31, 1997 and 1996, and for each of
the three years in the period ended December 31, 1997, which report is included
in the American International Group, Inc. Annual Report on Form 10-K. We also
consent to the reference to us under the headings "Experts" and "Selected
Consolidated Financial Data" in such Joint Proxy Statement/Prospectus. However,
it should be noted that PricewaterhouseCoopers LLP has not prepared or certified
such "Selected Consolidated Financial Data".
PricewaterhouseCoopers LLP
New York, New York
October 6, 1998
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of American International Group, Inc. of our report dated November 7, 1997
which appears on page F-2 of SunAmerica Inc.'s Annual Report on Form 10-K for
the year ended September 30, 1997. We also consent to the incorporation by
reference of our report on the Financial Statement Schedules, which appears on
page S-2 of such Annual Report on Form 10-K. We also consent to the references
to us under the headings "Experts" and "Selected Consolidated Financial Data" in
such Joint Proxy Statement/Prospectus. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified such "Selected
Consolidated Financial Data".
PricewaterhouseCoopers LLP
Los Angeles, California
October 6, 1998
<PAGE> 1
[Morgan Stanley Dean Witter Letterhead]
October 7, 1998
Board of Directors
American International Group, Inc.
70 Pine Street
New York, New York 10270
Dear Sirs:
We hereby consent to the inclusion in the Registration Statement of American
International Group, Inc. on Form S-4, of our opinion letter appearing as
Appendix C to the Joint Proxy Statement/Prospectus which is part of the
Registration Statement, and to the references of our firm name therein. 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,
as amended, or the rules and regulations adopted by the Securities and Exchange
Commission thereunder, nor do we admit that we are experts with respect to any
part of the Registration Statement within the meaning of the term "experts" as
used in the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ DOUGLAS L. BROWN
------------------------------------
Douglas L. Brown
Managing Director
<PAGE> 1
[Goldman, Sachs & Co. Letterhead]
PERSONAL AND CONFIDENTIAL
October 7, 1998
Board of Directors
SunAmerica Inc.
1 SunAmerica Center
Los Angeles, CA 90067
Re: Registration Statement of American International Group, Inc.
Gentlemen and Madame:
Reference is made to our opinion letter dated August 19, 1998 with respect
to the fairness from a financial point of view to the holders of the outstanding
shares of Common Stock, par value $1.00 per share (the "Shares"), of SunAmerica
Inc. (the "Company") of the exchange ratio of 0.855 shares of Common Stock, par
value $2.50 per share, of American International Group, Inc. ("AIG") to be
received for each Share pursuant to the merger contemplated by the Agreement and
Plan of Merger, dated as of August 19, 1998, between the Company and AIG.
The foregoing opinion letter is provided for the information and assistance
of the Board of Directors of the Company with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or 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.
In that regard, we hereby consent to the reference to the opinion of our
Firm under the captions "Summary -- The Merger -- Reasons for the Merger",
"Summary -- The Merger -- Opinions of Financial Advisors", "The
Merger -- Background of the Merger", "The Merger -- SunAmerica Reasons for the
Merger; Recommendation of the SunAmerica Board" and "The Merger -- Opinions of
SunAmerica's Financial Advisors", and to the inclusion of the foregoing opinion
in the Joint 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 and
Exchange Commission thereunder.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
<PAGE> 1
[Wasserstein Perella & Co., Inc. Letterhead]
October 7, 1998
Board of Directors
SunAmerica Inc.
1 SunAmerica Center
Century City
Los Angeles, CA 90067
Members of the Board,
We hereby consent to the inclusion of our opinion, dated as of August 19,
1998, as Exhibit E to the Joint Proxy Statement/Prospectus constituting a part
of the Registration Statement on Form S-4 filed by American International Group,
Inc., and to the references to us and our opinion under the captions "SUMMARY --
Reasons for the Merger -- Opinions of Financial Advisors"; "THE
MERGER -- Background of the Merger," "-- SunAmerica Reasons for the Merger;
Recommendation of the SunAmerica Board," and "-- Opinions of SunAmerica's
Financial Advisors." By giving such consent we do not thereby admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "expert" as used in, or that we come within the category of
persons whose consent is required under, the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
WASSERSTEIN PERELLA & CO., INC.
