-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q3NimKwJwnThh5tsZH3WmLSWAG+wtWhwfxunbBWFT1zcXtiU1ytt2vbIdhHTUzNp 3ltG/FAQ89PIuNyJwe+aFg== 0000005103-00-000022.txt : 20000516 0000005103-00-000022.hdr.sgml : 20000516 ACCESSION NUMBER: 0000005103-00-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL CORP /TX/ CENTRAL INDEX KEY: 0000005103 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 740483432 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07981 FILM NUMBER: 631525 BUSINESS ADDRESS: STREET 1: 2929 ALLEN PKWY CITY: HOUSTON STATE: TX ZIP: 77019 BUSINESS PHONE: 7135221111 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to _____________________ Commission file number 1-7981 American General Corporation (Exact name of registrant as specified in its articles of incorporation) Texas 74-0483432 (State of Incorporation) (I.R.S. Employer Identification No.) 2929 Allen Parkway, Houston, Texas 77019-2155 (Address of principal executive offices) (Zip Code) (713) 522-1111 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . As of April 30, 2000, there were 248,393,147 shares (excluding shares held in treasury and by a subsidiary) of American General's Common Stock outstanding. INDEX TO FORM 10-Q Page Part I. FINANCIAL INFORMATION. Item 1. Financial Statements. Consolidated Income Statement for the three months ended March 31, 2000 and 1999 ............. 2 Consolidated Balance Sheet at March 31, 2000 and December 31, 1999 ................................ 3 Consolidated Statements of Shareholders' Equity and Comprehensive Income for the three months ended March 31, 2000 and 1999 .......................... 4 Consolidated Condensed Statement of Cash Flows for the three months ended March 31, 2000 and 1999 ... 5 Notes to Consolidated Financial Statements ......... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .............. 11 Part II. OTHER INFORMATION. Item 1. Legal Proceedings .................................. 24 Item 3. Quantitative and Qualitative Disclosures about Market Risk .................................. 24 Item 6. Exhibits and Reports on Form 8-K ................... 24 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. AMERICAN GENERAL CORPORATION Consolidated Income Statement (Unaudited) (In millions, except per share data) Three Months Ended March 31, 2000 1999 Revenues Premiums and other considerations ................ $ 993 $ 924 Net investment income ............................ 1,330 1,285 Finance charges .................................. 391 357 Realized investment losses ....................... (51) (2) Other ............................................ 74 56 Total revenues ............................... 2,737 2,620 Benefits and expenses Insurance and annuity benefits ................... 1,384 1,313 Operating expenses ............................... 396 392 Commissions ...................................... 317 278 Change in deferred policy acquisition costs and cost of insurance purchased ..................... (116) (86) Provision for finance receivable losses .......... 49 52 Goodwill amortization ............................ 12 12 Interest expense Corporate ....................................... 54 44 Consumer Finance ................................ 163 138 Total benefits and expenses .................. 2,259 2,143 Earnings Income before income tax expense ................. 478 477 Income tax expense ............................... 168 168 Income before net dividends on preferred securities of subsidiaries ...................... 310 309 Net dividends on preferred securities of subsidiaries ................................. 25 22 Net income ................................... $ 285 $ 287 Net income per share Basic ........................................... $ 1.14 $ 1.14 Diluted ......................................... $ 1.12 $ 1.11 Item 1. Financial Statements (continued). AMERICAN GENERAL CORPORATION Consolidated Balance Sheet (Unaudited) (In millions) March 31, December 31, 2000 1999 Assets Investments Fixed maturity securities (amortized cost: $63,428; $62,375) ........................ $ 61,794 $ 60,625 Mortgage loans on real estate .............. 3,667 3,686 Equity securities (cost: $303; $299) ....... 357 339 Policy loans ............................... 2,377 2,375 Investment real estate ..................... 220 222 Other long-term investments ................ 513 412 Short-term investments ..................... 1,855 676 Total investments ...................... 70,783 68,335 Cash ........................................ 240 294 Assets held in separate accounts ............ 26,495 24,097 Finance receivables, net .................... 10,744 10,634 Deferred policy acquisition costs ........... 5,175 4,980 Cost of insurance purchased ................. 1,134 1,170 Goodwill .................................... 1,493 1,501 Other assets ................................ 5,703 4,436 Total assets ........................... $121,767 $115,447 Liabilities Insurance and annuity liabilities ........... $ 66,659 $ 66,401 Liabilities related to separate accounts .... 26,495 24,097 Debt (short-term) Corporate ($2,049; $1,932) ................. 3,237 3,120 Consumer Finance ($4,569; $4,489) .......... 10,271 10,206 Income tax liabilities ...................... 996 833 Other liabilities ........................... 5,574 2,446 Total liabilities ...................... 113,232 107,103 Redeemable equity Company-obligated mandatorily redeemable preferred securities of subsidiaries holding solely company subordinated notes Non-convertible .......................... 1,675 1,675 Convertible .............................. 250 249 Total redeemable equity ................ 1,925 1,924 Shareholders' equity Convertible preferred stock (shares issued and outstanding: 0, 2.3) .................... - 85 Common stock (shares issued: 269.3, 269.3; outstanding: 248.7, 248.1) ................. 936 962 Retained earnings ........................... 7,907 7,732 Accumulated other comprehensive income (loss) (1,181) (1,278) Cost of treasury stock ...................... (1,052) (1,081) Total shareholders' equity ............. 6,610 6,420 Total liabilities and equity ........... $121,767 $115,447 Item 1. Financial Statements (continued). AMERICAN GENERAL CORPORATION Consolidated Statements of Shareholders' Equity and Comprehensive Income (Unaudited) (In millions, except per share data) Three Months Ended March 31, Shareholders' Equity 2000 1999 Convertible preferred stock Balance at beginning of period .................. $ 85 $ 85 Conversion ...................................... (85) - Balance at end of period ........................ - 85 Common stock Balance at beginning of period .................. 962 939 Issuance of treasury shares ..................... (26) (18) Balance at end of period ........................ 936 921 Retained earnings Balance at beginning of period .................. 7,732 7,007 Net income ...................................... 285 287 Cash dividends (per share) Preferred ($.64; $.64) ......................... (1) (1) Common ($.44; $.40) ............................ (109) (100) Balance at end of period ........................ 7,907 7,193 Accumulated other comprehensive income (loss) Balance at beginning of period................... (1,278) 1,599 Change in net unrealized gains (losses) on securities .................................. 97 (568) Balance at end of period ........................ (1,181) 1,031 Cost of treasury stock Balance at beginning of period .................. (1,081) (759) Issuance for preferred stock conversion ......... 99 - Issuance under employee benefit plans and other . 23 34 Share repurchases ............................... (93) (104) Balance at end of period ........................ (1,052) (829) Total shareholders' equity .................... $ 6,610 $ 8,401 Comprehensive Income Net income ....................................... $ 285 $ 287 Change in net unrealized gains (losses) on securities Fair value of fixed maturity securities ......... 116 (1,304) Deferred policy acquisition costs and cost of insurance purchased ............................ 18 424 Deferred income taxes ........................... (47) 311 Change in fixed maturity securities ............. 87 (569) Change in equity securities and other ........... 10 1 Total ......................................... 97 (568) Comprehensive income (loss) ...................... $ 382 $ (281) Item 1. Financial Statements (continued). AMERICAN GENERAL CORPORATION Consolidated Condensed Statement of Cash Flows (Unaudited) (In millions) Three Months Ended March 31, 2000 1999 Operating activities Net cash provided by operating activities ... $ 629 $ 612 Investing activities Investment purchases .............................. (4,550) (5,591) Investment dispositions and repayments ............ 3,485 4,170 Finance receivable originations and purchases ..... (1,505) (1,452) Finance receivable principal payments received .... 1,333 1,248 Net increase in short-term investments ............ (1,179) (594) Other, net ........................................ (48) (49) Net cash used for investing activities ...... (2,464) (2,268) Financing activities Retirement Services and Life Insurance Policyholder account deposits ................... 1,770 1,444 Policyholder account withdrawals ................ (1,712) (1,082) Net policyholder account deposits ............ 58 362 Short-term collateralized financings ............ 1,698 1,133 Total Retirement Services and Life Insurance.. 1,756 1,495 Consumer Finance Net increase (decrease) in short-term debt ...... 80 (179) Long-term debt issuances ........................ 379 315 Long-term debt redemptions ...................... (396) (26) Total Consumer Finance ....................... 63 110 Corporate Net increase in short-term debt ................. 117 103 Long-term debt issuance ......................... - 148 Common stock repurchases ........................ (90) (94) Dividends on common and preferred stock ......... (110) (101) Other, net ...................................... 45 (125) Total Corporate .............................. (38) (69) Net cash provided by financing activities ... 1,781 1,536 Net decrease in cash ............................... (54) (120) Cash at beginning of period ........................ 294 341 Cash at end of period .............................. $ 240 $ 221 Supplemental disclosure of cash flow information: Cash paid (received) during the period for Income taxes .................................... $ 36 $ (44) Interest Corporate ...................................... 60 45 Consumer Finance ............................... 195 155 Dividends on preferred securities of subsidiaries ................................... 18 14 Item 1. Financial Statements (continued). AMERICAN GENERAL CORPORATION Notes to Consolidated Financial Statements March 31, 2000 (In millions, except per share data) 1. Accounting Policies. The accompanying unaudited consolidated financial statements of American General Corporation (American General) and its subsidiaries (collectively, the company or we) have been prepared in accordance with generally accepted accounting principles for interim periods. In the opinion of management, these statements include all adjustments that are necessary for a fair presentation of the company's consolidated financial position at March 31, 2000, and the consolidated results of operations, shareholders' equity, comprehensive income, and cash flows for the three months ended March 31, 2000 and 1999. 2. Future Accounting Standard. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) 133, "Accounting for Derivative Instruments and Hedging Activities," which requires all derivative instruments to be recognized at fair value in the balance sheet. Changes in the fair value of a derivative instrument will be reported as earnings or other comprehensive income, depending upon the intended use of the derivative instrument. We will adopt SFAS 133 on January 1, 2001. We do not expect adoption to have a material impact on the company's results of operations and financial position. 3. Calculation of Earnings Per Share. We calculate basic and diluted earnings per share as follows: Three Months Ended March 31, 2000 1999 Net income ......................... $ 285 $ 287 Net dividends on convertible preferred stock ................... - (1) Basic earnings ..................... 285 286 Net dividends on dilutive securities Convertible preferred securities of subsidiary ................... 3 3 Convertible preferred stock ...... - 1 Diluted earnings ................... $ 288 $ 290 Average basic shares outstanding ... 248.9 251.4 Dilutive securities Convertible preferred securities of subsidiary ................... 6.1 6.1 Convertible preferred stock ...... - 2.3 Stock options .................... 1.4 1.5 Restricted stock ................. .6 .4 Average diluted shares outstanding assuming dilution ................ 257.0 261.7 Net income per share Basic ............................. $ 1.14 $ 1.14 Diluted ........................... $ 1.12 $ 1.11 Item 1. Financial Statements (continued). 4. Investing Activities. Cash flows related to investing activities were as follows: Dispositions and Purchases Repayments Three Months Ended Three Months Ended March 31, March 31, 2000 1999 2000 1999 Fixed maturity securities $4,340 $5,348 $3,345 $4,032 Mortgage loans 85 58 105 77 Equity securities 10 6 10 19 Other 115 179 25 42 Total $4,550 $5,591 $3,485 $4,170 5. Derivative Financial Instruments. Derivative financial instruments did not have a material effect on net investment income, interest expense, or net income during the three months ended March 31, 2000 or 1999. Significant activity related to derivative financial instruments during the three months ended March 31, 2000 was as follows: During first quarter 2000, we purchased call swaptions with notional amounts of $1.8 billion, while swaptions with notional amounts of $10.6 billion expired. Swaptions, which are options to enter into interest rate swap agreements, limit the company's exposure to reduced spreads between investment yields and interest rates credited to policyholders should interest rates decrease or increase significantly over prolonged periods. Call and put swaptions with notional amounts of $7.1 billion and $855 million, respectively, average strike rates of 5.1% and 9.5%, respectively, and total premium paid of $2 million and $.3 million, respectively, were outstanding at March 31, 2000. These swaptions expire throughout 2000. Should the strike rates remain below market rates (for call swaptions) and above market rates (for put swaptions), the swaptions will expire and the company's exposure would be limited to the premiums paid. 6. Dollar Rolls. We use dollar roll agreements as part of our strategy to increase investment income. Dollar rolls are agreements to sell mortgage-backed securities and repurchase substantially the same securities at a specified price and date in the future. We account for dollar rolls as short-term collateralized financings and include the repurchase obligation in other liabilities. At March 31, 2000, the company had $1.7 billion of outstanding dollar roll agreements. The average amount outstanding and the weighted-average interest rate on the short-term collateralized borrowings for the three months ended March 31, 2000 were $1.6 billion and 5.5%, respectively. 7. Redemption of Preferred Stock. On March 1, 2000, we redeemed all outstanding shares of our mandatorily convertible preferred stock. Holders received .8264 share of our common stock for each share of preferred stock redeemed. In total, we issued 1.9 million shares of common stock. Item 1. Financial Statements (continued). 8. Legal Proceedings. The company is party to various lawsuits and proceedings, including the following: 1) In the mid-1990s, one of our subsidiaries, American General Financial Center (renamed A.G. Financial Service Center, Inc.) (Financial Service Center), provided financing for satellite dishes sold by independent unaffiliated dealers. On May 18, 1999, the Chancery Court of the First Judicial District of Jones County, Mississippi in a case captioned Clayton D. Smith, et al. v. Delta TV Corporation, Don Acy, US Electronics, American General Financial Center, Civil Action No. 96-0254 (the Clayton Smith matter), rendered a judgment awarding approximately $500,000 in compensatory damages and $167 million in punitive damages against Financial Service Center. The lawsuit was filed on November 15, 1996, by 29 individuals who had each purchased a satellite dish. Financial Service Center, together with certain other American General companies, currently are named as defendants in other pending cases involving the financing of satellite dishes. In August 1999, Financial Service Center filed a voluntary petition to reorganize under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Southern District of Indiana. The decision to reorganize was necessitated by the judgment rendered against Financial Service Center by the Mississippi state court. The filing for reorganization under Chapter 11 is limited to Financial Service Center and was intended to provide a fair and orderly process for managing the claims against Financial Service Center. In January 2000, settlement agreements were entered into in connection with the Clayton Smith matter and other pending cases relating to satellite dish financing. Accordingly, we recorded a charge of $57 million ($36 million aftertax) in fourth quarter 1999 to cover the proposed settlements and other litigation. Resolution of the satellite dish litigation within the recorded charge is dependent upon a number of factors, including obtaining the bankruptcy court's approval of Financial Service Center's plan of reorganization. If court approvals are obtained and appeals are not taken, we expect that the settlements will be final in third quarter 2000. 2) Prior to our acquisition of USLIFE Corporation, one of its subsidiaries entered the workers' compensation reinsurance business in 1997. We discontinued writing new workers' compensation reinsurance business in 1998. Our largest contract was a quota share reinsurance agreement with Superior National Insurance Group, Inc. and its affiliates (collectively, Superior National), effective May 1, 1998. On November 29, 1999, we initiated an arbitration proceeding to rescind this contract from its inception, based in part on misrepresentations and nondisclosures which we believe were made by Superior National. On March 3, 2000, the California Department of Insurance ordered seizure of certain of Superior National's insurance subsidiaries as a result of their financial condition. On April 26, 2000, Superior National Insurance Item 1. Financial Statements (continued). Group, Inc. filed a voluntary petition to reorganize under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Central District of California. We do not believe that the action of the California Department of Insurance or the bankruptcy filing will prevent the company from ultimately arbitrating its claim for recission, and we plan to fully pursue all remedies through the arbitration process. Although we believe, based on the advice of counsel, that the company will succeed in rescinding the contract, risks and uncertainties remain with respect to the ultimate outcome. In the unlikely event the company does not prevail in the arbitration, we do not expect the additional aftertax losses from our workers' compensation business to exceed $85 million. We believe that any ultimate loss related to our workers' compensation business will not have a material adverse effect on our results of operations and financial position. 3) Certain companies acquired by American General Life and Accident Insurance Company (collectively, AGLA), a subsidiary of the company, previously issued small face-amount life insurance policies known as industrial life insurance, which were similar to products sold by other life insurance companies. Although AGLA ceased writing industrial life insurance more than twenty years ago, recent legal actions have been brought challenging certain pricing practices in this business. On December 10, 1999, a class action was filed by Leola McNeil against AGLA, Leola McNeil v. American General Life and Accident Insurance Company et al., Civil Action No. 3-99-1157 (M.D. TN 1999), principally challenging AGLA's pricing practices with respect to certain minority purchasers of industrial life insurance and seeking compensatory and punitive damages and injunctive relief. On April 27, 2000, the Florida Treasurer and Insurance Commissioner issued a cease and desist order to AGLA, In the Matter of American General Life and Accident Insurance Company, Case No. 348600-00-C, requiring AGLA to cease collecting a portion of premiums from Florida minority policyholders and to submit a corrective action plan to the Florida Department of Insurance. Prior to that date, AGLA had taken action to cease collecting a portion of the premiums on its industrial life policies from the affected minority policyholders nationwide. AGLA is engaged in efforts designed to resolve these matters expeditiously. We believe that any ultimate loss relating to these matters will not have a material adverse effect on American General's financial position. However, it is possible that the outcome of these matters or other future proceedings could have a material adverse effect on the company's results of operations for a given period. The company is also party to various other lawsuits and proceedings arising in the ordinary course of business. These lawsuits and proceedings include certain class action claims and claims filed by individuals who excluded themselves from market conduct settlements relating to life insurance pricing and sales practices. In addition, many of these claims arise in jurisdictions, such as Alabama and Mississippi, that permit damage awards disproportionate to the actual economic damages alleged to have been incurred. Based upon information Item 1. Financial Statements (continued). presently available, we believe that the total amounts that will ultimately be paid, if any, arising from these lawsuits and proceedings will not have a material adverse effect on the company's results of operations and financial position. However, it should be noted that the frequency of large damage awards, including large punitive damage awards that bear little or no relation to actual economic damages incurred by plaintiffs in some jurisdictions, continues to create the potential for an unpredictable judgment in any given suit. 9. Tax Return Examinations. American General and the majority of its subsidiaries file a consolidated Federal income tax return. The Internal Revenue Service (IRS) has completed examinations of our tax returns through 1988. The IRS is currently examining our tax returns for 1989 through 1996. Although the final outcome of any issues raised is uncertain, we believe that the ultimate liability, including interest, will not exceed amounts recorded in the financial statements. 10. Division Results. We report our financial results in three business divisions, as well as a category for corporate operations. Results of each division include earnings from its business operations and earnings on the amount of equity we consider necessary to support its business. Corporate operations include corporate capital costs and other income or expenses not allocated to the business divisions. Goodwill amortization, net realized investment gains (losses), and non-recurring items are also excluded from divisions results, consistent with the manner in which we review and evaluate the divisions. Division earnings information was as follows: Income Revenues Before Taxes Net Income Three Months Three Months Three Months Ended Ended Ended March 31, March 31, March 31, 2000 1999 2000 1999 2000 1999 Retirement Services $ 983 $ 845 $ 243 $ 211 $ 162 $ 142 Life Insurance 1,352 1,356 284 265 187 173 Consumer Finance 463 421 92 82 59 53 Total divisions 2,798 2,622 619 558 408 368 Corporate operations (10) - (78) (67) (53) (45) Goodwill amortization (12) (12) (12) (12) Net dividends on preferred securities of subsidiaries (25) (22) Operating earnings 318 289 Realized investment losses (51) (2) (51) (2) (33) (2) Total $2,737 $2,620 $ 478 $ 477 $ 285 $ 287 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This item presents specific comments on material changes to our consolidated results of operations, capital resources, and liquidity for the periods reflected in the interim financial statements filed with this report. This analysis should be read in conjunction with the consolidated financial statements and related notes on pages 2 through 10 of this Quarterly Report on Form 10-Q. Amounts in the tables are in millions, except per share data. OVERVIEW The company is a diversified financial services organization with over $120 billion of assets and $20 billion of annual revenues and deposits. We are a leading provider of retirement services, life insurance, consumer loans, and investments to 12 million customers. Our financial highlights for first quarter 2000 were as follows: Three Months Ended March 31, 2000 1999 Revenues and deposits $ 5,514 $ 4,735 Earnings Operating earnings 318 289 Net income 285 287 Earnings per share Operating earnings 1.25 1.11 Net income 1.12 1.11 Assets* 123,061 107,301 Shareholders' equity* Total 7,825 7,392 Per share 31.61 29.20 Operating return on equity 16.20% 15.46% *Excludes fair value adjustment under SFAS 115. Revenues and deposits increased $779 million, or 16%, for the three months ended March 31, 2000, compared to the same period in 1999, due to higher fixed and variable deposits in our retirement services and life insurance divisions. Operating earnings increased 10% due to increases in earnings in our retirement services division (up 14%), life insurance division (up 8%), and consumer finance division (up 11%). Operating earnings per share increased 13%, compared to the 10% increase in operating earnings, as a result of the decline in average shares outstanding due to the repurchase of 6.2 million shares of our common stock in the last twelve months. Net income decreased $2 million, or 1%, due to a $31 million aftertax increase in realized losses on sales of securities, reflecting our ongoing management of the investment portfolio to maximize its relative value and to optimize the company's tax position. The $433 million increase in shareholders' equity reflects $1.1 billion in net income over the last twelve months, partially offset by dividends paid to our shareholders of $415 million and share repurchases of $414 million. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). BUSINESS DIVISIONS We manage our business operations through three divisions retirement services, life insurance, and consumer finance based on products and services offered. Results of each of our business division's operations are discussed below. Retirement Services Our retirement services division results were as follows: Three Months Ended March 31, 2000 1999 Fixed margin $ 243 $ 230 Variable margin 74 48 Total margin 317 278 Other revenue 16 7 Net revenue 333 285 Operating expenses 82 71 Other, net* 8 3 Pretax earnings 243 211 Income taxes 81 69 Division earnings $ 162 $ 142 *Primarily commissions and change in DPAC/CIP. Earnings. Retirement services earnings are a function of the level of our managed assets, fixed and variable margin, and operating expenses. Division earnings increased 14%, or $20 million, for the three months ended March 31, 2000 compared to the same period in 1999. The increase was due to a 22% increase in managed assets that resulted in increased total margin, which more than offset higher operating expenses. Assets and Deposits. Investments and separate account assets grew 7% and 48%, respectively, from March 31, 1999 to March 31, 2000, contributing to the increases in our fixed and variable margins. Assets and deposits were as follows: Three Months Ended March 31, 2000 1999 Assets Investments* $42,561 $39,668 Separate accounts 23,606 15,973 Premiums and deposits Fixed 1,337 1,055 Variable 887 780 Mutual funds 271 20 Surrender ratios Fixed 9.87% 6.93% Variable 5.91 5.27 *Excludes fair value adjustment under SFAS 115. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Total premiums and deposits increased 35%, from $1.9 billion in first quarter 1999 to $2.5 billion in first quarter 2000. The 27% increase in fixed premiums and deposits resulted from our strong sales of fixed annuities through financial institutions. Variable deposit growth of 14% reflects our ability to meet continued consumer interest in equity-based products through group retirement plans. Mutual fund deposit growth of $251 million reflects our recent introduction of this product to meet customer demand for mutual funds without an annuity wrapper. Changes in the surrender ratios resulted from more aggressive management of interest spreads, more policies without surrender protection, and increased competition. Fixed Margin. Fixed margin, the difference between net investment income on general account investments and interest credited to policyholders' fixed accounts, increased 6% in the first quarter of 2000 compared to 1999. Fixed investment spread measures this difference in terms of interest rates. Net investment income and the components of fixed investment spread were as follows: Three Months Ended March 31, 2000 1999 Net investment income $ 775 $ 716 Investment yield 7.70% 7.66% Average crediting rate 5.35 5.38 Fixed investment spread 2.35% 2.28% The $13 million increase in the fixed investment margin was largely due to a higher level of invested assets and the resulting 8% increase in net investment income. Investment yield, average crediting rate, and fixed investment spread were relatively flat for the three months ended March 31, 2000 compared to the same period in 1999. Variable Margin. Our variable margin includes mortality and expense risk fees and asset management fees. The increase in these fees of $26 million, or 54%, for the first three months of 2000, compared to the same period of 1999, was driven by a 48% growth in separate account assets. Our variable fee rate increased 8 basis points for first quarter 2000 due to more favorable revenue- sharing agreements with third-party asset managers. Operating Expenses. Operating expenses increased $11 million for the three months ended March 31, 2000, compared to the same period in 1999, primarily due to increased personnel costs for our expanded sales force and $2 million of operating expenses for a mutual fund group that we purchased in first quarter 2000. The ratio of operating expenses to average assets improved to .48% for first quarter 2000 from .49% for first quarter 1999. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Life Insurance Our life insurance division results were as follows: Three Months Ended March 31, 2000 1999 Premiums and other considerations $ 757 $ 759 Net investment income 544 555 Other income 51 42 Total revenues 1,352 1,356 Insurance and annuity benefits 707 733 Operating expenses 167 172 Other expenses* 194 186 Total expenses 1,068 1,091 Pretax earnings 284 265 Income taxes 97 92 Division earnings $ 187 $ 173 *Primarily commissions and change in DPAC/CIP. Earnings. The division's profitability is driven by asset growth, investment spread, mortality, and operating expenses. Earnings increased 8% for the three months ended March 31, 2000 compared to the same period in 1999. The increase resulted from a 6% growth in separate and general account reserves and a 10% increase in insurance in force, due to growth in existing business as well as new ventures, and reduced operating expenses. Sales, Deposits, and Premiums. Sales represent annualized premiums for new products issued, while deposits represent funds we receive for interest- sensitive insurance and annuities. Sales and premiums and deposits of the life insurance division were as follows: Three Months Ended March 31, 2000 1999 Premiums and deposits Life insurance $ 864 $ 819 Annuities 236 149 Other 146 170 Sales Life insurance 174 164 Annuities 236 143 Life insurance sales and premiums and deposits for first quarter 2000 increased 6% over first quarter 1999 due to increasing sales of variable products, universal life, and term insurance, offset by lower corporate market sales. Annuity sales increased 65% in the first three months of 2000, compared to the same period of 1999, while premiums and deposits increased 58%. These increases were due to strong sales of variable annuities through our financial institution channel. Other premiums and deposits, which include primarily our accident and health, and property and casualty business, declined 14% for first quarter 2000 compared to first quarter 1999 due to our de-emphasis of these lines of business. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Investment Spread. Investment results and interest crediting rates were as follows: Three Months Ended March 31, 2000 1999 Assets Investments* $28,597 $27,527 Separate accounts 2,890 1,517 Insurance and annuity liabilities 26,085 25,895 Investment yield 8.03% 8.35% Average crediting rate 5.82 5.92 Investment spread 2.21% 2.43% *Excludes fair value adjustment under SFAS 115. Net investment income and the investment yield decreased during the first three months of 2000, compared to the same period of 1999, due to lower income from securities called before their maturity dates and lower market rates on new and reinvested funds. These decreases were partially offset by our reduction of crediting rates on interest-sensitive products, as well as the increase in invested assets. Mortality and Persistency. Death claims and premium termination rates were as follows: Three Months Ended March 31, 2000 1999 Death claims $ 259 $ 250 Death claims per $1,000 in force 3.76 3.66 Premium termination rate 12.15% 12.42% Death claims per $1,000 of in force increased in first quarter 2000, compared to the same period in 1999, due to the increasing average age of the in force business. The lower premium termination rate for 2000 reflects higher than normal terminations in our career agency lines during 1999. Mortality and persistency experience during first quarter 2000 reflected normal fluctuations and remained within our pricing assumptions. Expenses. Operating expenses decreased $5 million, or 3%, for the first three months of 2000 compared to the same period in 1999. Reductions in salary- related and technology costs more than offset costs to market new products. The ratio of operating expenses to direct premiums and deposits improved to 13.25% in 2000 compared to 15.09% in 1999. Other expenses, which consist of commissions and the change in DPAC and CIP, increased $8 million, or 4%, in first quarter 2000 compared to first quarter 1999. Commissions increased period over period due to the higher level of sales in first quarter 2000. Deferrals of commissions and certain operating expenses, as well as the related amortization of previously-capitalized DPAC and CIP, increased in first quarter 2000 compared to the same period in 1999. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Consumer Finance Our consumer finance division results were as follows: Three Months Ended March 31, 2000 1999 Finance margin $ 228 $ 219 Other income 72 64 Net revenue 300 283 Provision for finance receivable losses 49 52 Operating expenses 128 123 Other expenses* 31 26 Pretax earnings 92 82 Income taxes 33 29 Division earnings $ 59 $ 53 *Primarily insurance benefits Earnings. Division earnings are a function of the amount and mix of finance receivables, interest spread, credit quality, and operating expenses. Earnings increased 11% for the three months ended March 31, 2000, compared to the same period in 1999, due to a 14% increase in average receivables, improved credit quality, and the benefits of operating efficiencies, partially offset by lower interest spread. Finance Receivables. The mix of finance receivables at quarter end was as follows: March 31, 2000 1999 Real estate loans $ 7,232 $6,069 Non-real estate loans 2,521 2,475 Retail sales finance 1,360 1,261 Total finance receivables 11,113 9,805 Allowance for losses (369) (384) Finance receivables, net $10,744 $9,421 Average finance receivables $11,058 $9,721 We increased our finance receivables portfolio by $1.3 billion during the last twelve months. Average finance receivables in the first three months of 2000, compared to the same period in 1999, increased 14% due to higher loan production and acquisitions of real estate loan portfolios. Over the last twelve months, we generated $6.4 billion of loans in our branch offices and purchased $1.6 billion of real estate loans, while $6.5 billion of loans were repaid. We increased the percentage of real estate loans in the portfolio to 65% at March 31, 2000, compared to 62% at March 31, 1999. During first quarter 2000, we completed the sale of $27 million of fully-reserved receivables, resulting in a pretax gain of $1 million. The allowance for finance receivable losses decreased $15 million from the prior year period, primarily due to the sale of these receivables. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Finance Margin. Finance margin is the difference between the finance charges we charge our customers and interest expense on the debt required to fund finance receivables. Interest spread measures this difference in terms of interest rates. Finance margin and the components of interest spread were as follows: Three Months Ended March 31, 2000 1999 Finance charges $ 391 $ 357 Interest expense 163 138 Finance margin $ 228 $ 219 Yield on finance receivables 14.19% 14.85% Borrowing cost 6.42 6.22 Interest spread 7.77% 8.63% From prior year-to-date, finance charges increased 9% due to the increases in our average finance receivables, partially offset by the decline in yield on the receivables. The decline in yield reflected the increased proportion of real estate loans in our portfolio. Interest expense increased due to increases in average debt outstanding and higher borrowing costs. Interest spread decreased in 2000 due to the combined effect of the decline in yield and the increase in our borrowing cost. Credit Quality. Net charge-off and delinquency ratios reflect the quality of our receivables portfolio, the success of our collection efforts, and general economic conditions. Credit quality information was as follows: Three Months Ended March 31, 2000 1999 Charge offs $ 49 $ 52 Delinquencies 355 378 Allowance for losses 369 384 Ratios Charge-off 1.76% 2.14% Delinquency 3.05 3.65 Allowance 3.32 3.92 Charge-off coverage 1.90x 1.85x Risk-adjusted yield 12.43% 12.71% Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). The decrease in the charge-off ratio for the first three months of 2000, compared to the same period in 1999, reflects our continuing focus on credit quality, including the increased percentage of loans secured by real estate. The decreases in delinquencies and the delinquency ratio at March 31, 2000, compared to March 31, 1999, were due to continued improvement in credit quality and the sale of $27 million of fully-reserved receivables in first quarter 2000. The allowance for finance receivable losses is maintained at an amount that we believe is adequate to absorb anticipated credit losses in our existing portfolio. The allowance as a percentage of finance receivables has continued to decline, reflecting the improved credit quality and portfolio mix, while the charge-off coverage ratio has increased to 1.9 times annual charge offs. Risk-adjusted yield represents the yield on finance receivables less the charge-off ratio. Although risk-adjusted yield declined, the decrease is less than the decline in yield on finance receivables due to the improvement in the charge-off ratio. Operating Expenses. Operating expenses as a percentage of average finance receivables for the first three months of 2000 improved to 4.57% from 5.06% for the same period of 1999. This decrease reflects a 14% increase in average finance receivables compared to a 3% increase in operating expenses. Operating expenses increased due to higher salary-related and technology costs, partially offset by lower litigation expenses. INVESTMENTS Our invested assets consist primarily of fixed maturity securities, mortgage loans on real estate, and policy loans. Fair Value of Securities. At March 31, 2000, the market value of our fixed maturity securities was 97.4% of amortized cost compared to 97.2% of amortized cost at December 31, 1999. A slight decline in market interest rates during first quarter 2000 reduced the negative fair value adjustment on our fixed maturity securities portfolio by $116 million, with a related $87 million positive adjustment to shareholders' equity. The components of the fair value adjustment at March 31, 2000 and December 31, 1999, and the first quarter change, were as follows: March 31, December 31, 2000 1999 Change Fair value adjustment to fixed maturity securities $(1,634) $(1,750) $ 116 Related increase in DPAC/CIP 365 347 18 Related decrease in deferred income taxes 448 495 (47) Valuation allowance on deferred tax asset (381) (381) - Net unrealized losses Fixed maturity securities (1,202) (1,289) 87 Other 21 11 10 Net unrealized losses on securities $(1,181) $(1,278) $ 97 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Fixed Maturity Securities. At March 31, 2000, our fixed maturity securities investment portfolio consisted of $46.5 billion of corporate bonds, $13.1 billion of mortgage-backed securities, and $2.1 billion of bonds issued by governmental agencies. The average credit rating of the portfolio was A at March 31, 2000 and A+ at December 31, 1999. Average ratings by category at March 31, 2000 were as follows: March 31, Average Credit 2000 % Rating Investment grade $45,387 74% A Mortgage-backed 13,075 21 AAA Below investment grade 3,332 5 BB- Total fixed maturity securities $61,794 100% A Investment income from our below investment grade securities was $90 million (9.9% yield) for the three months ended March 31, 2000 and $85 million (9.9% yield) for the same period in 1999. Realized investment losses on below investment grade securities were $35 million in first quarter 2000 and $15 million in first quarter 1999. Non-performing bonds were less than 0.1% of total fixed maturity securities at March 31, 2000 and December 31, 1999. We classify bonds as non-performing when the payment of interest is sufficiently uncertain as to preclude accrual of interest. Mortgage Loans. Mortgage loans on real estate, consisting primarily of loans on office and retail properties, represented 5% of our invested assets at March 31, 2000 and December 31, 1999. Mortgage loan statistics at March 31, 2000 and December 31, 1999 were as follows: March 31, December 31, 2000 1999 Mortgage loans $ 3,692 $ 3,712 Allowance for losses (25) (26) Mortgage loans, net $ 3,667 $ 3,686 Yield on total mortgage loans 8.3% 8.3% Yield on restructured loans 7.8 7.8 Percentage of mortgage loans Restructured 1.7 1.7 Delinquent (60+ days) .6 .6 Watch list loans .7 .9 Allowance for losses .7 .7 Assets Under Management. Assets under management, which include invested assets, separate account assets, finance receivables, and mutual funds, increased to $115 billion at March 31, 2000 from $97 billion at March 31, 1999. The 18% increase over the prior year primarily related to growth in invested assets and separate account assets. Our acquisition of the North America Funds, a family of 16 sub-advised mutual funds, in first quarter 2000 increased mutual funds under management by $1.1 billion to $2.5 billion. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). CAPITAL RESOURCES Corporate Capital. The level of our corporate capital is determined primarily by the required equity of our business divisions. The mix of corporate capital between debt and equity is influenced by our overall corporate strategy and structure. Our target capital structure consists of 25% corporate debt, 15% redeemable equity, and 60% shareholders' equity. The amount and mix of our corporate capital at March 31, 2000 and December 31, 1999 were as follows: March 31, December 31, 2000 1999 Corporate capital* $12,987 $12,768 Corporate debt 24.9% 24.4% Redeemable equity 14.8 15.1 Shareholders' equity 60.3 60.5 *Excludes fair value adjustment under SFAS 115. Shareholders' Equity. On March 1, 2000, we redeemed all outstanding shares of our mandatorily convertible preferred stock, with a stated value of $85 million. Holders received .8264 share of our common stock for each share of preferred stock redeemed, for a total of 1.9 million common shares. We use share repurchases as a means of maintaining our target capital structure. We repurchased 1.7 million shares for $93 million in first quarter 2000. Since 1987, American General has repurchased 124.3 million common shares for an aggregate cost of $3.3 billion. Our future repurchase activity will be based on the company's corporate development activities, capital management strategy, and fluctuations in our common stock price. Retirement Services and Life Insurance. The amount of statutory equity required to support the business of our retirement services and life insurance companies is principally a function of four factors: (1) quality of assets invested to support insurance and annuity reserves, (2) mortality and other insurance-related risks, (3) interest-rate risk resulting from potential mismatching of asset and liability durations, and (4) general business risks. Each of these items is a key factor in the National Association of Insurance Commissioners' risk-based capital (RBC) formula, used to evaluate the adequacy of a life insurance company's statutory equity. We manage the statutory equity of our principal retirement services and life insurance companies to a target of 2.5 times the Company Action Level RBC (or 5.0 times the Authorized Control Level RBC). We adjust dividends from, or contributions to, these companies to maintain this target. At March 31, 2000, our principal retirement services and life insurance companies had statutory equity in a range of 2.1 to 3.4 times the Company Action Level RBC, with a weighted-average of 2.6 times. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Consumer Finance. The capital of our consumer finance division varies directly with the level of its finance receivables. This capital, totaling $11.8 billion at March 31, 2000, consisted of $1.5 billion of equity and $10.3 billion of consumer finance debt, which was not guaranteed by American General. The capital mix of consumer finance debt and equity is based upon maintaining leverage at a level that supports cost-effective funding. The consumer finance division's target ratio of debt to tangible net worth, a standard measure of financial risk in the consumer finance industry, is currently 7.5 to 1. The ratio equaled the target at March 31, 2000 and was 7.6 to 1 at December 31, 1999. LIQUIDITY Our overall liquidity is based on cash flows from the business divisions and our ability to borrow in both the long-term and short-term markets at competitive rates. At March 31, 2000, we had committed and unused credit facilities of $5.6 billion, substantially all of which were to support the company's commercial paper borrowings. We believe that our overall sources of liquidity will continue to be sufficient to satisfy our foreseeable financial obligations. Corporate Operations. The primary sources of cash for corporate operations include net dividends from our business divisions and the proceeds from issuances of debt and redeemable equity. Corporate operations use cash to pay dividends to shareholders, to pay aftertax interest on corporate debt and dividends on preferred securities, to repurchase common stock, and to pay other corporate expenses. We expect to fund future acquisitions and maturities of debt and preferred securities through external sources, while maintaining our capital structure. Net dividends received from our business divisions were as follows: Three Months Ended March 31, 2000 1999 Dividends received Retirement Services $ 70 $ 42 Life Insurance 123 83 Consumer Finance 27 41 Total received 220 166 Contributions paid Life Insurance 22 179 Net dividends received (paid) $ 198 $ (13) The 1999 net dividends included contributions of $179 million to fund the payment of market conduct litigation costs. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Retirement Services. Principal sources of cash for our retirement services division were as follows: Three Months Ended March 31, 2000 1999 Cash from operating activities $ 505 $ 504 Fixed policyholder account deposits, net of withdrawals 72 292 Variable account deposits, net of withdrawals 787 655 Mutual fund deposits, net of withdrawals 200 (11) Short-term collateralized financings 1,024 953 The increase in net variable account and mutual fund deposits and decline in net fixed policyholder account deposits quarter over quarter were a result of policyholders continuing to seek higher returns in equity-based investments, as well as new variable product introductions. Because the investment risk on variable accounts and mutual fund products lies predominately with the policyholder, deposits and withdrawals related to separate accounts and mutual funds are not included in the company's cash flow statement. The increase in cash from short-term collateralized financings relates to the company's expanded use of dollar rolls as part of our investment strategy. The division's major use of cash was the net purchase of investments necessary to support increases in insurance and annuity liabilities. The division also paid dividends of $70 million to the parent in first quarter 2000. Life Insurance. Principal sources of cash for our life insurance division were as follows: Three Months Ended March 31, 2000 1999 Cash from operating activities $ 39 $ 7 Fixed policyholder account deposits, net of withdrawals (14) 70 Variable account deposits, net of withdrawals 219 114 Short-term collateralized financings 674 180 The $84 million decline in net fixed policyholder account deposits and the increase in net variable account deposits in first quarter 2000, compared to 1999, resulted from policyholders seeking higher returns from equity-based investments and new variable product introductions. The increase in short- term collateralized financings relates to our expanded use of dollar rolls. The division's major use of cash was the net purchase of investments necessary to support increases in insurance and annuity liabilities. In first quarter 2000, the division paid net dividends to the parent of $101 million. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued). Consumer Finance. Principal sources of cash for our consumer finance division were as follows: Three Months Ended March 31, 2000 1999 Cash from operating activities $ 192 $ 158 Increase in debt 63 110 Net cash provided by operating activities increased $34 million in first quarter 2000 compared to first quarter 1999 due to the increase in finance charges from higher average net receivables. Cash generated by borrowings decreased in 2000, compared to the same period in 1999, due to lower growth in finance receivables in 2000. The division's major use of cash was to fund finance receivables growth. Net cash used to fund finance receivables was $172 million in first quarter 2000, compared to $204 million in first quarter 1999. In first quarter 2000, the division paid dividends to the parent of $27 million. FORWARD-LOOKING STATEMENTS All statements, trend analyses, and other information contained herein relative to markets for our products and trends in our operations or financial results, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," and other similar expressions, constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. We have made these forward-looking statements based upon our current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments affecting the company will be those we anticipated. Actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: (1) changes in general economic conditions, including the performance of financial markets and interest rates; (2) customer responsiveness to both products and distribution channels; (3) competitive, regulatory, or tax changes that affect the cost of, or demand for, our products; (4) our ability to secure necessary regulatory approvals; (5) adverse litigation or arbitration results, or resolution of litigation or arbitration; and (6) the formation of strategic alliances or business combinations among our competitors or business partners. Investors are also directed to other risks and uncertainties discussed in documents we filed with the Securities and Exchange Commission. We undertake no obligation to update or revise any forward-looking information, whether as a result of new information, future developments, or otherwise. PART II. OTHER INFORMATION Item 1. Legal Proceedings. Refer to Note 8 of Notes to Consolidated Financial Statements included in Part I of this Form 10-Q for the quarter ended March 31, 2000. Item 3. Quantitative and Qualitative Disclosures about Market Risk. American General's exposure to market risk is primarily related to changes in interest rates. Quantitative and qualitative disclosures about our market risk resulting from changes in interest rates are included in the section titled "Asset/Liability Management" of Management's Discussion and Analysis in our 1999 Annual Report to Shareholders. There have been no material changes in such risks or our asset/liability management program during the quarter ended March 31, 2000. Refer to Note 5 of Notes to Consolidated Financial Statements included in Part I of this Form 10-Q for the quarter ended March 31, 2000 for a discussion of significant derivative financial instrument activity during the quarter. Item 6. Exhibits and Reports on Form 8-K. a. Exhibits. Exhibit 3 Amended and Restated Bylaws of American General Exhibit 10.1 Second Amendment to Employment Agreement between American General and Robert M. Devlin Exhibit 10.2 Second Amendment to Supplemental Executive Retirement Agreement between American General and Robert M. Devlin Exhibit 10.3 Form of Employment Agreement between American General and each of the following executive officers: Frederick W. Geissinger, John A. Graf, Rodney O. Martin Jr. and Richard W. Scott Exhibit 10.4 Form of Supplemental Executive Retirement Agreement between American General and each of the following executive officers: Frederick W. Geissinger and Rodney O. Martin Jr. Exhibit 10.5 Form of Supplemental Executive Retirement Agreement between American General and each of the following executive officers: John A. Graf and Richard W. Scott Exhibit 11 Computation of Earnings per Share (included in Note 3 of Notes to Consolidated Financial Statements) Exhibit 12 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends Exhibit 27 Financial Data Schedule b. Reports on Form 8-K. None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 15, 2000. AMERICAN GENERAL CORPORATION (Registrant) By: NICHOLAS R. RASMUSSEN Nicholas R. Rasmussen Executive Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) EXHIBIT INDEX Exhibit 3 Amended and Restated Bylaws of American General 10.1 Second Amendment to Employment Agreement between American General and Robert M. Devlin 10.2 Second Amendment to Supplemental Executive Retirement Agreement between American General and Robert M. Devlin 10.3 Form of Employment Agreement between American General and each of the following executive officers: Frederick W. Geissinger, John A. Graf, Rodney O. Martin Jr. and Richard W. Scott 10.4 Form of Supplemental Executive Retirement Agreement between American General and each of the following executive officers: Frederick W. Geissinger and Rodney O. Martin Jr. 10.5 Form of Supplemental Executive Retirement Agreement between American General and each of the following executive officers: John A. Graf and Richard W. Scott 11 Computation of Earnings per Share (included in Note 3 of Notes to Consolidated Financial Statements) 12 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends 27 Financial Data Schedule EX-3 2 Amended and Restated Bylaws (as of April 27, 2000) of American General Corporation Houston, Texas [Logo of American General appears here] AMENDED AND RESTATED BYLAWS OF AMERICAN GENERAL CORPORATION ARTICLE I. Capital Stock SECTION 1. Certificates for Shares. The certificates for shares of the capital stock of the company shall be in such form as shall be approved by the board of directors. The certificates shall be signed by the chairman of the board or president, and also by the secretary, and may be sealed with the seal of the company or a facsimile thereof. Where any such certificate is countersigned by a transfer agent, or registered by a registrar, either of which is other than the company itself or an employee of the company, the signatures of the chairman of the board or president and of the secretary may be facsimiles. The certificates shall be consecutively numbered and shall be entered on the stock records of the company as they are issued, and each shall exhibit the holder's name and the number of shares. SECTION 2. Transfer of Shares. The shares of stock of the company shall be transferable only on the stock records of the company by the registered holders thereof in person or by their duly authorized attorneys or legal representatives, upon surrender of certificates representing such shares duly endorsed or in proper form for transfer, with appropriate evidence of authority to transfer, and cancellation thereof. SECTION 3. Fixing of Record Date; Closing of Transfer Books. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or for any other proper purpose, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty (50) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. In lieu of fixing a record date, the board of directors may provide that the stock transfer books of the company shall be closed for a stated period not to exceed, in any case, fifty (50) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which the notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided herein, such determination shall apply to any adjournment of the meeting except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired. SECTION 4. Registered Shareholders. The company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person or entity, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of Texas. SECTION 5. Lost, Destroyed, or Stolen Stock Certificates. No certificate for shares of stock in the company shall be issued in place of any certificate alleged to have been lost, destroyed, or stolen except on production of evidence satisfactory to the board of directors, or such person or persons as it may designate, of such loss, destruction, or theft, and, if the board of directors so requires, upon the furnishing of an indemnity bond in such amount (but not to exceed twice the then-market value of the shares represented by the certificate) and with such terms and such surety or sureties as the board of directors may, in its discretion, require. SECTION 6. Regulations. The board of directors shall have the power and authority to make all such rules and regulations to the extent permitted by law, the articles of incorporation, and these bylaws, as it may deem expedient concerning the issue, transfer, registration, or replacement of certificates for shares of the capital stock of the company. ARTICLE II. Shareholders SECTION 1. Annual Meeting. The annual meeting of the shareholders shall be held at such hour as shall be designated by the board of directors either (i) on the last business day of April of each year, or (ii) on such other date, not more than thirteen (13) months after the last preceding annual meeting, as the board of directors shall designate, for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. SECTION 2. Special Meetings. A special meeting of shareholders for any purpose or purposes may be called at any time by the chairman of the board, the president, or a majority of the board of directors, and shall be called by the chairman of the board, the president, or the secretary upon the written request therefor, stating the purpose or purposes of the meeting, delivered to such officer, signed by the holders of at least ten percent (10%) of the issued and outstanding shares entitled to vote at such meeting. Only such business as shall be stated or indicated in the notice of the meeting shall be transacted at any such special meeting of shareholders. SECTION 3. Place. The annual meeting of shareholders may be held at any place as may be designated in the call of the meeting. Meetings of shareholders shall be held at the principal office of the company unless another place is designated for a meeting in the manner provided herein. SECTION 4. Notice. Written or printed notice stating the place, day, and hour of each meeting of shareholders, and in case of a special meeting the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the officer calling the meeting, to each shareholder of record entitled to vote at such meeting. SECTION 5. Quorum. Except as may be otherwise provided by law or the articles of incorporation, no meeting of shareholders shall elect directors, or transact other business of the company, unless there shall be present, in person or by proxy, a quorum, which is defined as the holders of a majority of the issued and outstanding shares of capital stock of the company entitled to vote at the meeting, and the act of a majority of the shares represented at any meeting at which a quorum is present shall be the act of the meeting. The shareholders present at any meeting, though less than a quorum, may adjourn the meeting, and any business may be transacted at the adjourned meeting that could have been transacted at the original meeting. No notice of adjournment, other than the announcement at the meeting, need be given. SECTION 6. Proxies. At any meeting of shareholders, a shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxies shall be filed with the secretary of the company before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. Each proxy shall be revocable unless it is expressly provided therein that the proxy shall be irrevocable or unless it is otherwise made irrevocable by law. SECTION 7. Voting of Shares. Each outstanding share of a class of stock entitled to vote upon a matter submitted to a vote at a meeting of shareholders shall be entitled to one vote on such matter. Votes for directors, and upon demand of any shareholder votes upon any question before a meeting, shall be by ballot. SECTION 8. Presiding Officer and Secretary. The chairman of the board, or in his absence the president, shall preside at each meeting of shareholders. In the absence of both, a chairman selected by the board of directors from among the directors present shall preside. The records of each meeting shall be kept by the secretary, or in his absence an assistant secretary, or in the absence of both, a person appointed by the chairman of the meeting. SECTION 9. List of Shareholders. A complete list of shareholders entitled to vote at each shareholders' meeting, arranged in alphabetical order, with the address of each and number of shares of each class and series of stock held by each, shall be prepared by the secretary and filed at the registered office of the company, and shall be subject to inspection by any shareholder during usual business hours for a period of ten (10) days prior to such meeting. It shall be produced at such meeting and shall at all times during such meeting be subject to inspection by any shareholder. SECTION 10. Inspectors of Election. The chairman of each meeting of shareholders shall appoint a committee to act as inspectors of election. Such committee shall report to the meeting the number of shares of each class and series of stock, and of all classes, represented by proxy and shall prepare a list showing the total number of shares of each class and series of stock, and of all classes, represented either in person or by proxy. The inspectors of election shall oversee the vote of the shareholders for the election of directors and for any other matters that are put to a vote of shareholders at the meeting; receive a ballot evidencing votes cast by the proxy committee; judge the qualifications of shareholders voting; collect, count, and report the results of ballots cast by any shareholders voting in person; and perform such other duties as may be required by the chairman of the meeting or the shareholders. SECTION 11. Nature of Business at Meetings of Shareholders. No business may be transacted at an annual meeting of shareholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the board of directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by a shareholder of the company (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 11 and on the record date for the determination of shareholders entitled to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 11. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the company. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the company not less than one hundred and twenty (120) days nor more than one hundred and fifty (150) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary must set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such shareholder, (iii) the class or series and number of shares of capital stock of the company which are owned beneficially or of record by such shareholder, (iv) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business and (v) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 11; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 11 shall be deemed to preclude discussion by any shareholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. ARTICLE III. Board of Directors SECTION 1. Number, Term of Office, Nomination, Vacancy and Removal. The business affairs and property of the company shall be managed and controlled by the board of directors, and, subject to the restrictions imposed by law, by the articles of incorporation, or by these bylaws, the board of directors may exercise all of the powers of the company. (a) Number. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of the directors of the company shall be fixed from time to time by the board of directors but shall not be fewer than three (3) nor more than twenty-five (25). Within these limits, the number of directors may be increased or decreased (provided that any decrease does not shorten the term of any incumbent director) from time to time by resolution of the board of directors. Directors must be shareholders, but they need not be residents of the State of Texas. (b) Election and Terms. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect additional directors under specified circumstances, directors shall be elected at the annual meeting of the shareholders. Each director shall serve until the next annual meeting and until his successor shall have been elected and qualified, or until his earlier death, resignation, or removal; provided, however, that the term of any director who is also an officer of the company or of any subsidiary of the company shall simultaneously terminate when that director ceases, for whatever reason, to be an officer of the company or of any subsidiary of the company, unless the board of directors, in its discretion and upon resolution adopted by a majority of the remaining directors then in office, waives the applicability hereof. (c) Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the company, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the company to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the board of directors may be made at any annual meeting of shareholders, or at any special meeting of shareholders called for the purpose of electing directors, (a) by or at the direction of the board of directors (or any duly authorized committee thereof) or (b) by any shareholder of the company (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 1(c) and on the record date for the determination of shareholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 1(c). In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the company. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the company (a) in the case of an annual meeting, not less than one hundred and twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of shareholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary must set forth (a) as to each person whom the shareholder proposes to nominate for election as a director (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the company which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the shareholder giving the notice (i) the name and record address of such shareholder, (ii) the class or series and number of shares of capital stock of the company which are owned beneficially or of record by such shareholder, (iii) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such shareholder, (iv) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the company unless nominated in accordance with the procedures set forth in this Section 1(c). If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. (d) Vacancies. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect directors under specified circumstances, any vacancies on the board of directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the board of directors. Any director so elected by the board of directors to fill a vacancy shall hold office for the remainder of the full term of the director whose departure from the board created the vacancy. A directorship to be filled by reason of an increase in the number of directors by action of the board of directors (within the limits set forth in paragraph (a) of Section 1 of this article) may be filled by the board of directors for a term of office continuing only until the next election at an annual meeting or at a special meeting of shareholders called for that purpose; provided, however, that the board of directors shall not fill more than two such directorships during the period between two successive annual meetings of shareholders. (e) Removal. Subject to the rights of any class or series of stock having a preference over the Common Stock of the company as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office, with or without cause, only by the affirmative vote of the holders of at least seventy-five percent (75%) of the combined voting power of the then outstanding shares of all classes of stock of the company entitled to vote generally in the election of directors, voting together as a single class. SECTION 2. Annual Meeting. Each newly elected board of directors shall hold its first meeting immediately following the annual meeting of shareholders each year, for the purposes of organization, the election of a chairman of the board from among their number, the election of officers of the company, and the transaction of such other business as may properly come before such meeting, and no notice of such meeting shall be necessary. SECTION 3. Regular Meetings. In addition to the annual meeting of the board of directors, four (4) regular meetings shall be held in each year at the time and place designated by the chairman of the board, for the purpose of transacting any business within the powers of the board. Notice of such regular meetings shall be given as provided herein. SECTION 4. Special Meetings. A special meeting of the board of directors shall be held whenever called by the chief executive officer or by the secretary on the written request of any five (5) of the directors, and at such time and place as may be specified in the notice thereof. Such notice, or any waiver pursuant to Article VII, Section 6 hereof, need not state the purpose or purposes of such meeting. SECTION 5. Notice. The secretary shall give notice to each director of each regular and special meeting in person or by mail or by any form of telecommunication, at least twenty-four (24) hours before the meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting has not been lawfully called or convened. SECTION 6. Quorum. A majority of the directors in office shall constitute a quorum for the transaction of business, but if at any meeting of the board of directors there is less than a quorum present, a majority of those present or any director solely present may adjourn the meeting from time to time without further notice. The act of a majority of the directors present at a meeting at which a quorum is in attendance shall be the act of the board of directors, unless the act of a greater number is required by law, the articles of incorporation, or these bylaws. SECTION 7. Chairman of the Board. The chairman of the board shall preside at all meetings of the shareholders and of the board of directors; shall have authority to execute all legal instruments necessary for the transaction of the company's business; may sign certificates for shares of capital stock of the company; may be designated as chief executive officer as provided in these bylaws; and shall have such other responsibilities and powers as may be prescribed in these bylaws or from time to time by the board of directors. If he is not designated as chief executive officer, the chairman of the board shall have such powers and perform such duties as maybe delegated to him by the chief executive officer, and shall be vested with all the powers and authorized to perform all the duties of the chief executive officer in his absence or inability to act. SECTION 8. Order of Business and Officers at Meetings. At meetings of the board of directors, business shall be transacted in such order as the board may determine from time to time. At all meetings of the board of directors, the chairman of the board shall preside, and in the absence of the chairman of the board, a chairman shall be chosen by the board of directors from among the directors present. The secretary of the company shall act as secretary of all meetings of the board of directors, or in the absence of the secretary an assistant secretary shall so act; or in the absence of both, the presiding officer shall appoint any person to act as secretary of the meeting. SECTION 9. Compensation. Directors shall not receive any stated salary for their service as directors, but by resolution of the board of directors an annual retainer may be paid and a fixed sum and expenses of attendance, if any, may be allowed for attendance at any meeting of the board of directors; provided that nothing contained herein shall be construed to preclude any director from serving the company in any other capacity and receiving compensation therefor. SECTION 10. Presumption of Assent. A director of the company who is present at a meeting of the board of directors at which action on any company matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the company immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 11. Retirement. No director of the company shall stand for reelection as a director following his seventieth birthday with the exception of any person who shall serve, or has served, as chief executive officer of the company at any time, who shall not be prevented by this provision from standing for reelection as a director for five years after retirement from the position of chief executive officer, or until the annual meeting following the attainment of age seventy-five, whichever shall first occur. Any director who is also an officer, other than the chief executive officer, of the company or an officer of any subsidiary of the company shall retire as provided in Section 1 of this article. ARTICLE IV. Committees of the Board of Directors SECTION 1. Executive Committee. The board of directors, acting by resolution adopted by a majority of the full board of directors, may elect from among its members an executive committee of not fewer than three (3) nor more than ten (10) members, which committee shall have and may exercise all of the authority of the board of directors in the business and affairs of the company except where action of the full board of directors is specified by law. The chief executive officer shall be a member of the executive committee and shall be chairman of such committee. The executive committee shall meet at such times and places as may be fixed by the committee, or on the call of the chief executive officer, at such times and places as may be designated in the call of such meetings. The executive committee shall maintain a record of its proceedings and shall report to each regular meeting of the board of directors a summary of the actions taken by such committee since the last regular meeting of the board of directors. SECTION 2. Audit Committee. The following shall be the charter of the audit committee: (a) Membership. The board of directors, acting by resolution adopted by a majority of the full board of directors, may elect from among its members an audit committee of not fewer than three (3) nor more than ten (10) members, none of whom shall be an officer of the company or any of its subsidiaries, or have any relationship to the company or any of its subsidiaries that, in the opinion of the board of directors, would interfere with the exercise of independent judgment as a committee member. The chairman of the committee shall be elected by a majority of the full board of directors at the time the committee is elected or at such time as it becomes necessary to elect a new chairman because of the chairman's death, resignation or removal. Each member of the committee shall be financially literate, or shall undertake to become financially literate within a reasonable period of time after being elected to the committee, and at least one member shall have accounting or related financial management expertise, as these qualifications are determined in the opinion of the board of directors. (b) Process. The audit committee shall meet at such times and places as may be fixed by the committee, or on the call of its chairman, at such times and places as may be designated in the call of such meetings. The committee shall also meet promptly upon the request of the company's principal outside auditors. The committee shall maintain a record of its proceedings and shall report to the board of directors a summary of its activities not less frequently than twice each fiscal year, along with such recommendations as the committee deems appropriate. (c) Responsibilities. The audit committee shall have the following powers and duties: (1) subject to confirmation by the board of directors, to select, evaluate and, where appropriate, replace the principal outside auditors (or to nominate the principal outside auditors to be proposed for shareholder approval in any proxy statement); (2) to discuss with the principal outside auditors that the outside auditors are ultimately accountable to the board of directors and the audit committee; (3) to review at regular intervals audit arrangements for the company and its subsidiaries and the reports to be rendered; (4) to review in advance the plan and scope of the audit of the company and its subsidiaries to be performed by the principal outside auditors and the related estimate of fees, and to recommend such audit plan, scope, and fee estimate for board approval; (5) to review non-audit services and fees of the company's principal outside auditors, giving appropriate consideration to the possible effect on the auditors' independence of each non-audit service provided; (6) to ensure that the principal outside auditors submit to the committee at least annually a formal written statement delineating all relationships between the principal outside auditors and the company, and to review with the principal outside auditors any disclosed relationships or services that may impact the objectivity and independence of the outside auditors for the purpose of recommending, as necessary, that the board of directors take appropriate action to satisfy itself of the outside auditors' independence; (7) to review periodically with the company's principal outside auditors the accounting principles and policies of the company, including any matters required to be discussed by Statement on Auditing Standards No. 61, as it may be amended or supplemented; (8) to review periodically with the company's principal outside auditors such matters relating to the internal auditing systems and procedures and the internal accounting controls of the company and its subsidiaries as the committee or the board of directors may determine to be necessary or desirable; (9) to review periodically the coordination between the company's principal outside auditors and the company's internal audit staff, and to review with the company's principal outside auditors, upon completion of their audit, their findings and recommendations and the responses of the company's management to such findings and recommendations; (10) to review and discuss with management the company's audited financial statements; (11) to recommend to the board of directors that the audited financial statements presented to the audit committee be included in the company's annual report on Form 10-K; (12) to periodically review the company's corporate responsibility program and receive information and assurances from management as to its effectiveness; (13) to conduct from time to time, or cause to be conducted, such investigations or inquiries relating to the committee's responsibilities, including accounting or audit matters, as the facts presented to the committee warrant and as the committee may deem necessary or appropriate in the interest of the company and its shareholders; (14) to confer with and direct the officers of the company to the extent necessary to exercise the committee's powers and to carry out its duties; (15) to meet with representatives of any outside auditors of the company and/or its internal audit staff in the absence of management, whenever the committee deems such to be appropriate; and (16) to perform such additional duties as may be assigned to the committee by the board of directors. SECTION 3. Personnel Committee. The board of directors, acting by resolution adopted by a majority of the full board of directors, may elect from among its members a personnel committee of not fewer than three (3) nor more than ten (10) members, none of whom shall be an officer of the company or of any of its subsidiaries during the time of service on this committee. The chairman of the committee shall be elected by a majority of the full board of directors at the time the committee is elected or at such