1 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

AIG RECAPITALIZATION 

Summary of Terms of September 30, 2010 

Transaction Overview As more fully described below, American International Group, Inc. 

(“AIG”), the Federal Reserve Bank of New York (“FRBNY”), the United 

States Department of the Treasury (“UST”) and the AIG Credit Facility 

Trust (“Trust”) propose to enter into a series of integrated transactions 

(collectively, the “Recapitalization”),1

 that would result in, among other 

things, the following: 

• at the closing of the Recapitalization (the “Closing”), the full repayment 

in cash of all remaining principal, accrued and unpaid interest, fees and 

other amounts owing, and the termination of all commitments, under 

the Credit Agreement dated as of September 22, 2008 (the “FRBNY 

Credit Facility”) between AIG and the FRBNY, funded solely from (i) 

secured non-recourse loans to AIG from AIA Aurora LLC (the “AIA 

SPV”) and ALICO Holdings LLC (the “ALICO SPV”, and together 

with the AIA SPV, the “SPVs”) of the net cash proceeds from the initial 

public offering of American International Assurance Company, Limited 

(“AIA”) and the sale of American Life Insurance Company (“ALICO”) 

and (ii) the “excess” cash made available by AIG and its subsidiaries 

for repayment of the FRBNY Credit Facility at the Closing as described 

below; 

• at the Closing, the amendment and restatement of the Securities 

Purchase Agreement (as amended and restated, the “SPA”) relating to 

AIG’s Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock 

(the “Series F Preferred Stock”) to exchange a portion of AIG’s 

remaining right to draw up to $22.3 billion (the “Series F Drawdown 

Right”), in an amount to be designated by AIG prior to the Closing that 

shall not exceed $2 billion, for the right of AIG to draw up to such 

designated amount (the “Series G Designated Amount”) after the 

Closing for general corporate purposes (the “Series G Drawdown 

Right”); 

• AIG drawing at the Closing an amount up to the amount remaining 

undrawn pursuant to the Series F Drawdown Right subject to the 

limitations set forth herein; 

• the purchase by AIG at the Closing of AIA Preferred Interests and 

ALICO Preferred Interests from the FRBNY having an aggregate 

liquidation preference equal to the amount drawn at the Closing 

pursuant to the Series F Drawdown Right; 

• the exchange by the UST of the Series F Preferred Stock (including 

amounts drawn at the Closing) for: 

− all of the AIA Preferred Interests and ALICO Preferred Interests 

purchased from the FRBNY; 

 1

 It is understood and agreed among all parties to the Recapitalization that the components of the Recapitalization 

constitute a single, integrated, non-severable transaction. 
2 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

− approximately 167.6 million shares2 of AIG common stock, par 

value $2.50 per share (“AIG Common Stock”); and 

− shares of a new series of preferred stock of AIG designated as the 

“Series G Cumulative Mandatory Convertible Preferred Stock” (the 

“Series G Preferred Stock”), which will evidence (i) any amounts 

allocated by AIG to the Series G Drawdown Right to be available to 

be drawn after the Closing and (ii) any amounts drawn by AIG on 

the Series F Drawdown Right between announcement and Closing; 

• the exchange of AIG’s Series C Perpetual, Convertible, Participating 

Preferred Stock (the “Series C Preferred Stock”) for approximately 

562.9 million shares3

 of AIG Common Stock;

• the exchange of AIG’s Series E Fixed Rate Non-Cumulative Preferred 

Stock (the “Series E Preferred Stock”) for approximately 924.5 

million shares of AIG Common Stock; 

• AIG’s issuance after the Closing to the holders of AIG Common Stock 

prior to the Closing, by means of a dividend, of 10-year warrants to 

purchase up to 75 million shares of AIG Common Stock in the 

aggregate at an exercise price of $45.00 per share; and 

• AIG having the following pro forma capitalization immediately after 

giving effect to the Recapitalization: 

 

