EXHIBIT
10.2
American International Group, Inc.
Sign-On Stock Option Award Agreement
     This award agreement (this “Award Agreement”) sets forth the terms and
conditions of an award (this “Award”) of stock options to purchase and stock
appreciation rights with respect to (collectively, the “Options”) shares of
Common Stock (“Shares”) granted to you by American International Group, Inc.
(the “Company” or “AIG”) under the American International Group, Inc. Amended
and Restated 2007 Stock Incentive Plan (the “Plan”) on July 16, 2008 (the “Date
of Grant”).
     1. The Plan. This Award is made pursuant to the Plan, the terms of which
are incorporated in this Award Agreement. Capitalized terms used in this Award
Agreement that are not defined in this Award Agreement, or in the attached
Glossary of Terms, have the meanings as used or defined in the Plan.
     2. Award. The number of Options, the Date of Grant of the Options and the
Exercise Price of the Options are set forth at the end of this Award Agreement.
One Share shall underlie each Option. THIS AWARD IS SUBJECT TO ALL TERMS,
CONDITIONS AND PROVISIONS OF THE PLAN AND THIS AWARD AGREEMENT, INCLUDING,
WITHOUT LIMITATION, THE ARBITRATION AND CHOICE OF FORUM PROVISIONS SET FORTH IN
PARAGRAPH 17.
     3. Expiration Date. Notwithstanding anything to the contrary in this Award
Agreement, the Options shall expire and no longer be exercisable as of the tenth
anniversary of the Date of Grant of the Options (the “Expiration Date”), subject
to earlier termination as provided in this Award Agreement, or otherwise in
accordance with the Plan.
     4. Vesting. Except as provided in Paragraphs 5 and 9, you shall become
vested in the Options, and the Options shall become exercisable, in the
following installments on the following dates (each, a “Vesting Date”):
     (a) You shall become vested in one ninth (1/9) of the Options on each of
the first three anniversaries of the Date of Grant (or if earlier, as provided
in Paragraph 6 below);
     (b) You shall become vested in one third (1/3) of the Options on the 15th
consecutive trading day on the New York Stock Exchange on which the closing
price of the Common Stock exceeds 125% of the Exercise Price of the Options set
forth at the end of this Award Agreement; and
     (c) You shall become vested in one third (1/3) of the Options on the 15th
consecutive trading day on the New York Stock Exchange on which the closing
price of the Common Stock exceeds 150% of the Exercise Price of the Options set
forth at the end of this Award Agreement.

 

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     For the avoidance of doubt, if the Common Stock does not attain the
required closing price for the required number of days, the Options subject to
such attainment shall not vest and shall not become exercisable, and, if not
previously vested or exercisable, shall nonetheless expire on the scheduled
Expiration Date (subject to earlier termination as provided in this Award
Agreement).
     5. Termination of Unvested Options. Except as provided in Paragraph 6, your
rights in respect of your outstanding unvested Options shall immediately
terminate (and no such Options shall be exercisable) if your Employment with the
Company is terminated for any reason. Your outstanding vested Options, if any,
shall terminate as set forth in Paragraph 9.
     6. Termination of Employment. Notwithstanding Paragraph 5, but subject to
Paragraph 7:
     (a) Death; Disability. If you die, or if your Employment with the Company
is terminated by reason of Disability, and provided your rights in respect of
the Options have not previously terminated, (i) all of the Options vesting
pursuant to Paragraph 4(a) shall immediately vest, and (ii) the Options vesting
pursuant to Paragraph 4(b) and Paragraph 4(c) shall continue to vest on the
Vesting Dates set forth therein, but all other conditions of this Award
Agreement, including Paragraph 7, shall continue to apply.
     (b) Retirement; Termination with Benefits under Executive Severance Plan.
If (i) you retire from Employment with the Company with the consent of the
Committee (which consent shall not be unreasonably withheld), or (ii) your
Employment with the Company is terminated under circumstances that entitle you
to receive “Severance Installments” (or similar payments) under AIG’s Executive
Severance Plan or any successor or substitute plan (as in effect from time to
time and giving effect to the letter agreement, effective as of July 16, 2008,
between you and AIG (the “Letter Agreement”), the “Executive Severance Plan”),
and provided your rights in respect of the Options have not previously
terminated, the Options shall continue to vest on the Vesting Dates set forth in
Paragraph 4, but all other conditions of this Award Agreement, including
Paragraph 7, shall continue to apply. For the avoidance of doubt, if your
Employment with the Company terminates under any circumstance other than as set
forth as set forth in clause (i) or (ii) of the preceding sentence or as set
forth in Paragraph 6(a), then Paragraph 5 shall apply, and your rights in
respect of your then outstanding unvested Options shall immediately terminate
(and no such Options shall be exercisable).
     7. Restrictive Covenants; Forfeiture; Release Required.
     (a) Restrictive Covenants. You acknowledge and recognize the highly
competitive nature of the businesses of the Company and accordingly agree to the
provisions set forth in Paragraph 6(a) of your Sign-On Restricted Stock Award
Agreement, dated July 16, 2008, between you and AIG (the “Sign-On Restricted
Stock Award Agreement”), which shall be deemed to be incorporated by reference
into this Award Agreement.
     (b) Forfeiture. If, prior to the exercise of the Options, the Board
determines, upon adoption of a resolution by a majority of the Board other than