time as it becomes necessary to elect a new chairman because of the chairman's death or resignation. The committee shall meet at such times and places as may be fixed by the committee, or on the call of its chairman, at such times and places as may be designated in the call of such meetings. The committee shall maintain a record of its proceedings and shall report to each regular meeting of the board of directors a summary of the actions taken by the committee since the last regular meeting of the board of directors. The personnel committee shall have the following powers and duties: (a) to review the relationship of the contribution of key officers and employees to the company's performance and prospects; (b) to review and approve and recommend to the board of directors for approval or ratification the annual salary of any officer of the company or of a subsidiary of the company whose annual salary is or will be of an amount which will place him or her among the twenty-five most highly salaried officers in the group; (c) to review and approve or ratify the annual salary of any officer or employee of the company or of a subsidiary of the company whose annual salary is or will be of an amount which will place him or her among the second twenty-five most highly salaried officers in the group; (d) to review and approve incentive compensation and other employee benefit programs; (e) to review key personnel issues; and (f) to perform such additional duties as may be assigned to the committee by the board of directors. SECTION 4. Other Committees. In addition to the executive, audit, and personnel committees, the board of directors may, by resolution adopted by a majority of the full board of directors, elect from among its own members such other committees as it shall deem to be appropriate, each of which shall have and may exercise that authority of the board of directors which shall have been delegated to it in the resolution creating such committee, except as may be prohibited by law. SECTION 5. Term of Office and Committee Size. The term of office of each member of any committee shall be the period designated by the board of directors, but shall not be longer than one year and until his successor shall be elected, unless such member shall be removed by the board of directors, as provided in this section, or the committee is dissolved by the board of directors. A member of any committee may be removed during the period between annual meetings by action of the majority of the full board of directors at any regular or special meeting. The membership of any committee elected by the board of directors may be increased or decreased during the period between annual meetings, subject to any limitations of this article, by action of the majority of the full board of directors at any regular or special meeting. SECTION 6. Quorum. A majority of the members of any committee shall constitute a quorum for the transaction of business. The act of the majority of the members present at a meeting at which a quorum is present shall be the act of the committee. SECTION 7. Responsibility. The designation of any committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed upon it or him by law. SECTION 8. Vacancies. The board of directors may fill all vacancies in any committee. ARTICLE V. Officers SECTION 1. Titles and Term of Office. The board of directors at its annual meeting shall elect officers of the company as follows: a chief executive officer, a president and a secretary. The board of directors may also elect one or more vice chairmen. The board of directors or the executive committee may elect other officers, including one or more executive vice presidents, senior vice presidents, vice presidents, a general counsel, a controller, a general auditor, and other officers and assistant officers as the board of directors or the executive committee deems necessary. Each officer shall hold office for the term for which he is elected and until his successor shall have been duly elected and qualified, or until his death, resignation, or removal in the manner hereinafter provided. One person may hold more than one office except that the president shall not also hold the office of secretary. The chief executive officer shall be a director of the company, but no other officer need be a director. SECTION 2. Removal. Any officer who may be elected only by the board of directors may be removed only by the board of directors. Any officer who may be elected by either the board of directors or the executive committee may be removed by either the board of directors or the executive committee. Removal of any officer may occur whenever in the judgment of the board of directors or the executive committee, as the case may be, the best interests of the company will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election of an officer shall not of itself create contract rights. SECTION 3. Vacancies. A vacancy in the office of any officer may be filled for the unexpired portion of the term by the board of directors. SECTION 4. Chief Executive Officer. The board of directors shall designate either the chairman of the board or the president to be the chief executive officer of the company. All other officers of the company shall be subordinate to the chief executive officer and shall report to him as he may direct. The chief executive officer shall have responsibility for the general management and direction of the business of the company and for the execution of all orders and resolutions of the board of directors. In addition to the powers prescribed in these bylaws, he shall have all of the powers usually vested in the chief executive officer of a corporation and such other powers as may be prescribed from time to time by the board of directors. He may delegate any of his powers and duties to any other officer with such limitations as he may deem proper. SECTION 5. President. In the absence of the chairman of the board, the president shall preside at all meetings of the shareholders; shall have authority to execute all legal instruments necessary for the transaction of the company's business; may sign certificates for shares of capital stock of the company; and may be designated as chief executive officer, as provided in these bylaws. He may delegate such of his powers and duties to other officers with such limitations as he may deem proper. The president shall have such other powers and duties as may be prescribed in these bylaws or from time to time by the board of directors. If he is not designated as chief executive officer, the president shall have such powers and perform such duties as may be delegated to him by the chief executive officer, and shall be vested with all the powers and authorized to perform all the duties of the chief executive officer in his absence or inability to act. SECTION 6. Vice Chairman. Each vice chairman shall have authority to execute all legal instruments necessary for the transaction of the company's business; shall have such other powers and duties as may be delegated to him by the board of directors or the chief executive officer; and may exercise the powers of the president during his absence or inability to act. SECTION 7. Vice President. Each vice president shall have such powers and duties as may be delegated to him by the board of directors or the chief executive officer, or any authorized officers senior to the vice president. SECTION 8. Secretary. The secretary shall keep the minutes of all meetings of the board of directors, of the shareholders, and of the executive committee; shall issue all notices; may sign with the chairman of the board, the president, or a vice chairman in the name of the company all legal instruments necessary for the transaction of the company's business and affix the seal of the company thereto; shall sign with the chairman of the board or president all certificates for shares of the capital stock of the company; and shall have such other powers and duties as may be prescribed by the board of directors or the chief executive officer. SECTION 9. Treasurer. The treasurer shall have responsibility for the safekeeping and custody of all the funds and securities of the company; shall establish and execute programs for the provision of the capital required by the company, including negotiating the procurement of capital and maintaining the required financial arrangements; shall establish and maintain adequate sources for the company's short-term borrowings; shall establish and maintain liaison with investment bankers and financial analysts; shall establish and maintain banking arrangements; and shall have such other powers and duties as may be prescribed by the board of directors or the chief executive officer. SECTION 10. Powers and Duties of Assistant Secretaries. Each assistant secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the secretary, and may exercise the powers of the secretary during that officer's absence or inability to act. Any action taken by an assistant secretary in the performance of the duties of the secretary shall be conclusive evidence of the absence or inability to act of the secretary at the time such action was taken. SECTION 11. Powers and Duties of Assistant Treasurers. Each assistant treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the treasurer, and may exercise the powers of the treasurer during that officer's absence or inability to act. Any action taken by an assistant treasurer in the performance of the duties of the treasurer shall be conclusive evidence of the absence or inability to act of the treasurer at the time such action was taken. ARTICLE VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS SECTION 1. Actions. The company shall indemnify any person who was or is a named defendant or respondent or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative, or investigative (including any action by or in the right of the company), or any appeal of such action, suit or proceeding and any inquiry or investigation that could lead to such an action, suit or proceeding, by reason of the fact that he is or was a director, officer or employee of the company, or is or was serving at the request of the company as a director, officer, partner, venturer, proprietor, trustee, employee, or similar functionary of another foreign or domestic corporation or non-profit corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise (any such person acting in any such capacity being hereinafter referred to as "potential indemnitee"), against judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement, and reasonable expenses (including court costs and attorneys' fees) actually incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed, (i) in the case of conduct in his official capacity as a director of the company, to be in the best interests of the company and (ii) in all other cases, to be not opposed to the best interests of the company; and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful; provided, however, that in connection with any action, suit or proceeding in which the person shall have been adjudged to be liable to the company or liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the person's official capacity as a director or officer, (i) indemnification shall be limited to reasonable expenses (including court costs or attorneys' fees) actually incurred in connection with such proceeding, and (ii) indemnification shall be prohibited, if the person is found liable for willful or intentional misconduct in the performance of his duty to the company. The termination of any action, suit or proceeding by judgment, order, settlement, or conviction, or on a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in the best interests of the company; and, with respect to any criminal action or proceeding, shall not create a presumption that the person had reasonable cause to believe that his conduct was unlawful. SECTION 2. Success on Merits or 0therwise. Where a potential indemnitee has been wholly successful, on the merits or otherwise, in defense of any such action, suit or proceeding, he shall be indemnified against reasonable expenses (including court costs and attorneys' fees) actually incurred by him in connection therewith. SECTION 3. Determination that Indemnification is Proper. Any indemnification under Section 1 of this article (unless otherwise ordered by a court of competent jurisdiction) shall be made by the company only as authorized in a specific case upon a determination that the applicable standard of conduct has been met. Such determination shall be made (i) by the board of directors by a majority vote of a quorum consisting of directors who at the time of the vote have not been named as defendants or respondents in such action, suit or proceeding, or (ii) if such a quorum cannot be obtained, by a majority vote of a committee of the board of directors, designated to act in the matter by a majority vote of all directors, consisting solely of two or more directors who at the time of the vote are not named defendants or respondents in such action, suit or proceeding, or (iii) by special legal counsel selected by the board of directors (or a committee thereof) by vote in the manner set forth in subparagraphs (i) and (ii) of this Section 3, or if such a quorum cannot be obtained and such a committee cannot be established, by a majority vote of all directors, or (iv) by the shareholders in a vote that excludes the shares held by any director who is named as a defendant or respondent in such action, suit or proceeding. SECTION 4. Expenses Prior to Final Disposition. Reasonable expenses incurred by a director, officer, or employee of the company or other person entitled to indemnity hereunder, who was, is or is threatened to be made a named defendant or respondent in any such action, suit or proceeding described in Section 1 shall be paid by the company in advance of the final disposition thereof upon receipt of a written affirmation by the director, officer, employee or other person of his good faith belief that he has met the standard of conduct necessary for indemnification under this article and a written undertaking by or on behalf of the director, officer, employee or other person to repay such amount if it is ultimately determined that the person has not met such necessary standard of conduct or that indemnification is prohibited by Section 1 of this article. Determinations with respect to payments under this Section 4 shall be made in the manner specified by Section 3 for determining that indemnification is permissible, except as otherwise provided by law. SECTION 5. Nonexclusive Rights-Continuance Beyond Tenure. The indemnification provided by this article shall not be deemed (i) to be exclusive of any other rights consistent with law to which the person indemnified may be entitled under the articles of incorporation of the company, bylaws, any general or specific action of the board of directors, agreement, authorization of shareholders, or otherwise, or as may be permitted or required by law, both as to action in his official capacity as a director and as to action in another capacity while holding such office, or (ii) to be a limitation upon the power of the company to indemnify and to advance expenses, consistent with law. The indemnification provided by this article shall continue as to a person who has ceased to be a director, officer, or employee of the company or other person entitled to indemnity hereunder or to serve in such other capacity in which he was entitled to indemnification hereunder, and shall inure to the benefit of his heirs and legal representatives. SECTION 6. Insurance Authorized. Subject to any restrictions now or hereafter established by applicable law, the company shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, or employee of the company or who is or was serving at the request of the company as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation or non-profit corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such a person, whether or not the company would have the power to indemnify him against that liability under the provisions of this article or the Texas Business Corporation Act. SECTION 7. Definitions. For purposes of this article, references to "the company" include any domestic or foreign predecessor entity of the company in a merger, consolidation, or other transaction in which the liabilities of the predecessor are transferred to the company by operation of law and in any other transaction in which the company assumes the liabilities of the predecessor but does not specifically exclude liabilities that are the subject matter of this article. For purposes of this article, references to "serving at the request of the company" shall include any service as a director, officer or employee of the company which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the company" as referred to in this article. SECTION 8. Expenses as Witness. Notwithstanding any other provision of this article, the company may pay or reimburse expenses incurred by any director, officer, or employee of the company or any other potential indemnitee hereunder in connection with his appearance as a witness or other participation in any action, suit or a proceeding described in Section 1 at a time when he is not a named defendant or respondent in such action, suit or proceeding. SECTION 9. Notice to Shareholders. Any indemnification of or advance of expenses to a director in accordance with this article shall be reported in writing to the shareholders of the company with or before the notice or waiver of notice of the next shareholders' meeting or with or before the next submission to shareholders of a consent to action without a meeting and, in any case, within the twelve-month period immediately following the date of the indemnification or advance. ARTICLE VII. Miscellaneous Provisions SECTION 1. Registered Office. Unless the board of directors otherwise determines, the registered office of the company, required by the Texas Business Corporation Act to be maintained in the State of Texas, shall be the principal place of business of the company, but such registered office may be changed from time to time by the board of directors in the manner provided by law and need not be identical to the principal place of business of the company. SECTION 2. Books and Records. Correct and complete books and records of account of the company and the minutes of the proceedings of its shareholders, board of directors, and each committee of its board of directors shall be kept at the registered office of the company. Records of the original issuance of shares issued by the company and of each transfer of those shares that have been presented for registration of transfer shall be kept at the registered office of the company or at the office of its principal transfer agent or registrar. A record of the past and present shareholders of the company, giving the names and addresses of all such shareholders and the number of shares of each class and series of stock held by each, shall also be kept at the registered office of the company or at the office of its principal transfer agent or registrar. Any books, records, and minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. Any person who shall have been a holder of record of shares for at least six (6) months immediately preceding his demand, or who shall be the holder of record of at least five percent (5%) of all the outstanding shares of the company, upon written demand stating the purpose thereof, or any director of the company shall have the right to examine, in person or by agent, accountant, or attorney, at any reasonable time or times, for any proper purpose, its relevant books and records of account, minutes, and share transfer records, and to make extracts therefrom. SECTION 3. Action Without Meeting and Telephone Meetings. Any action permitted, or required by law, these bylaws, or the articles of incorporation of the company, to be taken at a meeting of the board of directors or of any committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the board of directors or of such committee, as the case may be. Such consent shall have the same force and effect as a unanimous vote at a meeting. Subject to the notice requirements of these bylaws, members of the board of directors or of any committee created by the board of directors may participate in and hold a meeting of such board or committee by means of conference telephone or similar communications equipment, including teleconferencing via a satellite communications system, provided all persons participating in the meeting can hear each other. SECTION 4. Fiscal Year. The fiscal year of the company shall be the calendar year. SECTION 5. Seal. The seal of the company shall be such as from time to time may be approved by the board of directors. SECTION 6. Notice and Waiver of Notice. Whenever any notice is required to be given under the provisions of these bylaws, said notice shall be deemed to be sufficient if given by depositing the same in a post office box in a sealed postpaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the records of the company, and such notice shall be deemed to have been given on the day of such mailing. A waiver of notice, signed by the person or persons entitled to said notice, whether before or after the date and time stated therein, shall be deemed equivalent thereto. SECTION 7. Resignations. Any director or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the chairman of the board, the president, or the secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. SECTION 8. Securities of Other Corporations. The board of directors shall by resolution designate the officers of the company who shall have power and authority to transfer, endorse for transfer, vote, or consent to or take any other action with respect to any securities of another issuer which may be held or owned by the company and to make, execute, and deliver any waiver, proxy, or consent with respect to any such securities. SECTION 9. Investments and Loans. Investments and loans of the company shall be made pursuant and subject to the provisions of the law. SECTION 10. Execution of Contracts and Other Instruments. All contractual or obligatory undertakings, including but not limited to deeds, conveyances, transfers, and releases, shall be signed by, (a) the chairman of the board, the president, a vice chairman, or a vice president, or (b) any attorney-in-fact or agent of the company who has been, or at any time in the future may be, appointed by the chairman of the board, the president, a vice chairman, or a vice president, and by the company secretary or an assistant secretary. When necessary, such instruments may have the corporate seal affixed and may be attested by the secretary or an assistant secretary. Checks may be signed by the chairman of the board, the president, a vice chairman, a vice president, the secretary, the treasurer, or any other person who may be authorized by the board of directors or the chief executive officer. SECTION 11. Rules and Regulations. Rules and regulations for the conduct of the company's business not in conflict with these bylaws may be adopted by the executive committee by resolution duly recorded in the minutes of the committee; provided, however, that such action may be modified or abrogated by the board of directors. ARTICLE VIII. Amendments Unless otherwise provided in the Articles of Incorporation, the power to alter, amend, or repeal these bylaws or adopt new bylaws shall be vested in the full board of directors subject, however, to repeal or change by action of the affirmative vote of the holders of at least seventy-five percent (75%) of the then outstanding shares of all classes of stock of the company entitled to vote generally in election of directors, voting together as a single class. EX-10 3 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT This Second Amendment to the Employment Agreement made as of February 1, 1998 between American General Corporation, a Texas corporation (the "Company") and Robert M. Devlin (the "Executive"), as first amended on April 30, 1998 (the "Agreement"), is made on May 1, 2000. 1. Section 8(a) of the Agreement is hereby amended by the addition of the following sentence at the end thereof: "As soon as practicable after a termination of the Executive's employment for Disability, the Company shall pay the Executive a pro rata portion to the Date of Termination of the Annual Bonus for the year in which the Date of Termination occurs, calculated by using a fraction (the numerator of which shall be the number of days of employment in such year up to and including the Date of Termination and the denominator of which shall be three- hundred-sixty-five (365)) to multiply the award that the Executive would have earned for the entire year (if the Executive's employment had continued), based on the Company's actual performance for such year, and assuming the achievement, at the target level, of any individual performance objectives established with respect to such award; provided, however, that any amount otherwise payable pursuant to this sentence shall be reduced by any payment already received by the Executive pursuant to the applicable Annual Bonus plan with respect to the year in which the Date of Termination occurs." 2. Further, the second sentence of Section 8(a) of the Agreement is hereby amended to read as follows: "Upon termination of the Executive's employment for Disability, the Company shall have no additional obligations to the Executive under this Agreement except to the extent provided in the last sentence of this Section 8(a) and in Sections 6(c), 6(d), 7(b) 8(e) and 15 hereof (and, to the extent applicable, Sections 9, 10 and 11 hereof) and to pay to the Executive the Executive's normal post-termination compensation and benefits as such payments become due." 3. As amended by this Second Amendment, the Agreement is hereby specifically ratified and reaffirmed. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment on May 1, 2000. AMERICAN GENERAL CORPORATION By___/S/ GARY D. REDDICK____________ Name: Gary D. Reddick Title: Executive Vice President ____/S/ ROBERT M. DEVLIN____________ Robert M. Devlin EX-10 4 SECOND AMENDMENT TO SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT This Second Amendment to the Supplemental Executive Retirement Agreement made as of February 1, 1998) between American General Corporation, a Texas corporation (the "Company") and Robert M. Devlin (the "Executive"), as first amended on April 30, 1998 (the "Agreement"), is made on May 1, 2000. 1. Section 6.1 of the Agreement is hereby amended by the addition of the following sentence at the end of the definition of Years of Service contained therein: "Notwithstanding the foregoing, if the Executive retires on or after the attainment of age 62, he shall be credited with twenty-eight (28) Years of Service." 3. As amended by this Second Amendment, the Agreement is hereby specifically ratified and reaffirmed. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment on May 1, 2000. AMERICAN GENERAL CORPORATION By__/S/ GARY D. REDDICK ________ Name: Gary D.Reddick Title: Executive Vice President __/S/ ROBERT M. DEVLIN__________ Robert M. Devlin EX-10 5 (Form) EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of May 1, 2000 (the "Effective Date"), by and between [______________________] (the "Executive") and American General Corporation, a Texas corporation (the "Company"). WHEREAS, during the course of Executive's employment with the Company, the Executive has performed outstanding services for the Company; and WHEREAS, it is deemed by the Company to be in the best interests of the Company to assure continuation of Executive's employment; and WHEREAS, the Company and the Executive have determined to enter into this Agreement pursuant to which the Company will continue to employ the Executive on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Defined Terms. The definitions of capitalized terms used in this Agreement (if not provided where a capitalized term initially appears) are provided in the last Section hereof. 2. Employment. The Company hereby agrees to employ the Executive, and the Executive hereby accepts such employment, on the terms and conditions hereinafter set forth. 3. Term. (a) Duration of Term. Unless earlier terminated as provided in Section 3(b)hereof, the Executive's employment with the Company under this Agreement shall commence at the Effective Date and shall end on the final day of the Term. For purposes of this Agreement, the "Term" shall mean the full three-year term of the Agreement from the Effective Date until the day before the third anniversary thereof, plus any extensions made as provided in this Section 3. On the first day of each month occurring after the Effective Date, the Term shall automatically be extended for an additional month unless, prior to any such first day of a month, the Company or the Executive shall have given notice not to extend the Term. Nothing in this Section shall limit the right of the Company or the Executive to terminate the Executive's employment hereunder on the terms and conditions set forth in Section 7 hereof. The Company and the Executive agree that any such notice by the Company shall not constitute Good Reason for the Executive to terminate the Executive's employment. (b) Termination of Employment during the Term. Nothing in this Section 3 shall limit the right of the Company or the Executive to terminate the Executive's employment under this Agreement during the Term hereof on the terms and conditions set forth in Section 7 hereof. Further, notwithstanding any other provision of this Agreement, the Company shall have the right to terminate the Executive's employment under this Agreement at any time prior to the expiration of the Term for any other reason whatsoever, including termination without Cause, in the sole discretion of the Company's Board of Directors (the "Board"); provided, however, that, any termination of the employment relationship by the Company prior to the expiration of the Term other than a termination by the Company on the terms and conditions set forth in Section 7 hereof shall be deemed to be a termination without Cause within the meanings of Section 8(c) hereof. (c) After the Term: "At-Will" Relationship and Termination of Employment. If the Executive remains employed by the Company beyond the expiration of the Term, such employment shall automatically convert to an "at-will" relationship (upon the expiration of the Term hereof) terminable at any time by either the Company or the Executive for any reason whatsoever, with or without Cause. Upon a termination of employment after the Term hereof, the Company shall pay the Executive's full salary to the Executive through the date of such termination at the rate in effect immediately prior to such termination, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during the Executive's employment by the Company. In addition to any payments or benefits due hereunder upon such a termination, the Executive shall receive such post-termination compensation and benefits as shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to such termination. 4. Position and Duties. On and after the Effective Date, the Executive shall serve as Vice Chairman and Group Executive of the Company and shall have such additional duties and responsibilities as may be assigned to the Executive by the Chief Executive Officer of the Company. The Executive shall report to the Chief Executive Officer of the Company. The Executive agrees to devote substantially all the Executive's full working time, attention and energies during normal business hours to the performance of the Executive's duties for the Company, provided that the Executive may serve as a director on the boards of such companies and organizations as the Chief Executive Officer of the Company may specifically approve in writing. 5. Place of Performance. The principal place of employment and office of the Executive shall be in Houston, Texas, or such other location as may be designated by the Chief Executive Officer of the Company. 6. Compensation and Related Matters. (a) Base Salary. As compensation for the performance by the Executive of the Executive's duties hereunder, during the Employment Period the Company shall pay the Executive an annual base salary no less than the annual base salary in effect on the Effective Date (such amount, as it may be increased from time to time, is hereinafter referred to as "Base Salary"). Base Salary shall be payable in accordance with the Company's normal payroll practices, shall be reviewed at least annually by the Committee and may be increased (but not decreased) upon review. (b) Annual Bonus. During the Employment Period, the Executive shall participate, on comparable terms, in the Company's performance- based annual incentive plan in which similarly situated executives of the Company participate. (c) Other Compensation and Benefit Plans and Arrangements; Fringe Benefits. During the Employment Period, the Executive shall be entitled to participate, at a level appropriate to the Executive's position with the Company, in such other employee benefit and compensation plans and arrangements (including, without limita- tion, long-term incentive arrangements, medical and dental care, life insurance, disability protection and pension and retirement plans, whether tax-qualified or supplemental) and fringe benefits as are generally available to similarly situated executives of the Company from time to time, and any successors thereto. (d) Expenses. The Company shall reimburse the Executive for all reasonable business expenses incurred during the Employment Period, subject to the applicable and reasonable policies and procedures of the Company in force from time to time. (e) Automobile Allowance. At all times during the Employment Period, the Company shall provide the Executive with an automobile (and pay related expenses) pursuant to the Company's policy as in effect on the Effective Date, as such policy may be amended from time to time (the "Automobile Policy"). (f) Vacation. During the Employment Period, the Company shall provide the Executive with the number of paid vacation days annually to which the Executive is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on the date hereof. 7. Termination. The Executive's employment hereunder may be terminated, and the Employment Period hereunder shall be ended,as follows: (a) Death. The Executive's employment shall terminate upon the Executive's death. Upon such a termination, the Executive's estate, designated beneficiary or surviving spouse, as the case may be, shall become entitled to the payments provided in Section 8(b) hereof in accordance with the terms of such Section. (b) Disability. The Company may terminate the Executive's employment hereunder for Disability. During the Disability Period (as defined in Section 8(a) hereof) and upon such a termination, the Executive shall be entitled to the payments and benefits provid ed in Section 8(a) hereof in accordance with the terms of such Section. (c) Cause. The Company may terminate the Executive's employment hereunder for Cause. The decision as to whether Cause exists shall be made in good faith by the Committee. Upon such a termination, the Executive shall become entitled to the payments provided in Section 8(b) hereof in accordance with the terms of such Section. (d) Termination by the Executive. (i) The Executive may terminate the Executive's employment hereunder for Good Reason. Upon a Good Reason termination, the Executive shall become entitled to the payments and benefits provided in Section 8(c) hereof in accordance with the terms of such Section. (ii) The Executive may terminate the Executive's employment hereunder without Good Reason, upon giving notice of one month to the Company. In the event of such a termination, the Executive shall comply with any reasonable request of the Company to assist in providing for an orderly transition of authority, but such assistance shall not delay the Executive's termination of employment longer than six months beyond the giving of the Executive's Notice of Termination. Upon such a termination, the Executive shall become entitled to the payments and benefits provided in Section 8(b) hereof in accordance with the terms of such Section. (e) Notice of Termination. Any purported termination of the Executive's employment (other than termination pursuant to Section 7(a) hereof) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 16 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of the resolution regarding such termination duly adopted by the Board or by the Executive Termination Review Committee. (f) Date of Termination. For purposes of this Agreement, "Date of Termination" shall mean the following: (i) if the Executive's employment is terminated by the Executive's death, the date of the Executive's death; (ii) if the Executive's employment is terminated for Disability pursuant to Section 7(b) hereof, thirty (30) days after the Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such thirty-(30)- day period); (iii) if the Executive's employment is terminated for Cause pursuant to Section 7(c) hereof, the date specified in the Notice of Termination; (iv) if the Executive's employment is terminated pursuant to Section 7(d)(ii) hereof, the date determined in accordance with said Section, and (v) if the Executive's employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). 8. Compensation During Disability or Upon Termination. (a) Disability Period and Termination for Disability. During any period during the Employment Period that the Executive fails to perform the Executive's full-time duties hereunder as a result of incapacity due to physical or mental illness ("Disability Period"), the Company shall pay the Executive's full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until the Executive's employment is terminated by the Company for Disability; provided, however, that such salary payments shall be reduced by the sum of the amounts, if any, payable to the Executive at or prior to the time of any such salary payment under disability benefit plans of the Company or under the Social Security disability insurance program, which amounts were not previously applied to reduce any such salary payment. Upon termination of the Executive's employment for Disability, the Company shall have no additional obligations to the Executive under this Agreement except to the extent provided in Sections 6(c), 6(d), 7(b) and 14 hereof and the last sentence of this Section 8(a) (and, to the extent applicable, Sections 9 and 10 hereof) and to pay to the Executive the Executive's normal post-termination compensation and benefits as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect from time to time. As soon as practicable after such termination, the Company shall pay the Executive a pro rata portion to the Date of Termination of the Annual Bonus for the year in which the Date of Termination occurs, calculated by using a fraction (the numerator of which shall be the number of days of employment in such year up to and including the Date of Termination and the denominator of which shall be three-hundred-sixty-five (365)) to multiply the award that the Executive would have earned for the entire year (if the Executive's employment had continued), based on the Company's actual performance for such year, and assuming the achievement, at the target level, of any individual performance objectives established with respect to such award; provided, however, that any amount otherwise payable pursuant to this sentence shall be reduced by any payment already received by the Executive pursuant to the applicable Annual Bonus plan with respect to the year in which the Date of Termination occurs (b) Termination (x) by the Company with Cause, (y) by the Executive without Good Reason, or (z) by Reason of Death. If the Executive's employment hereunder is terminated (x) by the Company with Cause, (y) by the Executive without Good Reason, or (z) by reason of death, then: (i) as soon as practicable, the Company shall pay the Executive's Base Salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination; and (ii) the Company shall have no additional obligations to the Executive under this Agreement except to the extent provided in Sections 6(c), 6(d) and 14 hereof (and, to the extent applicable, Sections 9 and 10 hereof) and to pay to the Executive the Executive's normal post-termination compensation and benefits as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans,programs and arrangements as in effect from time to time; and (iii) only if such termination is by reason of the Executive's death, the Company shall pay the Executive a pro rata portion to the Date of Termination of the Annual Bonus for the year in which the Date of Termination occurs, calculated by using a fraction (the numerator of which shall be the number of days of employment in such year up to and including the Date of Termination and the denominator of which shall be three-hundred-sixty-five (365)) to multiply the award that the Executive would have earned for the entire year (if the Executive's employment had continued), based on the Company's actual performance for such year, and assuming the achievement, at the target level, of any individual performance objectives established with respect to such award; provided, however, that any amount otherwise payable pursuant to this clause (iii) shall be reduced by any payment already received by the Executive pursuant to the applicable Annual Bonus plan with respect to the year in which the Date of Termination occurs. (c) Termination (x) by Company without Cause or (y) by the Executive with Good Reason. For purposes of this Agreement, termination of the Executive's employment "by the Company without Cause" shall not include termination by the Company for Disability or termination by reason of the Executive's death. If the Executive's employment hereunder is terminated (x) by the Company without Cause or (y) by the Executive with Good Reason: (i) the Company shall pay the Executive's Base Salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company's compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason; (ii) notwithstanding any provision of any Annual Bonus plan to the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (A) any Annual Bonus which has been allocated or awarded (but not yet paid or deferred) to the Executive for a completed fiscal year preceding the Date of Termination under any Annual Bonus plan, and (B) a pro rata portion to the Date of Termination of the Annual Bonus for the year in which the Date of Termination occurs, calculated by using a fraction (the numerator of which shall be the number of days of employment in such year up to and including the Date of Termination and the denominator of which shall be three-hundred-sixty-five (365)) to multiply the award that the Executive would have earned for the entire year (if the Executive's employment had continued), based on the Company's actual performance for such year, and assuming the achievement, at the target level, of any individual performance objectives established with respect to such award; provided, however, that any amount otherwise payable pursuant to this clause (B) of this Section 8(c)(ii) shall be reduced by any payment already received by the Executive pursuant to the applicable Annual Bonus plan with respect to the year in which the Date of Termination occurs; (iii) in lieu of any further salary or bonus payments as severance to the Executive for periods subsequent to the Date of Termination and (except as provided in Section 8(d) hereof) in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a severance payment, in cash, equal to three times the sum of (x) the Executive's Base Salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (y) the Average Annual Bonus. As determined in the Company's sole discretion, such severance payment may either be paid in substantially equal monthly or more frequent installments over the three-year period immediately following the Date of Termination or in a lump sum discounted to present value using 120% of the rate provided in section 1274(b)(2)(B) of the Code; (iv) For the thirty-six (36) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive with medical, dental, life and accident insurance benefits substantially similar to those provided to the Executive (other than any "split-dollar" life insurance) immediately prior to the Date of Termination, at no greater cost to the Executive than the cost to the Executive immediately prior to such date or occurrence. Benefits otherwise receivable by the Executive pursuant to the immediately preceding sentence shall be reduced to the extent benefits of the same type are received by or made available to the Executive by a successor employer during the thirty-six (36) month period following the Executive's termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive). (v) The Company shall provide the Executive with outplacement services suitable to the Executive's position for a period of six months or, if earlier, until the first acceptance by the Executive of an offer of employment. (vi) The Company shall have no additional obligations to the Executive under this Agreement except to the extent provided in Sections 6(c), 6(d) and 14 hereof (and, to the extent applicable, Sections 9 and 10 hereof) and to pay to the Executive the Executive's normal post-termination compensation and benefits as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect from time to time at the level of benefits and coverage applicable to the Executive immediately prior to such termination. (d) Effect of Entitlements (if any) under Severance Agreement. Notwithstanding any provision of this Agreement, it is the intention of the parties hereto that there shall be no duplication of benefits if the circumstances of the Executive's termination of employment would otherwise entitle the Executive to payments and benefits under both this Agreement and the Executive's Severance Agreement. Accordingly, in the event of such a termination, if a particular type of benefit is payable under both agreements, the Company shall in good faith compare the two benefits and the Executive shall be paid the greater of the two benefits. Such payment shall be accepted by the Executive in lieu of the lesser benefit provided by the second agreement. It is understood that this procedure may result in one type of benefit (for example, continuing medical insurance) being provided under one of the agreements while another type of benefit (for example, severance pay) is provided under the second agreement. 9. Time of Certain Payments. Any lump sum cash payments provided to the Executive or for the Executive's benefit in Section 8(c)(i), 8(c)(ii)(A) and 8(c)(iii) hereof shall be made not later than the fifth (5th) business day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate of the payments under Section 8(c), as determined in good faith by the Company, the estimate in each case to be of the minimum amount of such payments to which the Executive is clearly entitled, and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). 10. Legal and Arbitration Fees and Expenses. The Company also shall pay to the Executive all reasonable legal fees, arbitration fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive's employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. Notwithstanding the foregoing provisions of this Section 10, no such fees and expenses shall be paid unless the Executive prevails on at least one of the issues the Executive raises. 11. No Mitigation; Limited Offset. The Company agrees that, if the Executive's employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 8 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than Section 8(c)(iv) hereof) shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company (unless such amount is evidenced by a promissory note signed by the Executive), or otherwise. 12. Ownership and Protection of Information; Copyrights. (a) All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, and all expressions of ideas, which are created, conceived, made, developed or acquired by the Executive, individually or in conjunction with others, during the Executive's employment by Company, whether tangible or intangible, which relate to Company's business, products or services (including, without limitation, all such information relating to corporate opportunities, mutual funds, insurance or annuity products, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Company. Executive acknowledges that the Executive has heretofore disclosed all such information, ideas, concepts, improvements, discoveries, and inventions, as well as all expressions of ideas, to Company. (b) All such information, ideas, concepts, improvements, discoveries, and inventions identified in Section 12(a) hereof are and shall be the sole and exclusive property of Company. Moreover, if, during the Executive's employment by Company, the Executive creates any work of authorship fixed in any tangible medium of expression which is the subject matter of copyright(such as videotapes, written presentations, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Company's business, products, or services, whether such work is created solely by the Executive or jointly with others (whether during business hours or otherwise and whether on Company's premises or otherwise) Company shall be deemed the author of such work if the work is prepared by the Executive in the scope of the Executive's employment; or, if the work is not prepared by the Executive within the scope of the Executive's employment but is specially ordered by Company as a contribution to a collective work, as part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Company shall be the author of the work. If such work relating to Company's business, products, or services is neither prepared by the Executive within the scope of the Executive's employment nor a work specially ordered that is deemed to be a work made for hire, then the Executive hereby agrees to assign, and by these presents does assign, to Company all of the Executive's worldwide right, title, and interest in and to such work and all rights of copyright therein. Additionally, all documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and/or copyrightable expressions are and shall be the sole and exclusive property of Company. Executive acknowledges that Company is the owner of all such information, ideas, concepts, improvements, discoveries, inventions and/or copyrightable expressions that the Executive heretofore created, conceived, made, developed or acquired while employed by Company. (c) Executive will not, at any time during or after the Executive's employment by Company, make any unauthorized disclosure of any confidential business information or trade secrets of Company, or make any use thereof, for the Executive's benefit or for the benefit of others, except in the carrying out of the Executive's employment responsibilities hereunder. As a result of the Executive's employment by Company, the Executive shall also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Company. Executive also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Company's confidential business information and trade secrets. Upon termination of the employment relationship for any reason, the Executive shall promptly deliver to Company all documents and things containing Company trade secrets or confidential information. Executive may disclose those aspects of Company's confidential information as to which the Executive has received the written advice of counsel that such disclosure thereof is necessary under applicable federal, state, local, or foreign law or other regulations applicable to the Executive (including, without limitation, any confidential information that the Executive is legally compelled to disclose as a result of depositions, interrogatories, request for documents, subpoenas, civil investigative demands, or similar processes), provided, however, that the Executive has first provided Company with prompt prior written notice of such requirement so that Company may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement. In the event that such protective order or other remedy is not obtained, or that Company does not waive compliance with the provisions hereof, the Executive agrees to furnish only that portion of Company's confidential information which the Executive is advised in writing by the Executive's counsel is legally required to be disclosed and to exercise all reasonable efforts to obtain assurance that confidential treatment will be accorded such confidential information. (d) Both during the period of the Executive's employment by Company and thereafter, the Executive shall assist Company or its nominees, at any time, in the protection of Company's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Company or its nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries. To the extent any assistance is required from the Executive following the termination of the Executive's employment with Company, Company shall make reasonable efforts to coordinate the assistance required with the Executive's other business and personal commitments and the Executive shall likewise make reasonable efforts to accommodate Company's needs and time considerations. (e) Executive acknowledges that money damages would not be sufficient remedy for any breach of this Section 12 by the Executive, and Company shall be entitled to enforce the provisions of this Section 12 by terminating any payments then owing to the Executive under this Agreement and/or entitled to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Section 12, but shall be in addition to all remedies available at law or in equity to Company, including the recovery of damages from the Executive and the Executive's agents involved in such breach. 