 Outstanding 

Shares of AIG 

Common Stock 

(in millions)4

Percentage of 

Outstanding 

Shares 

AIG Common Stock issued upon 

exchange for: 

Series C Preferred Stock 562.9 31.3% 

Series E Preferred Stock 924.5 51.4% 

Series F Preferred Stock 167.6 9.3% 

Subtotal 1,655.0 92.1% 

Existing holders of AIG Common Stock 142.95

 7.9% 

Total 1,797.9 100.0% 

 (continued...) 2

 Calculated based on the aggregate liquidation preference of the Series F Preferred Stock currently outstanding. 

3

 Calculated based on the number of shares that would represent 79.8% of pro forma outstanding shares of AIG 

Common Stock prior to the Restructuring and the assumed number of shares of AIG Common Stock to be issued in exchange 

for the equity units described under “Exchange of Equity Units” below. To be adjusted to reflect the actual shares of AIG 

Common Stock issued in exchange for such equity units. 

4

 This table does not reflect the shares of AIG Common Stock underlying any AIG securities convertible into, or 

exchangeable or exercisable for, shares of AIG Common Stock, including the Series G Preferred Stock, the warrants to be 

issued to the AIG public stockholders after the Closing and the outstanding warrants currently held by the UST. This table also 

does not reflect the issuance of shares of AIG Common Stock in exchange for the equity units described under “Exchange of 

Equity Units” below. 

5

 This number reflects the currently outstanding shares of AIG Common Stock and the assumed number of shares of 

AIG Common Stock to be issued in exchange for the equity units described below under “Exchange of Equity Units” below. 
3 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

Repayment of FRBNY 

Credit Facility; Waiver 

of AIA and ALICO 

Preferred Distributions 

 

Repayment of FRBNY 

Credit Facility 

At the Closing, all principal, accrued and unpaid interest, fees and other 

amounts owing under the FRBNY Credit Facility will be repaid in full 

solely from (i) the borrowings under the SPV Intercompany Loans 

described below and (ii) the Excess Cash Proceeds (as defined below) 

available at the Closing. 

AIG will use commercially reasonable efforts (taking into account market 

prices and conditions) to raise cash proceeds (the “Excess Cash 

Proceeds”), in an aggregate amount at least sufficient to repay (when 

combined with the borrowings under the SPV Intercompany Loans) all 

remaining amounts owing under the FRBNY Credit Facility.

Notwithstanding the foregoing, any cash proceeds received in connection 

with the disposal of any Designated Pledged Asset (or distributions thereon) 

shall, unless directed in writing by the FRBNY and the UST, be excluded 

from the definition of “Excess Cash Proceeds”. 

At the Closing, all available undrawn commitments under the FRBNY 

Credit Facility will be terminated. 

 

Waiver; Escrow As consideration for AIG’s agreement to complete the Recapitalization, the 

FRBNY, as the holder of the preferred interests in the AIA SPV and 

ALICO SPV, will waive (the “Waiver”) the right to receive mandatory 

distributions on such preferred interests until the Closing, with all proceeds 

subject to the Waiver to be held in segregated escrow accounts with the 

FRBNY, as agent for the SPVs,6

 until the Closing.7 The preferred interests 

in the AIA SPV and the ALICO SPV are referred to herein as the “AIA 

Preferred Interests” and “ALICO Preferred Interests”, respectively, and 

interchangeably as the “AIA/ALICO Preferred Interests”.8

 

The Waiver will also provide that, at the Closing, proceeds will be released 

from escrow and loaned (each, an “SPV Intercompany Loan”) to AIG on 

the terms described below; provided, however, that if the aggregate amount 

of the proceeds subject to the Waiver, when combined with the Excess Cash 

Proceeds, exceeds all amounts owing under the FRBNY Credit Facility, 

such excess amount shall be distributed in accordance with the terms of the 

SPVs’ limited liability company agreements. 