By: /s/ STEPHEN P. CAMPBELL
--------------------------------------
Stephen P. Campbell
Vice President
<PAGE> 1
CONSENT
Reference is made to the Registration Statement on Form S-4, and to the
Joint Proxy Statement/ Prospectus which forms a part thereof (together, the
"Registration Statement"), to be filed with the Securities and Exchange
Commission by American International Group, Inc. ("AIG") in connection with the
merger of SunAmerica Inc. with and into AIG. In accordance with Rule 438 under
the Securities Act of 1933, the undersigned hereby consents to being named in
the Registration Statement, and any subsequent amendments thereto, as a person
who is about to become a director of AIG.
/s/ ELI BROAD
--------------------------------------
Eli Broad
October 7, 1998
<PAGE> 1
CONSENT
Reference is made to the Registration Statement on Form S-4, and to the
Joint Proxy Statement/Prospectus which forms a part thereof (together, the
"Registration Statement"), to be filed with the Securities and Exchange
Commission by American International Group, Inc. ("AIG") in connection with the
merger of SunAmerica Inc. with and into AIG. In accordance with Rule 438 under
the Securities Act of 1933, the undersigned hereby consents to being named in
the Registration Statement, and any subsequent amendments thereto, as a person
who is about to become a director of AIG.
/s/ JAY S. WINTROB
--------------------------------------
Jay S. Wintrob
October 7, 1998
<PAGE> 1
FOR USE BY HOLDERS OF COMMON STOCK OF
SUNAMERICA INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Eli Broad and Jay S. Wintrob as Proxies,
each with the power to appoint his substitute, and hereby authorizes each of
them to represent and to vote, as designated below, all the shares of the common
stock, par value $1.00 per share ("Common Stock"), of SunAmerica Inc. (the
"Company") held of record by the undersigned on October 9, 1998, at the
Special Meeting of Shareholders (the "Special Meeting") to be held on November
18, 1998, and at any and all adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER (EACH AS DEFINED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS) AND RECOMMENDS THAT HOLDERS OF COMMON STOCK VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
SUNAMERICA INC.
1 SUNAMERICA CENTER
CENTURY CITY
LOS ANGELES, CALIFORNIA 90067-6022
<PAGE> 2
SUNAMERICA INC.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT HOLDERS OF COMMON STOCK
VOTE FOR PROPOSAL 1.
1. Approval and adoption 2. In their discretion, All other proxies
of the Agreement and the Proxies are heretofore given
Plan of Merger between authorized to vote by the under-
American International upon such other signed to vote
Group, Inc. and business as may shares of the
SunAmerica Inc., dated properly come before Common Stock
as of August 19, 1998, the Special Meeting of the Company
and the Merger contem- or any adjournment which the under-
plated thereby, as or postponement signed would be
described in the thereof. entitled to vote
accompanying Joint if personally
Proxy Statement/ present at the
Prospectus. Special Meeting
For [X] Against [X] Abstain [X] or any and all
adjournments or
postponements
thereof, are
hereby expressly
revoked.
PLEASE DATE THIS PROXY AND
SIGN IT EXACTLY AS YOUR NAME
OR NAME(S) APPEAR ABOVE. WHEN
SHARES ARE HELD JOINTLY, BOTH
MUST SIGN. WHEN SIGNING AS AN
ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF SHARES ARE
HELD BY A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME
BY THE PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF SHARES
ARE HELD BY A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP
NAME BY AN AUTHORIZED PERSON.