13. Non-Competition and Non-Solicitation Obligations. (a) As part of the consideration for the compensation and benefits to be paid to the Executive hereunder, to protect the trade secrets and confidential information of Company or its subsidiaries or affiliates or their customers or clients that have been and will in the future be disclosed or entrusted to the Executive, the business goodwill of Company or its subsidiaries or affiliates that has been and will in the future be developed in the Executive, or the business opportunities that have been and will in the future be disclosed or entrusted to the Executive by Company or its subsidiaries or affiliates; and as an additional incentive for Company to enter into this Agreement, the Executive agrees to the non-competition and non-solicitation obligations hereunder: the Executive shall not, anywhere in the United States or any other country in which Company is offering financial services, directly or indirectly for the Executive or for others (i) during the term of the Executive's employment, compete in any manner with Company or any subsidiary or affiliate of Company by whom the Executive is employed at any time, (ii) solicit or attempt to convert to other financial services companies providing the same or similar products or services provided by Company, any customers or policyholders of Company or its subsidiaries or affiliates; or (iii) solicit for employment or employ any employee of Company. The obligations under clauses (i), (ii) and (iii) of the immediately preceding sentence shall extend throughout the Executive's period of employment hereunder and, unless the Executive's termination of employ- ment is by the Company without Cause or by the Executive with Good Reason or occurs after a Change in Control (as defined in the Executive's Severance Agreement), for a period of three (3) years following termination of the employment relationship; provided, however, that, if such termination shall have been preceded by the Company's having given notice not to extend the Term of this Agreement, such three-year period shall be reduced (but not to less than one year) by the period of the Executive's continued employment subsequent to the giving of such notice. (b) Executive understands that the foregoing restrictions may limit the Executive's ability to engage in certain businesses in the areas specified above during the period provided for above, but acknowledges that the Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Section 13 by the Executive, and Company shall be entitled to enforce the provisions of this Section 13 by terminating any payments then owing to the Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Section 13, but shall be in addition to all remedies available at law or in equity to Company, including, without limitation, the recovery cf damages from the Executive and the Executive's agents involved in such breach. (c) It is expressly understood and agreed that Company and the Executive consider the restrictions contained in this Section 13 to be reasonable and necessary to protect the trade secrets and confidential information of Company or its subsidiaries or affiliates, the business goodwill of Company or its subsidiaries or affiliates developed in the Executive, and/or the business opportunities disclosed or entrusted to the Executive by Company or its subsidiaries or affiliates. Nevertheless, if any of the aforesaid restrictions are found to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified so as to be reasonable and enforceable and, as so modified, to be fully enforced. (d) These duties and obligations of the Executive specified in this Section 13 are not exclusive. Executive owes Company the duties and obligations agreed to elsewhere in this Agreement and as are imposed by the law, e.g., the duty to refrain from tortiously interfering with Company's contractual and business relationships with others. 14. Indemnification and Liability Insurance. The Company shall indemnify the Executive to the full extent authorized by law and the Charter and By-Laws of the Company, as applicable, for all expenses, costs, liabilities and legal fees which the Executive may incur in the discharge of the Executive's duties hereunder. The Executive shall be insured under the Company's directors' and officers' liability insurance policy as in effect from time to time. Any termination of the Executive's employment or of this Agreement shall have no effect on the continuing operation of this Section 14. 15. Successors; Binding Agreement. (a) In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, each such amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 16. Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, if to the Executive, to the address inserted below the Executive's signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: American General Corporation 2929 Allen Parkway Houston, Texas 77019 Attention: General Counsel 17. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party, including, without limitation, any employment memorandum, memorandum of understanding, or severance arrangements (other than the Severance Agreement). Captions and Section headings in this Agreement are provided merely for convenience and shall not affect the interpretation of any of the provisions herein. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Texas. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Section 8 hereof) shall survive such expiration. 18. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 19. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 20. Settlement of Disputes; Arbitration. (a) All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Committee and shall be in writing. Any denial by the Committee of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Committee shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Committee a decision of the Committee within sixty (60) days after notification by the Committee that the Executive's claim has been denied. (b) Except for equitable relief as specified in Section 20(f) hereof and except for the Executive's claim under any Company benefit or compensation plans, programs, arrangements or awards (whether heretofore or hereafter established) which have a claim or dispute resolution procedure specifically applicable thereto, any dispute or controversy which is not resolved by agreement pursuant to Section 20(a) hereof, including all claims, demands, causes of action, disputes, controversies, and other matters in question arising out of or relating to this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement involving the Executive, the Company, and/or their respective representatives, even though some or all of such claims allegedly are extra-contractual in nature, whether such claims sound in contract, tort, or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Employment Dispute Resolution Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Houston, Texas. This agreement to arbitrate shall be enforceable in either federal or state court. (c) The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the issues subject to arbitration (i.e., arbitrability), the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitration, shall be governed by and construed pursuant to the Federal Arbitration Act and shall be decided by the arbitrators. In deciding the substance of any such claims, the arbitrators shall apply the substantive laws of the State of Texas (excluding Texas choice-of-law principles that might call for the application of some other state's law); provided, however, it is expressly agreed that the arbitrators shall have no authority to award treble, exemplary, or punitive damages under any circumstances regardless of whether such damages may be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary, or punitive damages in connection with any such claims. (d) The arbitration may be initiated by any party by providing to the other parties a written notice of arbitration specifying the claims. Within thirty (30) days of the notice of initiation of the arbitration procedure, (1) the Executive shall denominate one arbitrator and (2) the Company shall denominate one arbitrator. The two arbitrators shall select a third arbitrator failing agreement on which within sixty (60) days of the original notice, either the Executive or the Company shall apply to the Senior Active United States District Judge for the Southern District of Texas, who shall appoint a third arbitrator. While the third arbitrator shall be neutral, the two party-appointed arbitrators are not required to be neutral and it shall not be grounds for removal of either of the two party-appointed arbitrators or for vacating the arbitrators' award that either of such arbitrators has past or present minimal relationships with the party that appointed such arbitrator. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. (e) The three arbitrators shall by majority vote resolve all disputes between the parties. There shall be no transcript of the hearing before the arbitrators. The arbitrators' decision shall be in writing, but shall be as brief as possible. The arbitrators shall not assign the reasons for their decision. The arbitrators shall certify in their award that they have faithfully applied the terms and conditions of this Agreement and that no part of their award includes any amount for exemplary or punitive damages. All proceedings conducted hereunder and the decision of the arbitrators shall be kept confidential by the parties, e.g., the arbitrators' award shall not be released to the press or published in any of the various arbitration reporters. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. (f) Notwithstanding any provision of this Agreement to the contrary, (i) in the event of a breach or threatened breach by the Executive of any of the covenants set forth in Section 12 or 13 hereof, the Company shall be entitled to seek equitable relief, including an injunction, in any court of proper jurisdic- tion to maintain the status quo pending the resolution of the dispute by binding arbitration as provided above, and (ii) the Executive shall be entitled to seek specific performance of the Executive's right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. With respect to any such action, the Executive and the Company hereby irrevocably submit to the non- exclusive jurisdiction of any Federal or State court sitting in the City of Houston, Texas, and agree that process in any such action shall be valid and effective for all purposes if served upon the respective party in accordance with the notice provisions of Section 16 hereof. 21. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below: (a) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. (b) "Average Annual Bonus" shall mean the average annual bonus earned by the Executive pursuant to any annual bonus or incentive plan maintained by the Company in which the Executive participated in respect of any of the two calendar years ending immediately prior to the calendar year in which occurs the Date of Termination; provided, however, that if only one bonus is earned by the Executive in the applicable two-year period, such bonus shall be deemed to be the Average Annual Bonus. (c) "Board" shall mean the Board of Directors of the Company. (d) "Cause" for termination by the Company of the Executive's employment shall mean only the following actions or inactions by the Executive: (i) a willful material misrepresentation pertaining to the business or property of the Company or its Affiliates, (ii) misappropriation of a material aspect of the business or property of the Company or its Affiliates, (iii) willfully causing material damage to the property or business of the Company or its Affiliates, (iv) willful gross neglect to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to physical or mental illness), (v) willful gross misconduct result- ing in demonstrable and material economic harm to the Company or its Affiliates,(vi) conviction of the Executive for the commission of a felony involving moral turpitude or involving some aspect of the business or property of the Company or its Affiliates, or (vii) use of alcohol or drugs which interferes with the performance of the Executive's duties. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (f) "Committee" shall mean the Personnel Committee of the Board. (g) "Company" shall mean American General Corporation, a Texas corporation and shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. (h) "Date of Termination" shall have the meaning set forth in Section 7(f) hereof. (i) "Disability" shall be deemed the reason for the termination by the Company of the Executive's employment, if, (i) as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with the Company for a period of six (6) consecutive months, (ii) a physician agreed upon by the Executive (or the Executive's legal representative) and the Company (or, if the parties hereto are unable to agree upon a single physician, a third physician agreed upon by two physicians, each of whom has been selected by either the Executive (or the Executive's legal representative) or the Company) shall have determined that the Executive will be incapable, due to physical or mental illness, of substantially performing the Executive's duties and responsibilities under this Agreement for the remainder of the Term, (iii) the Company shall have given the Executive a Notice of Termination for Disability, and (iv) within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties. (j) "Employment Period" shall mean the period (which in no event shall extend beyond the expiration of the Term and may end earlier pursuant to Section 3(b) hereof) during which Executive has an obligation to render services hereunder, as described in Section 4 hereof. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (l) "Executive" shall mean the individual named in the first paragraph of this Agreement. (m) "Good Reason" for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (I), (V), (VI), (VII) or (VIII) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof: (I) a substantial adverse alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the date hereof; (II) a reduction by the Company in the Executive's Base Salary; (III) the failure by the Company to pay to the Executive any portion of the Executive's current compensation, or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due; (IV) except for any changes required by applicable law, the failure by the Company to continue in effect any compensation plan in which the Executive participates immediately prior to the date hereof which is material to the Executive's total compensation, including but not limited to the Company's Performance-Based Plan for Executive Officers, Supplemental Thrift Plan, Restoration of Retirement Income Plan, and 1997 Stock and Incentive Plan, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Executive's participation relative to other participants, as existed immediately prior to the date hereof; (V) except for any changes required by applicable law, the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the date hereof, the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive as of the date hereof, or the failure by the Company to provide the Executive with at least the number of annual paid vacation days to which the Executive is entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect on the date hereof; notwithstanding the foregoing provisions of this Section 21(m)(V), it shall not constitute Good Reason that the Executive's benefits under the Company's general medical, health and accident plans are no longer substantially similar to the benefits enjoyed by the Executive immediately prior to the date hereof, unless the changes in such benefits constitute a material adverse alteration thereof; (VI) any purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7(e) hereof; for purposes of this Agreement, no such purported termination shall be effective, except as provided in Section 3(b) hereof; or (VII) the Company's breach of a material term or condition of the Agreement. It shall also constitute Good Reason for termination by the Executive of the Executive's employment if: (X)if, at any time during the Term hereof (whether or not a Change in Control shall have occurred), Robert M. Devlin is not serving as Chief Executive Officer of the Company (or, if a merger, consolidation or share exchange by the Company (or a Company subsidiary) with another corporation shall have occurred, as Chief Executive Officer or second-in-command of the Company), and (Y) (i) there is a material diminution in the duties, responsibilities or title of the Executive, (ii) a substantial adverse alteration is made in the nature or status of the Executive's responsibilities from those in effect immediately prior to Robert M. Devlin's ceasing to so serve, (iii) the Company relocates the Executive's principal place of employment to a location more than fifty (50) miles from the Executive's principal place of employment immediately prior to Robert M. Devlin's ceasing to so serve, or (iv) the Company requires the Executive to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations. The Executive's right to terminate the Executive's employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness. The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. (n) "Notice of Termination" shall have the meaning set forth in Section 7(e) hereof. (o) "Pension Plans" shall mean all tax- qualified and non-qualified supplemental or excess benefit pension plans maintained by the Company and any other plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits. (p) "Severance Agreement" shall mean the Change in Control Severance Agreement (if any) in effect between the Executive and the Company from time to time, as amended from time to time. (q) "Term" shall mean the period of time described in Section 3 hereof (including any extension, continuation or termination described therein). American General Corporation By:___________________________ Name: Robert M. Devlin Title: Chairman and Chief Executive Officer ______________________________ Executive Address: ______________________________ ______________________________ ______________________________ (Please print carefully) EX-10 6 (Form for Geissinger and Martin) SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT THIS AGREEMENT is made as of the 1st day of May, 2000, by and between AMERICAN GENERAL CORPORATION, a Texas corporation (the "Company"), and [ ] (the "Executive"). WHEREAS, the Executive has been employed by the Company in valuable executive service to the Company; and WHEREAS, the Company desires to reward such past service and to encourage and reward the continued employment of Executive with the Company until his retirement and to promote his devotion to his duties on behalf of the Company without uncertainty or concern as to his retirement income security or that of his spouse; NOW, THEREFORE, the Company and the Executive hereby enter into this Supplemental Executive Retirement Agreement as hereinafter provided: ARTICLE I. GENERAL Section 1.1 Effective Date. This Agreement shall be effective as of May 1, 2000 (the "Effective Date"). Section 1.2 Defined Terms. The definitions of capitalized terms used in this Agreement (if not provided where a capitalized term initially appears) are provided in the last Article hereof. ARTICLE II. RETIREMENT BENEFITS Section 2.1 Normal Retirement Benefit. If the Executive retires on or after his Normal Retirement Date, the Retirement Benefit shall be an annual retirement benefit payable to the Executive for his lifetime, with a ten-year term certain (the "Normal Retirement Benefit"), in an annual amount equal to (X) minus (Y), calculated as follows: (A) The amount of (X) equals (a) multiplied by (b): (a) sixty-seven-and-2/10ths percent (67.2%) of such Executive's Final Average Compensation; (b) the fraction equal to his Years of Service (not in excess of twenty-eight (28) years) divided by twenty- eight (28); and (B) The amount of (Y) equals (e) plus (f) plus (g): (e) the Social Security Benefit; (f) the Qualified Plan Benefit; and (g) the Restoration Plan Benefit. Unless the Executive shall have notified the Company in writing no later than July 1, 2000 (and prior to any termination of his employment) of his election that this paragraph shall be null and void and of no effect, then, notwithstanding the foregoing provisions of this Section 2.1, if payment of a lump sum amount equal to the actuarial equivalent of a Normal Retirement Benefit is to be made pursuant to Section 2.6 hereof, the annual amount of the Normal Retirement Benefit shall equal (X) minus (Y), where (X) is calculated as set forth above, but the amount of (Y) equals only the Social Security Benefit plus the Qualified Plan Benefit (and not the Restoration Plan Benefit). The resulting increase in such lump sum amount shall be paid in lieu of any Restoration Plan Benefit under the circumstances described in Section 2.6 hereof and the Executive hereby waives his right to any Restoration Plan Benefit under (and only under) such circumstances. Section 2.2 Early Retirement Benefit. If the Executive retires on or after his Early Retirement Date (but before his Normal Retirement Date), the Retirement Benefit shall be the annual Retirement Benefit computed under Section 2.1, reduced as follows: (A) If payment of the Retirement Benefit commences after the Executive has attained age sixty (60), the Retirement Benefit shall be reduced by two-and-one-half percent (2.5%) per year for each complete year between such commencement and the Executive's Normal Retirement Date; the reduction per year shall be pro- rated for incomplete years; (B) If payment of the Retirement Benefit commences before the Executive attains age sixty (60), the Retirement Benefit shall be further reduced (beyond the reduction imposed by Section 2.2(A) hereof) by five percent (5%) per year for each complete year between such commencement and the Executive's attaining age sixty (60); the reduction per year shall be pro-rated for incomplete years. Section 2.3 Termination of Employment Prior to Early Retirement Date and Normal Retirement Date. If the Executive incurs a termination of employment with the Company after satisfying the vesting requirement under Section 2.7, but before attaining either an Early Retirement Date or a Normal Retirement Date, he shall receive a Retirement Benefit determined under Section 2.1, but, unless such termination is described in Section 2.6 hereof, such benefit shall be calculated by using his actual Years of Service (including all periods credited as Years of Service pursuant to this Agreement) and actual compensation at the time of his termination and the actual Social Security Benefit that he is entitled to receive at his Normal Retirement Date. Unless such termination is described in Section 2.6 hereof, payment of such benefit shall commence after, but not more than sixty (60) days after, his Normal Retirement Date. Section 2.4 Disability. If the Executive is receiving either short-term or long-term disability benefits under any Company plan, then, during the period of payment of such disability benefits, the Executive shall be treated as employed for all purposes of the Agreement, including, without limitation, attainment of the age, service and vesting requirements under the Agreement. The parties hereto agree that such disability benefits will cease and the Executive will no longer be considered employed by the Company on the date on which the Executive attains his Normal Retirement Age. Payment of the Executive's Retirement Benefit shall commence after, but not more than sixty (60) days after, his Normal Retirement Date. Section 2.5 Termination by Reason of Death. If the Executive dies (i) while in the employment of the Company, (ii) after the attainment of age fifty-five (55), (iii) having been credited with ten (10) Years of Service, and (iv) prior to the commencement of the payment of the Retirement Benefit hereunder, the Executive's surviving spouse, if any, shall receive for her lifetime an annual benefit equal to the two-thirds (2/3) survivor annuity she would have received had the Executive retired on the day before his death, deeming the Executive, for purposes of this Section 2.5 only, to have elected a joint and survivor annuity payable immediately at a reduced amount with a two- thirds (2/3) survivor annuity. The payment of spouse's benefit shall commence not later than sixty (60) days after the Executive's death. Section 2.6 Termination on or after Change in Control; Certain Other Terminations. Notwithstanding any other provision of this Agreement, upon any termination of the Executive's employment (whether occurring before or after any Change in Control), which termination is (i) by the Company without Cause, or (ii) by the Executive with Good Reason (as such terms are defined in the Executive's Employment Agreement with the Company dated as of May 1, 2000, as it may be amended from time to time (the "Employment Agreement")), the Company shall pay the Executive within the five (5) business days immediately following such termination a lump sum amount, in cash, equal to the actuarial equivalent of the Normal Retirement Benefit which the Executive would have accrued, if the Executive had accumulated (after his termination of employment) thirty-six (36) additional months of service and age credit (but in no event shall the Executive be deemed to have accumulated additional service and age credit after the Executive's sixty-fifth birthday). For purposes of this Section 2.6, an "actuarial equivalent" shall be determined using the same assumptions utilized under the American General Retirement Plan (or any successor plan thereto) immediately prior to the Executive's termination of employment, or, if earlier and more favorable to the Executive, immediately prior to the Change in Control. The Retirement Benefit so calculated shall be based on a projected Social Security Benefit that is determined under the provisions of the Social Security Act as in effect on the date of such termination, using the estimated "primary insurance amount" the Executive would be entitled to under such Act at his Normal Retirement Date, assuming (i) the amount of income he is receiving on the date such termination becomes effective which would be treated as wages for purposes of such Act would remain constant through his Normal Retirement Date, and (ii) an annual cost-of-living adjustment equal to four percent (4%). Notwithstanding the foregoing provisions of this Section 2.6, if termination of the Executive's employment occurs after a Change in Control (or during a Period of Anticipated Change in Control, as defined in the Executive's Change in Control Severance Agreement with the Company, as it may be amended from time to time (the "Severance Agreement")) and if payment of a lump sum amount equal to the actuarial equivalent of a Normal Retirement Benefit is to be made pursuant to this Section 2.6 after the Executive shall have attained age 57, the Normal Retirement Benefit calculated pursuant to this Section 2.6 shall not be less than the Normal Retirement Benefit which the Executive would have accrued if the Executive had continued to be employed by the Company until his Normal Retirement Date. Section 2.7 Vesting of Retirement Benefit. The Executive shall have a vested right to his Retirement Benefit upon the occurrence of any of the following while the Executive is employed by the Company: (i) his completion of ten (10) Years of Service; (ii) the attainment of his Normal Retirement Age; (iii) the termination of the Executive's employment pursuant to Section 8(c) of the Employment Agreement; or (iv) the occurrence of a Change in Control at any time. Section I.8 Time and Form of Payment. (A) Time of Payment. Except where specifically otherwise provided herein, the payment of any Retirement Benefit to which the Executive has become entitled shall commence after, but no more than sixty (60) days after, the Executive's date of retirement. The Executive shall give the Company reasonable advance notice in writing of his intention to retire (which shall be given at least one month before his intended retirement date). (B) Normal Form of Payment. A life annuity with a ten-year term certain is the normal form of payment of the Retirement Benefit for the Executive and any actuarial equivalents to be calculated pursuant to this Agreement will be based on the normal form of payment. If