Exhibit 10.3


 


Settlement Term Sheet


 


The
Ohio Public Employees Retirement System, the State Teachers Retirement System
of Ohio, and the Ohio Police and Fire Pension Fund (collectively, “Lead
Plaintiffs”), on behalf of all others similarly situated, and American
International Group, Inc. (“AIG”), have agreed in principle on the
settlement of all claims that Lead Plaintiffs have asserted against AIG in In re AIG Securities Litigation, Master
File No. 04 Civ. 8141 (S.D.N.Y.). 
The principle terms of the settlement are as follows:


 


Confidentiality:


 


The
parties will use their best efforts to maintain the confidentiality of the
existence and terms of this agreement until the settlement papers have been
submitted to the Court.  This provision
will not prevent the parties from communicating the terms of the settlement to
their advisors and complying with their disclosure obligations.  The parties will exchange their proposed
public statements relating to the initial announcement of the settlement for
review and comment 24 hours before such announcement is made.  The parties are not obligated to accept
proposed comments made by the other party.


 


Settlement
Class Definition:


 


The
settlement class definition will be the class definition as pled in the
Consolidated Third Amended Class Action Complaint (the “Complaint”), and
AIG will seek to join the motion filed by PricewaterhouseCoopers seeking that
class definition.  In the event the Court
does not accept this definition, then it will be the class definition as
modified by the Court’s February 22, 2010 Opinion regarding class
certification.  AIG, however, will agree
to use the Class Definition in the Court’s February 22, 2010 Opinion
if PricewaterhouseCoopers agrees to use that definition and no other party
urges upon the Court to accept a broader class definition for a period ending
five days after the hearing on preliminary approval.


 


Settlement
Amount:


 


$725
million.


 


Funding
Terms:


 


(1)                                  AIG will
transfer $175 million into an escrow account (the “Escrow Account”) within 10
days of the District Court entering an order granting preliminary approval of
the settlement.


 


(2)                                  AIG’s
obligation to fund the remainder of the Settlement Amount is conditioned on its
having consummated an offering of its common stock (a “Qualified Offering”), or
a series of such offerings, in which it raises net proceeds of at least $550
million at any time before the District Court enters its final order approving
the settlement (the “Order”).  AIG will
use its best efforts, consistent with the fiduciary duties of its management
and board of Directors, to consummate a Qualified Offering, but the decision as
to whether market conditions or pending or contemplated corporate transactions
make it commercially reasonable to proceed with such an offering will be


 

















 


within AIG’s unilateral
discretion.  In the event that AIG
effects a registered secondary offering of common stock on behalf of the U.S.
Treasury resulting in the U.S. Treasury receiving proceeds of at least equal to
$550 million, then market access will be deemed to have been demonstrated and
AIG shall be deemed to have consummated a Qualified Offering.  In addition, AIG, at any time prior to entry
of the Order, in its sole discretion, may otherwise raise sufficient funds to
pay the Settlement Amount in cash and deposit such funds into the Escrow
Account.


 


(3)                                  If AIG does not
fully fund the Escrow Account with $725 million by the time the District Court
enters its Order, Lead Plaintiffs may, within 10 days of entry of the Order


 


(a)                                  terminate the
settlement and return the parties to the positions they had in the litigation
as of July 1, 2010, or


 


(b)                                 elect to take
unrestricted, transferable AIG common stock valued at $550 million, and AIG
will be obligated, within 10 days of plaintiffs’ election, to fund the Escrow
Account with stock, which will be valued at the volume weighted average closing
price for the 10 trading days preceding entry of the Order (the “Settlement
Stock”), provided AIG is able to obtain all necessary approvals, or


 


(c)                                  elect to extend
the period for AIG to make a Qualified Offering or otherwise fund the escrow
agreement for up to one year after entry of the Order, provided that, at any
time during the year, Lead Plaintiffs may


 


(i)                                     elect, on 2
business days’ notice, to take the Settlement Stock (which will not be
repriced, except as described below) in full satisfaction of AIG’s settlement
obligations, however, if Lead Plaintiffs’ sale of Settlement Stock results in
net proceeds that exceed $550 million, then any proceeds in excess of $550
million will be returned to AIG, or


 


(ii)                                  elect, on 21
days’ notice, to terminate the settlement,


 


but
if AIG has taken steps to consummate a Qualified Offering before the expiration
of the 21 day period, Lead Plaintiffs may not demand stock or terminate the
settlement unless the offering is terminated.


 


(4)                                  If the
settlement is not consummated for any reason, then the cash and stock in the
escrow account, less reasonable administrative expenses (not to include the
parties’ attorneys’ fees), will be returned to AIG.


 


The
parties will use their best efforts to make sure that the Settlement Stock
receive the exemption from registration available under Section 3(a)(10) of
the Securities Act.  In the event the
exemption under Section 3(a)(10) is not available, AIG will use its
best efforts to deliver fully transferable, unrestricted stock for the
Settlement Stock.