Dated:__________________,1998
Signature(s)_________________
Signature(s)_________________
PLEASE MARK VOTE IN BOX IN THE
FOLLOWING MANNER USING DARK
INK ONLY. [X]
SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 3
FOR USE BY HOLDERS OF CLASS B STOCK OF
SUNAMERICA INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Eli Broad and Jay S. Wintrob as Proxies,
each with the power to appoint his substitute, and hereby authorizes each of
them to represent and to vote, as designated below, all the shares of Class B
Stock, par value $1.00 per share ("Class B Stock"), of SunAmerica Inc. (the
"Company") held of record by the undersigned on October 9, 1998, at the Special
Meeting of the Shareholders (the "Special Meeting") to be held on November 18,
1998, and at any and all adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER (EACH AS DEFINED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS) AND RECOMMENDS THAT HOLDERS OF CLASS B STOCK VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
SUNAMERICA INC.
1 SUNAMERICA CENTER
CENTURY CITY
LOS ANGELES, CALIFORNIA 90067-6022
<PAGE> 4
SUNAMERICA INC.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT HOLDERS OF CLASS B STOCK
VOTE FOR PROPOSAL 1.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Approval and adoption of the Agreement 2. In their discretion, the Proxies are All other proxies heretofore given by
and Plan of Merger between American authorized to vote upon such other business the undersigned to vote shares of the
International Group, Inc. and SunAmerica as may properly come before the Special Class B Stock of the Company which the
Inc., dated as of August 19, 1998, and the Meeting or any adjournment or postponement undersigned would be entitled to vote
Merger contemplated thereby, as described in thereof. if personally present at the Special
the accompanying Joint Proxy Meeting or any and all adjournments or
Statement/Prospectus. postponements thereof, are hereby
expressly revoked.
For /X/ Against /X/ Abstain /X/
Please date this Proxy and sign it exactly as your name or
name(s) appear above. When shares are held jointly, both
must sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title
as such. If shares are held by a corporation, please sign
in full corporate name by the President or other
authorized officer. If shares are held by a
partnership, please sign in partnership name by an
authorized person.
Dated: , 1998
--------------------------------------
Signature(s)
---------------------------------------
Signature(s)
---------------------------------------
PLEASE MARK VOTE IN BOX IN THE FOLLOWING /X/
MANNER USING DARK INK ONLY.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
PROXY
AMERICAN INTERNATIONAL GROUP, INC.
SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 18, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints M.R. Greenberg, Edward E. Matthews and
Thomas R. Tizzio, and each of them, with full power to act without the other
and with full power of substitution, as proxies to represent and to vote, as
directed herein, all shares the undersigned is entitled to vote at the special
meeting of the shareholders of American International Group, Inc. to be held at
Eighth Floor, 72 Wall Street, New York, New York 10270, on Wednesday, November
18, 1998 at 3:00 p.m., and all adjournments thereof, as follows:
(change of address/comments)
-------------------------------
-------------------------------
-------------------------------
(If you have written in the above
space, please mark the corresponding
box on the reverse side of this card)
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE AND RETURN IT
PROMPTLY USING THE ENCLOSED POSTAGE PREPAID ENVELOPE.
SEE REVERSE
SIDE
<PAGE> 2
/ X / Please mark your
votes as in this
example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" ITEM 1 BELOW, AND THE PROXIES ARE APPOINTED WITH THE AUTHORITY TO
VOTE IN THEIR DISCRETION UPON MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL
MEETING AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER (EACH AS DEFINED IN THE ACCOMPANYING JOINT
PROXY/STATEMENT PROSPECTUS) AND RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
- -------------------------------------------------------------------------------
1. Approval and adoption of the Agreement and Plan of Merger between American
International Group, Inc. and SunAmerica Inc., dated as of August 19, 1998,
and the Merger contemplated thereby, as described in the accompanying Joint
Proxy Statement/Prospectus.
FOR AGAINST ABSTAIN
/ / / / / /
- -------------------------------------------------------------------------------
If you have noted either an Address Change or made
Comments on the reverse side of the card, mark here. / /
PLEASE SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE(S) DATE
---------------------------------------- ----------------------
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If shares are held by a corporation or partnership, please
sign in full corporation or partnership name by an authorized person.