the Executive dies after payment of the Retirement Benefit in the normal form has commenced, payments shall continue for the remainder of the ten-year term certain to the beneficiary or beneficiaries designated by the Executive by written instruction delivered to the Administrator during the Executive's lifetime. The Executive may designate one or more primary and contingent beneficiaries to receive the remaining payments of the Retirement Benefit, and may designate the proportions in which such beneficiaries are to receive such payments. The Executive may change such designations from time to time, and the last written designation filed with the Administrator prior to the Executive's death shall control. If the Executive fails to specifically designate a beneficiary, or if no designated beneficiary survives the Executive, payment shall be made by the Administrator in the following order of priority: (i) to the Executive's surviving spouse, or, if none, (ii) to the Executive's children, or, if none, (iii) to the Executive's estate. (C) Election of Alternative Forms of Payment. Subject to Section 2.6 hereof, the Executive can elect that his Retirement Benefit be paid in any of the following forms by an irrevocable election in writing which is delivered to the Company within sixty (60) days after the Effective Date, or, with the permission of the Committee, by an irrevocable election in writing which is delivered to the Company at any time before his retirement becomes effective: (i) a joint and survivor annuity payable at a reduced amount for the life of the Executive with a survivor annuity for the life of the Executive's surviving spouse which shall be one hundred percent (100%) of the annuity payable during the joint lives of the Executive and the surviving spouse; (ii) a joint and survivor annuity payable at a reduced amount for the life of the Executive with a survivor annuity for the life of the Executive's surviving spouse which shall be seventy-five percent (75%) of the annuity payable during the joint lives of the Executive and the surviving spouse; (iii) a joint and survivor annuity payable at a reduced amount for the life of the Executive with a survivor annuity for the life of the Executive's surviving spouse which shall be fifty percent (50%) of the annuity payable during the joint lives of the Executive and the surviving spouse; or (iv) a lump-sum payment of the actuarial present value of the normal form of payment of the Retirement Benefit. In calculating an alternative form of payment for the Retirement Benefit, the Administrator shall use the same assumptions utilized under the American General Retirement Plan (or any successor plan thereto) immediately prior to the Executive's termination of employment, or, if a Change in Control shall have occurred prior to the Executive's termination of employment, the assumptions so utilized immediately prior to the Change in Control, if more favorable to the Executive. ARTICLE III. ADMINISTRATION Section 3.1 General. Except as otherwise specifically provided in the Agreement, the Administrator shall be responsible for administration of the Agreement. Section 3.2 Administrative Rules. The Administrator may adopt such rules of procedure as it deems desirable for the conduct of its affairs, except to the extent that such rules conflict with the provisions of the Agreement. Section 3.3 Duties. The Administrator shall have the following rights, powers and duties: (A) The decision of the Administrator in matters within its jurisdiction shall be final, binding and conclusive upon the Company and upon any person affected by such decision, subject to the claims procedure hereinafter set forth. (B) The Administrator shall have the duty and authority to interpret and construe the provisions of the Agreement, to determine eligibility for a Retirement Benefit and the appropriate amount of any Retirement Benefit, to decide any question which may arise regarding the rights of the Executive hereunder and to exercise such powers as the Administrator may deem necessary for the administration of the Agreement. (C) The Administrator shall maintain full and complete records of its decisions. Its records shall contain all relevant data pertaining to the Executive and his rights and duties under the Agreement. The Administrator shall maintain a bookkeeping account with respect to payment of any Retirement Benefit. (D) Notwithstanding any other provision of this Agreement, upon and after the occurrence of a Change in Control and within the six-month period immediately preceding a Change in Control, the Administrator's authority and powers shall not be used to interpret or construe the provisions hereof in any way (or to take any other action) which would adversely affect any right given the Executive by this Agreement. Section 3.4 Fees. No fee or compensation shall be paid to any person for services as the Administrator. ARTICLE IV. CLAIMS PROCEDURE Section 4.1 General. Any claim for a Retirement Benefit under the Agreement shall be filed by the Executive or beneficiary (either of which is referred to in this Article as the "claimant") in the manner prescribed by the Administrator. Section 4.2 Denials. If a claim for a Retirement Benefit under the Agreement is wholly or partially denied, notice of the decision shall be furnished to the claimant by the Administrator within a reasonable period of time after receipt of the claim by the Administrator. Section 4.3 Notice. Any claimant who is denied a claim for Retirement Benefits shall be furnished written notice setting forth: (i) the specific reason or reasons for the denial; (ii) specific reference to the pertinent provision of the Agreement upon which the denial is based; (iii) a description of any additional material or information necessary of the claimant to perfect the claim; and (iv) an explanation of the claims review procedure under the Agreement. Section 4.4 Appeals Procedure. In order that a claimant may appeal a denial of a claim, the claimant or the claimant's duly authorized representative may: (i) request a review by written application to the Committee, no later than sixty (60) days after receipt by the claimant of written notification of denial of a claim; (ii) review pertinent documents; and (iii) submit issues and comments in writing. Section 4.5 Review. A decision on review of a denied claim shall be made by the Committee not later than sixty (60) days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable period of time, but not later than one-hundred-and-twenty (120) days after receipt of a request for a review. The decision on review shall be in writing and shall include the specific reason(s) for the decision and the specific references(s) to the pertinent provisions of the Agreement on which the decision is based. Section 4.6 Arbitration. Any further dispute or controversy arising under or in connection with this Agreement which is not resolved by agreement pursuant to Sections 4.1 through 4.5 hereof shall be resolved by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Employment Dispute Resolution Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Houston, Texas. This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the issues subject to arbitration (i.e., arbitrability), the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitra tion, shall be governed by and construed pursuant to the Federal Arbitration Act and shall be decided by the arbitrators. In deciding the substance of any such claims, the arbitrators shall apply the substantive laws of the State of Texas (excluding Texas choice-of-law principles that might call for the application of some other state's law); provided, however, it is expressly agreed that the arbitrators shall have no authority to award treble, exemplary, or punitive damages under any circumstances regardless of whether such damages may be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary, or punitive damages in connection with any such claims. The arbitration may be initiated by any party by providing to the other parties a written notice of arbitration specifying the claims. Within thirty (30) days of the notice of initiation of the arbitration procedure, (1) the Executive shall denominate one arbitrator and (2) the Company shall denominate one arbitrator. The two arbitrators shall select a third arbitrator failing agreement on which within sixty (60) days of the original notice, either the Executive or the Company shall apply to the Senior Active United States District Judge for the Southern District of Texas, who shall appoint a third arbitrator. While the third arbitrator shall be neutral, the two party-appointed arbitrators are not required to be neutral and it shall not be grounds for removal of either of the two party-appointed arbitrators or for vacating the arbitrators' award that either of such arbitrators has past or present minimal relationships with the party that appointed such arbitrator. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. The three arbitrators shall by majority vote resolve all disputes between the parties. There shall be no transcript of the hearing before the arbitrators. The arbitrators' decision shall be in writing, but shall be as brief as possible. The arbitrators shall not assign the reasons for their decision. The arbitrators shall certify in their award that they have faithfully applied the terms and conditions of this Agreement and that no part of their award includes any amount for exemplary or punitive damages. All proceedings conducted hereunder and the decision of the arbitrators shall be kept confidential by the parties, e.g., the arbitrators' award shall not be released to the press or published in any of the various arbitration reporters. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. ARTICLE V. MISCELLANEOUS PROVISIONS Section 5.1 Amendment and Termination. This Agreement may be amended or modified only with the written consent of the parties hereto. Section 5.2 No Assignment. The Executive shall not have the power to pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose of in advance any interest in amounts payable hereunder of any of the payments provided for herein, nor shall any interest in amounts payable hereunder or in any payments be subject to seizure for payments of any debts, judgments, alimony or separate maintenance, or be reached or transferred by operation of law in the event of bankruptcy, insolvency or otherwise. Section 5.3 Successors and Assigns. The provisions of the Agreement are binding upon and inure to the benefit of each Company, its successors and assigns, and the Executive, his beneficiaries, heirs and legal representatives. Section 5.4 Governing Law. The Agreement shall be subject to and construed in accordance with the laws of the State of Texas to the extent not preempted by the provisions of ERISA. Section 5.5 No Guarantee of Employment. Nothing contained in the Agreement shall be construed as a contract of employment or deemed to give the Executive the right to be retained in the employ of an Company or any equity or other interest in the assets, business or affairs of an Company. Section 5.6 Severability. If any provision of the Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Agreement, but the Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein. Section 5.7 Notification of Addresses. The Executive and each beneficiary shall file with the Administrator, from time to time, in writing, the post office address of the Executive, the post office address of each beneficiary, and each change of post office address. Any communication, statement or notice addressed to the last post office address filed with the Administrator (or if no such address was filed with the Administrator, then to the last post office address of the Executive or beneficiary as shown on the Company's records) shall be binding on the Executive and each beneficiary for all purposes of the Agreement and neither the Administrator nor the Company shall be obliged to search for or ascertain the whereabouts of the Executive or beneficiary. Section 5.8 Bonding. The Administrator and all agents and advisors employed by it shall not be required to be bonded, except as may otherwise be required by ERISA. Section 5.9 Taxes. The Company shall have the right to withhold from any cash or other amounts due or to become due from the Company to a Executive (including by reducing the amount of any Retirement Benefit payable in the future) the amount of any federal, state and local taxes required to be withheld or otherwise deducted and paid by the Company with respect to the vesting or payment of any Retirement Benefit hereunder. Section 5.10 No Funding. There shall be no funding of the benefit amounts to be paid pursuant to this Agreement. The Agreement shall not confer upon the Executive (or beneficiary or any other person) any security interest or any other right, title or interest of any kind in or to any property of the Company. The Agreement shall constitute merely the unsecured promise of the Company to make the benefit payments provided for herein. Notwithstanding the foregoing provisions of this Section 5.10, the Company, in its discretion, may establish a trust to pay the benefit amounts hereunder, which trust shall be subject to the claims of the Company's general creditors in the event of the Company's bankruptcy or insolvency. If such a trust is established, the Company shall remain responsible for the payment of any benefit amounts provided hereunder which are not paid in accordance with the provisions hereof by such trust. ARTICLE VI. DEFINITIONS AND USAGE Section 6.1 Definitions. Wherever used in the Agreement, the following words and phrases shall have the meaning set forth below, unless the context plainly requires a different meaning: "Administrator" means the Company, acting through the Personnel Committee of the Board, or other person or persons designated by the Personnel Committee. "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. "Agreement" means this Supplemental Executive Retirement Agreement, as set forth herein and as amended from time to time. "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. "Board" means the Board of Directors of the Company. "Change in Control" means a change in the control of the Company, which shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (I)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (III) below; or (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation (or a share exchange between shareholders of the Company or any direct or indirect subsidiary of the Company and another corporation or entity pursuant to Article 5.02 (or any successor provision thereto) of the Texas Business Corporation Act), other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least fifty-one percent (51%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (IV) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least fifty-one percent (51%) of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. "Code" means the Internal Revenue Code of 1986, as amended from time to time. Any reference to a particular Code section shall include any provision which modifies, replaces or supersedes it. "Committee" shall mean the Personnel Committee of the Board until six months prior to the occurrence of a Change in Control and thereafter shall mean (i) the individuals (not fewer than three in number) who, on the date six months before a Change in Control, constitute the Personnel Committee of the Board, plus (ii) in the event that fewer than three individuals are available from the group specified in clause (i) above for any reason, such individuals as may be appointed by the individual or individuals so available (including for this purpose any individual or individuals previously so appointed under this clause (ii)); provided, however, that the maximum number of individuals constituting the Committee shall not exceed five. "Company" means American General Corporation, a Texas corporation, and, except in determining under the definition of Change in Control herein whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. "Early Retirement Date" means the first date on which the Executive (i) has completed ten (10) Years of Service and (ii) has attained the age of fifty-five (55). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Any reference to a particular ERISA section shall include any provision which modifies, replaces, or supersedes it. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Final Average Compensation" means the following sum divided by three (3): the sum of the base salary received by the Executive during, and the incentive payments received by the Executive pursuant to any annual bonus, incentive compensation or similar plan maintained by the Company with respect to, the three (3) calendar years (whether or not consecutive) ending within the last sixty (60) months of the Executive's employment with the Company which produce the highest total of such base salary and incentive payments (for purposes of this sentence, any amount of such base salary or incentive payment which is deferred by the Executive shall be included in the calculation of amounts received). Notwithstanding the immediately preceding sentence, if the Executive's termination of employment is described in Section 2.6 hereof and the Executive receives (pursuant to Section 8(c)(iii) of his Employment Agreement (or any successor provision thereto), or Section 4.5 of his Severance Agreement (or any successor provision thereto) and in lieu of any further salary or bonus payments) a lump sum amount (the "Severance Amount"), Final Average Compensation shall mean the Severance Amount divided by three (3). "Normal Retirement Age" means age sixty- two (62). "Normal Retirement Date" means the date on which the Executive attains his Normal Retirement Age. "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. "Qualified Plan" means the American General Retirement Plan, together with any other defined benefit retirement plan intended to be qualified under Section 401(a) of the Code which is adopted and maintained by the Company and under which the Executive is entitled to a retirement benefit at the date of his retirement or other termination of employment. "Qualified Plan Benefit" means the aggregate annual retirement benefit to which the Executive (at the date of his retirement or other termination of employment) is entitled under the plan or plans which comprise the Qualified Plan (expressed in the form of a single life annuity with a ten- year term certain commencing payment on the date payment of the Retirement Benefit hereunder commences). "Restoration Plan Benefit" means the annual retirement benefit to which the Executive (at the date of his retirement or other termination of employment) is entitled under the American General Corporation Restoration of Retirement Income Plan (expressed in the form of a single life annuity with a ten-year term certain commencing payment on the date payment of the Retirement Benefit hereunder commences). "Retirement Benefit" means the benefit payable under this Agreement, as determined under Article II. "Social Security Benefit" means one- half of the annual benefit payable under the Social Security Act, relating to Old-Age and Disability benefits, as of the Executive's Normal Retirement Date, or upon actual retirement, if later. "Years of Service" means the total number of years (measured in full and partial years, in increments of one-twelfth years) of active employment with the Company during which substantial services were rendered as an employee, commencing on the date the Executive was first employed by the Company and ending on the date he ceases to perform services for the Company (including employment before the Effective Date), but in no event shall more than twenty-eight (28) years be credited to the Executive regardless of his actual period of service with the Company. Notwithstanding the foregoing, if the Executive retires on or after the attainment of age 62, he shall be credited with twenty-eight (28) Years of Service. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. AMERICAN GENERAL CORPORATION By_____________________________ Robert M. Devlin Chairman, President and Chief Executive Officer ____________________________ Executive EX-10 7 (Form for Graf and Scott) SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT THIS AGREEMENT is made as of the 1st day of May, 2000, by and between AMERICAN GENERAL CORPORATION, a Texas corporation (the "Company"), and [ ] (the "Executive"). WHEREAS, the Executive has been employed by the Company in valuable executive service to the Company; and WHEREAS, the Company desires to reward such past service and to encourage and reward the continued employment of Executive with the Company until his retirement and to promote his devotion to his duties on behalf of the Company without uncertainty or concern as to his retirement income security or that of his spouse; NOW, THEREFORE, the Company and the Executive hereby enter into this Supplemental Executive Retirement Agreement as hereinafter provided: ARTICLE I. GENERAL Section 1.1 Effective Date. This Agreement shall be effective as of May 1, 2000 (the "Effective Date"). Section 1.2 Defined Terms. The definitions of capitalized terms used in this Agreement (if not provided where a capitalized term initially appears) are provided in the last Article hereof. ARTICLE II. RETIREMENT BENEFITS Section 2.1 Normal Retirement Benefit. If the Executive retires on or after his Normal Retirement Date, the Retirement Benefit shall be an annual retirement benefit payable to the Executive for his lifetime, with a ten-year term certain (the "Normal Retirement Benefit"), in an annual amount equal to (X) minus (Y), calculated as follows: (A) The amount of (X) equals (a) multiplied by (b): (a) sixty-seven-and-2/10ths percent (67.2%) of such Executive's Final Average Compensation; (b) the fraction equal to his Years of Service (not in excess of twenty-eight (28) years) divided by twenty- eight (28); and (B) The amount of (Y) equals (e) plus (f) plus (g): (e) the Social Security Benefit; (f) the Qualified Plan Benefit; and (g) the Restoration Plan Benefit. Unless the Executive shall have notified the Company in writing no later than July 1, 2000 (and prior to any termination of his employment) of his election that this paragraph shall be null and void and of no effect, then, notwithstanding the foregoing provisions of this Section 2.1, if payment of a lump sum amount equal to the actuarial equivalent of a Normal Retirement Benefit is to be made pursuant to Section 2.6 hereof, the annual amount of the Normal Retirement Benefit shall equal (X) minus (Y), where (X) is calculated as set forth above, but the amount of (Y) equals only the Social Security Benefit plus the Qualified Plan Benefit (and not the Restoration Plan Benefit). The resulting increase in such lump sum amount shall be paid in lieu of any Restoration Plan Benefit under the circumstances described in Section 2.6 hereof and the Executive hereby waives his right to any Restoration Plan Benefit under (and only under) such circumstances. Section 2.2 Early Retirement Benefit. If the Executive retires on or after his Early Retirement Date (but before his Normal Retirement Date), the Retirement Benefit shall be the annual Retirement Benefit computed under Section 2.1, reduced as follows: (A) If payment of the Retirement Benefit commences after the Executive has attained age sixty (60), the Retirement Benefit shall be reduced by two-and-one-half percent (2.5%) per year for each complete year between such commencement and the Executive's Normal Retirement Date; the reduction per year shall be pro- rated for incomplete years; (B) If payment of the Retirement Benefit commences before the Executive attains age sixty (60), the Retirement Benefit shall be further reduced (beyond the reduction imposed by Section 2.2(A) hereof) by five percent (5%) per year for each complete year between such commencement and the Executive's attaining age sixty (60); the reduction per year shall be pro-rated for incomplete years. Section 2.3 Termination of Employment Prior to Early Retirement Date and Normal Retirement Date. If the Executive incurs a termination of employment with the Company after satisfying the vesting requirement under Section 2.7, but before attaining either an Early Retirement Date or a Normal Retirement Date, he shall receive a Retirement Benefit determined under Section 2.1, but, unless such termination is described in Section 2.6 hereof, such benefit shall be calculated by using his actual Years of Service (including all periods credited as Years of Service pursuant to this Agreement) and actual compensation at the time of his termination and the actual Social Security Benefit that he is entitled to receive at his Normal Retirement Date. Unless such termination is described in Section 2.6 hereof, payment of such benefit shall commence after, but not more than sixty (60) days after, his Normal Retirement Date. Section 2.4 Disability. If the Executive is receiving either short-term or long-term disability benefits under any Company plan, then, during the period of payment of such disability benefits, the Executive shall be treated as employed for all purposes of the Agreement, including, without limitation, attainment of the age, service and vesting requirements under the Agreement. The parties hereto agree that such disability benefits will cease and the Executive will no longer be considered employed by the Company on the date on which the Executive attains his Normal Retirement Age. Payment of the Executive's Retirement Benefit shall commence after, but not more than sixty (60) days after, his Normal Retirement Date. Section 2.5 Termination by Reason of Death. If the Executive dies (i) while in the employment of the Company, (ii) after the attainment of age fifty-five (55), (iii) having been credited with ten (10) Years of Service, and (iv) prior to the commencement of the payment of the Retirement Benefit hereunder, the Executive's surviving spouse, if any, shall receive for her lifetime an annual benefit equal to the two-thirds (2/3) survivor annuity she would have received had the Executive retired on the day before his death, deeming the Executive, for purposes of this Section 2.5 only, to have elected a joint and survivor annuity payable immediately at a reduced amount with a two- thirds (2/3) survivor annuity. The payment of spouse's benefit shall commence not later than sixty (60) days after the Executive's death. Section 2.6 Termination on or after Change in Control; Certain Other Terminations. Notwithstanding any other provision of this Agreement, upon any termination of the Executive's employment (whether occurring before or after any Change in Control), which termination is (i) by the Company without Cause, or (ii) by the Executive with Good Reason (as such terms are defined in the Executive's Employment Agreement with the Company dated as of May 1, 2000, as it may be amended from time to time (the "Employment Agreement")), the Company shall pay the Executive within the five (5) business days immediately following such termination a lump sum amount, in cash, equal to the actuarial equivalent of the Normal Retirement Benefit which the Executive would have accrued, if the Executive had accumulated (after his termination of employment) thirty-six (36) additional months of service and age credit (but in no event shall the Executive be deemed to have accumulated additional service and