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you, and after providing you, together with counsel, a reasonable opportunity to
be heard before the Board, that (i) you materially breached this Award Agreement
(including, without limitation, by attempting to have any dispute under this
Award Agreement or the Plan resolved in any manner that is not provided for by
Paragraph 17) or (ii) grounds existed, on or prior to the date of termination of
your Employment with the Company, to terminate your employment for Cause, then
your then outstanding Options (whether vested or unvested) shall immediately
terminate (and no such Options shall be exercisable).
     (c) Release Required. Notwithstanding any other provision of this Award
Agreement to the contrary, you acknowledge and agree that any vesting of Options
that would occur after termination of your Employment with the Company (or
exercise of Options that would occur more than 90 days after that date) is
conditional upon and subject to your execution of a release and waiver,
substantially in the form set forth on Annex A to the Sign-On Restricted Stock
Award Agreement, of certain claims you may have against the Company and its
directors, officers and affiliates, except claims under this Award Agreement or
as otherwise expressly excluded in the release. If the release and waiver does
not become effective and irrevocable within 45 days of the date of termination
of your Employment with the Company, your then outstanding Options (whether
vested or unvested) shall immediately terminate (and no such Options shall be
exercisable).
     8. Non-transferability. Except as otherwise may be provided by the
Committee, the limitations set forth in Section 3.5 of the Plan shall apply. Any
assignment or delegation in violation of the provisions of this Paragraph 8
shall be null and void.
     9. Exercisability of Vested Options.
     (a) In General. Options that are not vested may not be exercised. Subject
to Paragraphs 9(b) and 9(c), outstanding vested Options may be exercised in
accordance with procedures set forth in Section 2.3.5 or 2.4.4 of the Plan, as
applicable, including procedures established by the Company. Subject to
Paragraph 7(b), outstanding Options that become vested pursuant to this Award
Agreement may be exercised until the scheduled Expiration Date (by you, by the
representative of your estate or by your legal guardian or representative, as
applicable, and after such documentation as may be requested by the Committee is
provided to the Committee); provided, however, that, notwithstanding the
foregoing, if you voluntarily terminate your Employment with the Company under
any circumstance other than retirement with the consent of the Committee, and
provided your rights in respect of the Options have not previously terminated,
any outstanding vested Options shall remain outstanding for 90 days after
termination of your Employment with the Company (during which time they may be
exercised in accordance with this Paragraph 9), and shall thereafter terminate.
     (b) Initial Exercise Date. Outstanding vested Options may not be exercised
earlier than the first anniversary of the Date of Grant of the Options (the
“Initial Exercise Date”); provided, however, that the condition set forth in
this Paragraph 9(b) shall be waived if your Employment with the Company is
terminated by reason of death, Disability or retirement.