 


In
the event the Company issues one or more Forms 8K during the pricing period or
during the two week period preceding the pricing period, Lead Plaintiffs may
elect, within 10 days of the issuance of such an 8K, to have the pricing period
deferred until two weeks after any such 8K is filed.


 


2

















 


In
the event the Company issues one or more Forms 8K within 12 weeks of Lead
Plaintiffs receiving Settlement Stock, Lead Plaintiffs may elect, within 10
days of the issuance of such an 8K, to have any unsold stock repriced before
sale, with the 10-day pricing period starting two weeks after any such 8K is
filed.


 


In
the event that, after the Order is entered, but before any stock or cash is
distributed to the Class, Lead Plaintiffs have received the Settlement Stock,
but, for any reason, the settlement does not become effective, then Lead
Plaintiffs will return to AIG any unsold Settlement Stock and the net amount
Lead Plaintiffs actually received in the sale of any Settlement Stock (i.e., the sale price less any
transaction costs), with no further obligation to AIG.


 


Timing:


 


Both
parties will use their best efforts to expedite approval of the
settlement.  AIG and Lead Plaintiffs will
use their best efforts to obtain all necessary approvals to enter into the
settlement by July 16, 2010, and the parties will use their best efforts
to submit settlement papers to the Court by August 13, 2010.


 


Subsequent
to July 16, 2010, and after AIG and Lead Plaintiffs receive all necessary
approvals to proceed with the settlement, the parties will seek a stay of all
deadlines in the litigation, both in the District Court and in the Second
Circuit.


 


Blow
provision:


 


The
confidential portion of this Exhibit 10.3 has been omitted and filed
separately with the Securities and Exchange Commission.  Confidential Treatment has been requested for
the omitted portions.


 


Payment
by Opt-Out Plaintiffs for Use of Class Discovery:


 


Plaintiffs
may seek an order from the Court requiring opt-out plaintiffs to pay into the
settlement fund a fee for class discovery materials (i.e., for the benefit of
the Class) in the same percentage of Lead Plaintiffs’ lodestar and expenses
related to discovery as the percentage of the shares held by that opt-out
plaintiff during the Class Period. 
Defendants will not be required to join in any such application.


 


Releases:


 


Lead
Plaintiffs and the Class will dismiss, with prejudice, all claims against
AIG, and will agree not to sue and to give general releases to AIG and everyone
AIG may have an obligation to indemnify.


 


Lead
Plaintiffs and the Class will also dismiss, with prejudice, and release
all claims against Eli Broad, John A. Graf, Frank J. Hoenemeyer, Martin J.
Sullivan, Thomas R. Tizzio, Wachovia Securities, Inc. and Merrill Lynch &
Co.


 


3

















 


Bar
Order:


 


The
bar order shall bar all future claims for contribution or indemnity (and
related claims where the injury to non-settling defendants is their liability
or risk of liability to the plaintiffs) arising out of the action, and shall
apply to the full extent of the PSLRA.


 


Disputes:


 


All
disputes regarding the interpretation of and compliance with this agreement
will be resolved by Hon. Layn Phillips, as sole arbitrator.  Issues regarding approval of the settlement
will be resolved by the District Court.


 


Approvals:


 


This
term sheet is conditioned upon AIG and Lead Plaintiffs receiving all necessary
approvals.  AIG and Lead Plaintiffs will
use its their best efforts to obtain all such approvals.


 


The
issuance of any Settlement Stock will be subject to all necessary approvals.


 


Attorneys’
Fees for Lead Plaintiffs’ Counsel:


 


After
entry of an Order approving the settlement and Lead Counsel’s fee request, and
before the resolution of appeals, if any, counsel for Lead Plaintiffs may
withdraw an amount equal to the award of attorneys’ fees and reimbursed
expenses from the Escrow Account, provided that any such withdrawal shall be
repaid by Counsel for Lead Plaintiffs, along with interest at the Escrow
Account rate of interest, if the settlement is not consummated for any reason
or if the award of attorneys’ fees and reimbursed expenses is otherwise
reversed or modified.


 


Execution:


 


This
Term Sheet may be executed in counterparts, including by signature transmitted
by facsimile or email.  Each counterpart
when so executed shall be deemed to be an original, and all such counterparts
together shall constitute the same instrument.


 


 


	
  DATED:  July 1, 2010

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  This Term Sheet is hereby
  agreed to by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/Thomas A. Dubbs

  	
   

  	
  /s/ Daniel J. Kramer

  
	
  Thomas A. Dubbs 

  	
   

  	
  Daniel J. Kramer 

  
	
  Labaton Sucharow LLP 

  	
   

  	
  Paul, Weiss, Rifkind,
  Wharton & Garrison LLP

  
	
  140 Broadway 

  	
   

  	
  1285 Avenue of the
  Americas 

  
	
  New York, NY  10005 

  	
   

  	
  New York, New York  10019 

  
	
  On
  behalf of Lead Plaintiffs and the Class 

  	
   

  	
  On
  behalf of American International Group, Inc.

  



 


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