age credit after the Executive's sixty-fifth birthday). For purposes of this Section 2.6, an "actuarial equivalent" shall be determined using the same assumptions utilized under the American General Retirement Plan (or any successor plan thereto) immediately prior to the Executive's termination of employment, or, if earlier and more favorable to the Executive, immediately prior to the Change in Control. The Retirement Benefit so calculated shall be based on a projected Social Security Benefit that is determined under the provisions of the Social Security Act as in effect on the date of such termination, using the estimated "primary insurance amount" the Executive would be entitled to under such Act at his Normal Retirement Date, assuming (i) the amount of income he is receiving on the date such termination becomes effective which would be treated as wages for purposes of such Act would remain constant through his Normal Retirement Date, and (ii) an annual cost-of-living adjustment equal to four percent (4%). Notwithstanding the foregoing provisions of this Section 2.6, if termination of the Executive's employment occurs after a Change in Control (or during a Period of Anticipated Change in Control, as defined in the Executive's Change in Control Severance Agreement with the Company, as it may be amended from time to time (the "Severance Agreement")) and if payment of a lump sum amount equal to the actuarial equivalent of a Normal Retirement Benefit is to be made pursuant to this Section 2.6 after the Executive shall have attained age 57, the Normal Retirement Benefit calculated pursuant to this Section 2.6 shall not be less than the Normal Retirement Benefit which the Executive would have accrued if the Executive had continued to be employed by the Company until his Normal Retirement Date. Section 2.7 Vesting of Retirement Benefit. The Executive shall have a vested right to his Retirement Benefit upon the occurrence of any of the following while the Executive is employed by the Company: (i) his completion of ten (10) Years of Service; (ii) the attainment of his Normal Retirement Age; (iii) the termination of the Executive's employment pursuant to Section 8(c) of the Employment Agreement; or (iv) the occurrence of a Change in Control at any time. Section 2.8 Time and Form of Payment. (A) Time of Payment. Except where specifically otherwise provided herein, the payment of any Retirement Benefit to which the Executive has become entitled shall commence after, but no more than sixty (60) days after, the Executive's date of retirement. The Executive shall give the Company reasonable advance notice in writing of his intention to retire (which shall be given at least one month before his intended retirement date). (B) Normal Form of Payment. A life annuity with a ten-year term certain is the normal form of payment of the Retirement Benefit for the Executive and any actuarial equivalents to be calculated pursuant to this Agreement will be based on the normal form of payment. If the Executive dies after payment of the Retirement Benefit in the normal form has commenced, payments shall continue for the remainder of the ten-year term certain to the beneficiary or beneficiaries designated by the Executive by written instruction delivered to the Administrator during the Executive's lifetime. The Executive may designate one or more primary and contingent beneficiaries to receive the remaining payments of the Retirement Benefit, and may designate the proportions in which such beneficiaries are to receive such payments. The Executive may change such designations from time to time, and the last written designation filed with the Administrator prior to the Executive's death shall control. If the Executive fails to specifically designate a beneficiary, or if no designated beneficiary survives the Executive, payment shall be made by the Administrator in the following order of priority: (i) to the Executive's surviving spouse, or, if none, (ii) to the Executive's children, or, if none, (iii) to the Executive's estate. (C) Election of Alternative Forms of Payment. Subject to Section 2.6 hereof, the Executive can elect that his Retirement Benefit be paid in any of the following forms by an irrevocable election in writing which is delivered to the Company within sixty (60) days after the Effective Date, or, with the permission of the Committee, by an irrevocable election in writing which is delivered to the Company at any time before his retirement becomes effective: (i) a joint and survivor annuity payable at a reduced amount for the life of the Executive with a survivor annuity for the life of the Executive's surviving spouse which shall be one hundred percent (100%) of the annuity payable during the joint lives of the Executive and the surviving spouse; (ii) a joint and survivor annuity payable at a reduced amount for the life of the Executive with a survivor annuity for the life of the Executive's surviving spouse which shall be seventy-five percent (75%) of the annuity payable during the joint lives of the Executive and the surviving spouse; (iii) a joint and survivor annuity payable at a reduced amount for the life of the Executive with a survivor annuity for the life of the Executive's surviving spouse which shall be fifty percent (50%) of the annuity payable during the joint lives of the Executive and the surviving spouse; or (iv) a lump-sum payment of the actuarial present value of the normal form of payment of the Retirement Benefit. In calculating an alternative form of payment for the Retirement Benefit, the Administrator shall use the same assumptions utilized under the American General Retirement Plan (or any successor plan thereto) immediately prior to the Executive's termination of employment, or, if a Change in Control shall have occurred prior to the Executive's termination of employment, the assumptions so utilized immediately prior to the Change in Control, if more favorable to the Executive. ARTICLE III. ADMINISTRATION Section 3.1 General. Except as otherwise specifically provided in the Agreement, the Administrator shall be responsible for administration of the Agreement. Section 3.2 Administrative Rules. The Administrator may adopt such rules of procedure as it deems desirable for the conduct of its affairs, except to the extent that such rules conflict with the provisions of the Agreement. Section 3.3 Duties. The Administrator shall have the following rights, powers and duties: (A) The decision of the Administrator in matters within its jurisdiction shall be final, binding and conclusive upon the Company and upon any person affected by such decision, subject to the claims procedure hereinafter set forth. (B) The Administrator shall have the duty and authority to interpret and construe the provisions of the Agreement, to determine eligibility for a Retirement Benefit and the appropriate amount of any Retirement Benefit, to decide any question which may arise regarding the rights of the Executive hereunder and to exercise such powers as the Administrator may deem necessary for the administration of the Agreement. (C) The Administrator shall maintain full and complete records of its decisions. Its records shall contain all relevant data pertaining to the Executive and his rights and duties under the Agreement. The Administrator shall maintain a bookkeeping account with respect to payment of any Retirement Benefit. (D) Notwithstanding any other provision of this Agreement, upon and after the occurrence of a Change in Control and within the six-month period immediately preceding a Change in Control, the Administrator's authority and powers shall not be used to interpret or construe the provisions hereof in any way (or to take any other action) which would adversely affect any right given the Executive by this Agreement. Section 3.4 Fees. No fee or compensation shall be paid to any person for services as the Administrator. ARTICLE IV. CLAIMS PROCEDURE Section 4.1 General. Any claim for a Retirement Benefit under the Agreement shall be filed by the Executive or beneficiary (either of which is referred to in this Article as the "claimant") in the manner prescribed by the Administrator. Section 4.2 Denials. If a claim for a Retirement Benefit under the Agreement is wholly or partially denied, notice of the decision shall be furnished to the claimant by the Administrator within a reasonable period of time after receipt of the claim by the Administrator. Section 4.3 Notice. Any claimant who is denied a claim for Retirement Benefits shall be furnished written notice setting forth: (i) the specific reason or reasons for the denial; (ii) specific reference to the pertinent provision of the Agreement upon which the denial is based; (iii) a description of any additional material or information necessary of the claimant to perfect the claim; and (iv) an explanation of the claims review procedure under the Agreement. Section 4.4 Appeals Procedure. In order that a claimant may appeal a denial of a claim, the claimant or the claimant's duly authorized representative may: (i) request a review by written application to the Committee, no later than sixty (60) days after receipt by the claimant of written notification of denial of a claim; (ii) review pertinent documents; and (iii) submit issues and comments in writing. Section 4.5 Review. A decision on review of a denied claim shall be made by the Committee not later than sixty (60) days after receipt of a request for review, unless special circumstances require an extension of time for processing, in which case a decision shall be rendered within a reasonable period of time, but not later than one-hundred-and-twenty (120) days after receipt of a request for a review. The decision on review shall be in writing and shall include the specific reason(s) for the decision and the specific references(s) to the pertinent provisions of the Agreement on which the decision is based. Section 4.6 Arbitration. Any further dispute or controversy arising under or in connection with this Agreement which is not resolved by agreement pursuant to Sections 4.1 through 4.5 hereof shall be resolved by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Employment Dispute Resolution Rules then in effect with the American Arbitration Association. The arbitration proceeding shall be conducted in Houston, Texas. This agreement to arbitrate shall be enforceable in either federal or state court. The enforcement of this agreement to arbitrate and all procedural aspects of this agreement to arbitrate, including but not limited to, the construction and interpretation of this agreement to arbitrate, the issues subject to arbitration (i.e., arbitrability), the scope of the arbitrable issues, allegations of waiver, delay or defenses to arbitrability, and the rules governing the conduct of the arbitra tion, shall be governed by and construed pursuant to the Federal Arbitration Act and shall be decided by the arbitrators. In deciding the substance of any such claims, the arbitrators shall apply the substantive laws of the State of Texas (excluding Texas choice-of-law principles that might call for the application of some other state's law); provided, however, it is expressly agreed that the arbitrators shall have no authority to award treble, exemplary, or punitive damages under any circumstances regardless of whether such damages may be available under Texas law, the parties hereby waiving their right, if any, to recover treble, exemplary, or punitive damages in connection with any such claims. The arbitration may be initiated by any party by providing to the other parties a written notice of arbitration specifying the claims. Within thirty (30) days of the notice of initiation of the arbitration procedure, (1) the Executive shall denominate one arbitrator and (2) the Company shall denominate one arbitrator. The two arbitrators shall select a third arbitrator failing agreement on which within sixty (60) days of the original notice, either the Executive or the Company shall apply to the Senior Active United States District Judge for the Southern District of Texas, who shall appoint a third arbitrator. While the third arbitrator shall be neutral, the two party-appointed arbitrators are not required to be neutral and it shall not be grounds for removal of either of the two party-appointed arbitrators or for vacating the arbitrators' award that either of such arbitrators has past or present minimal relationships with the party that appointed such arbitrator. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. The three arbitrators shall by majority vote resolve all disputes between the parties. There shall be no transcript of the hearing before the arbitrators. The arbitrators' decision shall be in writing, but shall be as brief as possible. The arbitrators shall not assign the reasons for their decision. The arbitrators shall certify in their award that they have faithfully applied the terms and conditions of this Agreement and that no part of their award includes any amount for exemplary or punitive damages. All proceedings conducted hereunder and the decision of the arbitrators shall be kept confidential by the parties, e.g., the arbitrators' award shall not be released to the press or published in any of the various arbitration reporters. Judgment upon any award rendered in any such arbitration proceeding may be entered by any federal or state court having jurisdiction. ARTICLE V. MISCELLANEOUS PROVISIONS Section 5.1 Amendment and Termination. This Agreement may be amended or modified only with the written consent of the parties hereto. Section 5.2 No Assignment. The Executive shall not have the power to pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose of in advance any interest in amounts payable hereunder of any of the payments provided for herein, nor shall any interest in amounts payable hereunder or in any payments be subject to seizure for payments of any debts, judgments, alimony or separate maintenance, or be reached or transferred by operation of law in the event of bankruptcy, insolvency or otherwise. Section 5.3 Successors and Assigns. The provisions of the Agreement are binding upon and inure to the benefit of each Company, its successors and assigns, and the Executive, his beneficiaries, heirs and legal representatives. Section 5.4 Governing Law. The Agreement shall be subject to and construed in accordance with the laws of the State of Texas to the extent not preempted by the provisions of ERISA. Section 5.5 No Guarantee of Employment. Nothing contained in the Agreement shall be construed as a contract of employment or deemed to give the Executive the right to be retained in the employ of an Company or any equity or other interest in the assets, business or affairs of an Company. Section 5.6 Severability. If any provision of the Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Agreement, but the Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein. Section 5.7 Notification of Addresses. The Executive and each beneficiary shall file with the Administrator, from time to time, in writing, the post office address of the Executive, the post office address of each beneficiary, and each change of post office address. Any communication, statement or notice addressed to the last post office address filed with the Administrator (or if no such address was filed with the Administrator, then to the last post office address of the Executive or beneficiary as shown on the Company's records) shall be binding on the Executive and each beneficiary for all purposes of the Agreement and neither the Administrator nor the Company shall be obliged to search for or ascertain the whereabouts of the Executive or beneficiary. Section 5.8 Bonding. The Administrator and all agents and advisors employed by it shall not be required to be bonded, except as may otherwise be required by ERISA. Section 5.9 Taxes. The Company shall have the right to withhold from any cash or other amounts due or to become due from the Company to a Executive (including by reducing the amount of any Retirement Benefit payable in the future) the amount of any federal, state and local taxes required to be withheld or otherwise deducted and paid by the Company with respect to the vesting or payment of any Retirement Benefit hereunder. Section 5.10 No Funding. There shall be no funding of the benefit amounts to be paid pursuant to this Agreement. The Agreement shall not confer upon the Executive (or beneficiary or any other person) any security interest or any other right, title or interest of any kind in or to any property of the Company. The Agreement shall constitute merely the unsecured promise of the Company to make the benefit payments provided for herein. Notwithstanding the foregoing provisions of this Section 5.10, the Company, in its discretion, may establish a trust to pay the benefit amounts hereunder, which trust shall be subject to the claims of the Company's general creditors in the event of the Company's bankruptcy or insolvency. If such a trust is established, the Company shall remain responsible for the payment of any benefit amounts provided hereunder which are not paid in accordance with the provisions hereof by such trust. ARTICLE VI. DEFINITIONS AND USAGE Section 6.1 Definitions. Wherever used in the Agreement, the following words and phrases shall have the meaning set forth below, unless the context plainly requires a different meaning: "Administrator" means the Company, acting through the Personnel Committee of the Board, or other person or persons designated by the Personnel Committee. "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. "Agreement" means this Supplemental Executive Retirement Agreement, as set forth herein and as amended from time to time. "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Exchange Act. "Board" means the Board of Directors of the Company. "Change in Control" means a change in the control of the Company, which shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (I)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (III) below; or (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation (or a share exchange between shareholders of the Company or any direct or indirect subsidiary of the Company and another corporation or entity pursuant to Article 5.02 (or any successor provision thereto) of the Texas Business Corporation Act), other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least fifty-one percent (51%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or (IV) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least fifty-one percent (51%) of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. "Code" means the Internal Revenue Code of 1986, as amended from time to time. Any reference to a particular Code section shall include any provision which modifies, replaces or supersedes it. "Committee" shall mean the Personnel Committee of the Board until six months prior to the occurrence of a Change in Control and thereafter shall mean (i) the individuals (not fewer than three in number) who, on the date six months before a Change in Control, constitute the Personnel Committee of the Board, plus (ii) in the event that fewer than three individuals are available from the group specified in clause (i) above for any reason, such individuals as may be appointed by the individual or individuals so available (including for this purpose any individual or individuals previously so appointed under this clause (ii)); provided, however, that the maximum number of individuals constituting the Committee shall not exceed five. "Company" means American General Corporation, a Texas corporation, and, except in determining under the definition of Change in Control herein whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise. "Early Retirement Date" means the first date on which the Executive (i) has completed ten (10) Years of Service and (ii) has attained the age of fifty-five (55). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. Any reference to a particular ERISA section shall include any provision which modifies, replaces, or supersedes it. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Final Average Compensation" means the following sum divided by three (3): the sum of the base salary received by the Executive during, and the incentive payments received by the Executive pursuant to any annual bonus, incentive compensation or similar plan maintained by the Company with respect to, the three (3) calendar years (whether or not consecutive) ending within the last sixty (60) months of the Executive's employment with the Company which produce the highest total of such base salary and incentive payments (for purposes of this sentence, any amount of such base salary or incentive payment which is deferred by the Executive shall be included in the calculation of amounts received). Notwithstanding the immediately preceding sentence, if the Executive's termination of employment is described in Section 2.6 hereof and the Executive receives (pursuant to Section 8(c)(iii) of his Employment Agreement (or any successor provision thereto), or Section 4.5 of his Severance Agreement (or any successor provision thereto) and in lieu of any further salary or bonus payments) a lump sum amount (the "Severance Amount"), Final Average Compensation shall mean the Severance Amount divided by three (3). "Normal Retirement Age" means age sixty- two (62). "Normal Retirement Date" means the date on which the Executive attains his Normal Retirement Age. "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. "Qualified Plan" means the American General Retirement Plan, together with any other defined benefit retirement plan intended to be qualified under Section 401(a) of the Code which is adopted and maintained by the Company and under which the Executive is entitled to a retirement benefit at the date of his retirement or other termination of employment. "Qualified Plan Benefit" means the aggregate annual retirement benefit to which the Executive (at the date of his retirement or other termination of employment) is entitled under the plan or plans which comprise the Qualified Plan (expressed in the form of a single life annuity with a ten- year term certain commencing payment on the date payment of the Retirement Benefit hereunder commences). "Restoration Plan Benefit" means the annual retirement benefit to which the Executive (at the date of his retirement or other termination of employment) is entitled under the American General Corporation Restoration of Retirement Income Plan (expressed in the form of a single life annuity with a ten-year term certain commencing payment on the date payment of the Retirement Benefit hereunder commences). "Retirement Benefit" means the benefit payable under this Agreement, as determined under Article II. "Social Security Benefit" means one- half of the annual benefit payable under the Social Security Act, relating to Old-Age and Disability benefits, as of the Executive's Normal Retirement Date, or upon actual retirement, if later. "Years of Service" means the total number of years (measured in full and partial years, in increments of one-twelfth years) of active employment with Western National Corporation or the Company during which substantial services were rendered as an employee, commencing on the date the Executive was first employed by Western National Corporation and ending on the date he ceases to perform services for the Company (including employment before the Effective Date), but in no event shall more than twenty-eight (28) years be credited to the Executive regardless of his actual period of service with Western National Corporation and the Company. Notwithstanding the foregoing, if the Executive retires on or after the attainment of age 62, he shall be credited with twenty-eight (28) Years of Service. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. AMERICAN GENERAL CORPORATION By_________________________ Robert M. Devlin Chairman, President and Chief Executive Officer ____________________________ Executive EX-12 8 Exhibit 12 AMERICAN GENERAL CORPORATION Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited) ($ in millions) Three Months Ended March 31, 1999 1998 Consolidated operations: Income before income tax expense, minority interest, and dividends on preferred securities ............. $ 477 $ 428 Fixed charges deducted from income Interest expense .................................. 182 172 Implicit interest in rents ........................ 5 5 Total fixed charges deducted from income ........ 187 177 Earnings available for fixed charges........... $ 664 $ 605 Fixed charges per above ............................. $ 187 $ 177 Dividends on preferred stock and securities ......... 37 37 Combined fixed charges and preferred stock dividends ................................. $ 224 $ 214 Ratio of earnings to fixed charges .................. 3.54 3.41 Ratio of earnings to combined fixed charges and preferred stock dividends ................. 2.96 2.83 Consolidated operations, corporate fixed charges and preferred stock dividends only: Income before income tax expense, minority interest, and dividends on preferred securities . $ 477 $ 428 Corporate fixed charges deducted from income - corporate interest expense ...................... 53 54 Earnings available for fixed charges .......... $ 530 $ 482 Total corporate fixed charges per above ........... $ 53 $ 54 Dividends on preferred stock and securities ....... 37 37 Combined corporate fixed charges and preferred stock dividends ..................... $ 90 $ 91 Ratio of earnings to corporate fixed charges....... 9.95 8.85 Ratio of earnings to combined corporate fixed charges and preferred stock dividends ..... 5.90 5.29 Exhibit 12 (continued) AMERICAN GENERAL CORPORATION Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Unaudited) ($ in millions) Three Months Ended March 31, 1999 1998 American General Finance, Inc.: Income before income tax expense ................... $ 80 $ 71 Fixed charges deducted from income Interest expense ................................. 138 122 Implicit interest in rents ....................... 4 3 Total fixed charges deducted from income ....... 142 125 Earnings available for fixed charges ......... $ 222 $ 196 Ratio of earnings to fixed charges ................. 1.56 1.57 EX-27 9
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 61,794 0 0 357 3,667 220 70,783 240 0 6,309 121,767 63,422 337 385 2,515 13,508 1,925 0 936 5,674 121,767 993 1,330 (51) 465 1,384 171 (287) 478 168 285 0 0 0 285 1.14 1.12 0 0 0 0 0 0 0 ALL FIXED MATURITY SECURITIES ARE CLASSIFIED AS AVAILABLE-FOR-SALE AND RECORDED AT FAIR VALUE. INCLUDES COST OF INSURANCE PURCHASED (CIP). THE SUM OF POLICY LOSSES, UNEARNED PREMIUMS, POLICY-OTHER, AND POLICYHOLDER FUNDS COMPRISES INSURANCE AND ANNUITY LIABILITIES. CONSISTS OF NON-CONVERTIBLE AND CONVERTIBLE MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARIES. CONSISTS OF NET OF THE FOLLOWING: COST OF TREASURY STOCK; RETAINED EARNINGS; AND ACCUMULATED OTHER COMPREHENSIVE INCOME. INCLUDES INSURANCE CHARGES. INCLUDES PRIMARILY FINANCE CHARGES ON FINANCE RECEIVABLES. CONSISTS OF AMORTIZATION OF POLICY ACQUISITION COSTS AND CIP, NET OF ACCRETION OF INTEREST. CONSISTS OF CAPITALIZATION OF POLICY ACQUISITION COSTS AND CIP. EXCLUDES $38 MILLION OF DIVIDENDS ON PREFERRED SECURITIES OF SUBSIDIARIES, SHOWN SEPARATELY, NET OF TAX, IN THE CONSOLIDATED INCOME STATEMENT. EXCLUDES $13 MILLION TAX BENEFIT FOR TAX DEDUCTIBLE DIVIDENDS RELATED TO PREFERRED SECURITIES OF SUBSDIARIES.
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