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     (c) Plan Authority. The number of Options granted as stock options to
purchase Shares under the Plan shall correspond to the maximum number of such
options that may be granted under the Plan to any one individual in any one year
pursuant to Section 2.3.1 of the Plan (as adjusted pursuant to the provisions of
Section 1.6.4 of the Plan). The number of Options granted as stock appreciation
rights with respect to Shares under the Plan shall correspond to the remainder
of the Options, and such rights shall be the Options vesting and becoming
exercisable latest in time pursuant to this Award Agreement.
     10. Delivery of Shares. Unless otherwise determined by the Committee, or as
otherwise provided in this Award Agreement, and except as provided in
Paragraph 11, upon receipt of payment of the total exercise price of, or
appropriate written notice with respect to, exercised Options in accordance with
the procedures set forth in Paragraph 9(a), delivery of Shares underlying such
Options (or net of the aggregate exercise price thereof, as applicable) shall be
effected by the delivery of Certificates representing such Shares. You shall
have no right to any dividend, distribution or other right with respect to such
Shares if the record date for such dividend, distribution or other right is
prior to the date of delivery of Certificates representing such Shares as
provided in this Paragraph 10. The Company may postpone such issuance and
delivery of Certificates until the Committee is satisfied that you have made
such representations and agreements and furnished such information as the
Committee may deem necessary pursuant to Section 2.3.5 or 2.4.4 of the Plan, as
applicable.
     11. Withholding, Consents and Legends.
     (a) The delivery of Shares underlying the Options is conditioned on your
satisfaction of any applicable withholding taxes (in accordance with Section 3.2
of the Plan).
     (b) Your exercise of the Options are conditioned on the receipt to the
reasonable satisfaction of the Committee of any required Consent (as defined in
Section 3.3 of the Plan) that the Committee may reasonably determine to be
necessary or advisable (including, without limitation, your consenting to
deductions from your wages, or another arrangement satisfactory to the
Committee, to reimburse the Company for advances made on your behalf to satisfy
withholding and other tax obligations in connection with this Award).
     (c) AIG may affix to Certificates representing Shares issued pursuant to
this Award Agreement any legend that the Committee reasonably determines to be
necessary or advisable (including to reflect any restrictions to which you may
be subject under a separate agreement with AIG). AIG may advise the transfer
agent to place a stop transfer order against any legended Shares.
     12. No Rights to Continued Employment. Nothing in this Award Agreement or
the Plan shall be construed as giving you any right to continued Employment by
the Company or affect any right that the Company may have to terminate or alter
the terms and conditions of your Employment.
     13. Successors and Assigns of AIG. The terms and conditions of this Award
Agreement shall be binding upon, and shall inure to the benefit of, AIG and its
successor entities (as defined in Section 3.6 of the Plan).

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     14. Committee Discretion. Subject to Paragraph 15, except as provided
otherwise in this Award Agreement, the Committee shall have full discretion with
respect to any actions to be taken or determinations to be made in connection
with this Award Agreement, and its determinations shall be final, binding and
conclusive.
     15. Amendment. The Committee reserves the right at any time to amend the
terms and conditions set forth in this Award Agreement, and the Board may amend
the Plan in any respect; provided that, notwithstanding the foregoing and
Sections 1.3.1(a), 1.3.1(b) and 3.1 of the Plan, no such amendment shall
materially adversely affect your rights and obligations under this Award
Agreement without your prior written consent (or the consent of your estate, if
such consent is obtained after your death). Any amendment of this Award
Agreement shall be in writing signed by an authorized member of the Committee or
a person or persons designated by the Committee.
     16. Adjustment. Subject to Paragraph 15, the Options shall be subject to
amendment and adjustment in accordance with Section 1.6.4 of the Plan.
     17. Arbitration; Choice of Forum. Any dispute, controversy or claim between
the Company and you, arising out of or relating to or concerning the Plan or
this Award Agreement, shall be finally settled by arbitration in accordance with
the terms set forth in Annex A to your Letter Agreement (which terms shall be
deemed to apply mutatis mutandis to the Plan and this Award Agreement and to be
incorporated by reference herein).
     18. Governing Law. THIS AWARD SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
     19. Headings. The headings in this Award Agreement are for the purpose of
convenience only and are not intended to define or limit the construction of the
provisions hereof.
     20. Vesting Not Subject to Executive Severance Plan. For the avoidance of
doubt, notwithstanding Paragraph 6(b), this Award Agreement shall not be subject
to any equity vesting provisions contained in the Executive Severance Plan.
     21. Survival. The provisions of this Award Agreement, including
Paragraph 7, shall survive any termination of your Employment and/or any
exercise or forfeiture of Options or delivery of Shares.
     22. Preemption. If any provision of this Award Agreement, including any
provision of the Plan as incorporated and/or limited herein, is inconsistent
with any provision of any other agreement, plan or other arrangement of the
Company applicable to you, the provision of this Agreement shall prevail.
     23. Authorization. The Company represents and warrants to you that all
necessary corporate action has been taken for the execution and delivery by the
Company of this Award Agreement and its taking the actions contemplated
hereunder.

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     IN WITNESS WHEREOF, AMERICAN INTERNATIONAL GROUP, INC. has caused this
Award Agreement to be duly executed and delivered as of the Date of Grant.

           
AMERICAN INTERNATIONAL GROUP, INC.
      By:    /s/ Andrew J. Kaslow           By:    /s/ Kathleen E. Shannon      
             

     
Recipient:
  Robert B. Willumstad  
Date of Grant:
  July 16, 2008   
Exercise Price:
  $23.28   
Number of Options:
  1,045,000 

         
Receipt
         
Acknowledged:
   /s/ Robert B. Willumstad    
 
 
 
Robert B. Willumstad    

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Glossary of Terms
Solely for purposes of this award of Options, the following terms shall have the
meanings set forth below. Capitalized terms not defined in this Glossary of
Terms shall have the meanings as used or defined in the applicable Award
Agreement or the Plan.
     “Cause” means (i) your willful failure to perform substantially your duties
with the Company or any subsidiary of the Company (other than any such failure
resulting from your incapacity due to physical or mental illness); (ii) your
willful malfeasance or misconduct in the conduct of your duties with the
Company; (iii) your willful and material violation of a provision of the
Company’s Code of Conduct or the Director, Executive Officer and Senior
Financial Officer Code of Business Conduct and Ethics, as such codes of conduct
may be in effect from time to time (and provided to you), or other material
written policies regarding behavior of employees (and provided to you); or
(iv) your conviction of, or entry of a plea of guilty or no contest with respect
to, a felony or any lesser crime of which fraud or dishonesty is a material
element. For purposes hereof, no act or inaction shall be deemed to be “willful”
if you reasonably believed that such action or inaction was in, or not opposed
to, the best interests of the Company. In addition, except with respect to
clause (iv) of this definition, “Cause” shall not exist unless (x) written
notice stating the basis therefor is provided to you, (y) if the conduct that is
the basis for such claim is reasonably susceptible of cure, you are given ten
(10) days from such notice to cure such conduct and (z) the Board determines,
upon adoption of a resolution by a majority of the Board other than you, and
after providing you, together with counsel, a reasonable opportunity to be heard
before the Board, that “Cause” exists and, if the conduct that is the basis for
such claim is reasonably susceptible of cure, that you have failed to cure such
conduct in the time provided herein.
     “Disability” means a period of medically determined physical or mental
impairment that is expected to result in death or last for a continuous period
of not less than 12 months during which you qualify for income replacement
benefits under AIG’s long-term disability plan for at least three months, or, if
you do not participate in such a plan, a period of disability during which you
are unable to engage in any substantial gainful activity by reason of any
medically determined physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months.

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