Upon the Closing, the Waiver will terminate and thereafter all cash received 

 6

 AIG and the FRBNY to agree on arrangements regarding the proceeds held in the escrow accounts. 

7

 The escrow accounts are expected to consist of, in the case of the AIA SPV, the net cash proceeds from the AIA IPO 

and, in the case of the ALICO SPV, the net cash proceeds from the sale of ALICO to MetLife. 

8

 For purposes of this document, the references to, and the aggregate liquidation preference of, the AIA/ALICO 

Preferred Interests will include, unless otherwise agreed by the FRBNY, the UST and AIG, the 1% and 5% preferred 

participating returns held by the FRBNY in the AIA SPV and the ALICO SPV, respectively. 
4 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

by each SPV from repayment of the SPV Intercompany Loans, receipt of 

SPV Capital Contributions, disposition of assets or otherwise will be 

distributed in accordance with the terms of the SPVs’ limited liability 

company agreements without regard to the Waiver. 

If the Recapitalization is terminated because the End Date (as defined 

below) occurs (or for any other reason), the Waiver will terminate and be of 

no further force or effect and all amounts held in escrow at each SPV will 

be released and distributed in accordance with the terms of the SPVs’ 

limited liability company agreements without regard to the Waiver. 

 

SPV Intercompany Loans Recourse against AIG under each SPV Intercompany Loan will be limited 

to the Designated Pledged Assets (other than any liability of AIG resulting 

from AIG’s intentional and knowing failure to perform its material 

obligations under the SPV Intercompany Loans and related security 

documents). 

The following assets of AIG and certain of its subsidiaries (who will 

become limited recourse guarantors to the extent of the applicable 

Designated Pledged Assets), along with all proceeds thereof and 

distribution thereon in each case (subject to exceptions to be agreed, 

consistent with the limitations on the collateral pledged to secure the 

FRBNY Credit Facility to the extent applicable, and any additional tax and 

regulatory considerations and timing constraints) (the “Designated Pledged 

Assets”) will be pledged to the SPVs to secure each SPV Intercompany 

Loan:

• the equity interests of Nan Shan Life Insurance Company, Ltd. (“Nan 

Shan”), AIG Star Life Insurance Co. Ltd (“Star”) and AIG Edison Life 

Insurance Company (“Edison”); 

• the equity interests of International Lease Finance Corporation 

(“ILFC”); 

• AIG’s and its subsidiaries’ interests in Maiden Lane II LLC and Maiden 

Lane III LLC and distributions thereon (subject to a commercially 

reasonable efforts standard taking into account applicable regulatory, 

tax and capital considerations); and

• any contract rights of AIG or any of the limited recourse guarantors 

under any contract to sell or otherwise dispose of any of the foregoing 

assets, whether presently effective or entered into after the date of the 

SPV Intercompany Loans. 

Notwithstanding anything in the FRBNY Credit Facility to the contrary: 

• unless the UST and the FRBNY direct in writing that any cash proceeds 

received prior to the Closing in connection with the disposal of any 

Designated Pledged Asset (or distributions thereon) constitute “Excess 

Cash Proceeds”, such cash proceeds shall not be applied to repay the 

FRBNY Credit Facility and will instead be applied at the Closing to 

simultaneously repay a portion of the SPV Intercompany Loans issued 

at the Closing, with the proceeds of such repayment distributed at the 

Closing in accordance with the terms of the SPVs’ limited liability 

company agreements; and 
5 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

• any non-cash proceeds or distributions received in connection therewith 

will be Designated Pledged Assets. 

Additionally, each SPV Intercompany Loan will be secured by a pledge of 

the common equity of the other SPV and guaranteed by such other SPV; 

provided, however, that, with respect to the AIA SPV, not more than either 

(i) 66% of the common equity of the AIA SPV will be pledged, or (ii) 66% 

of the equity interests in AIA Group Limited that are owned by AIA SPV 

will be subject to the guarantee. 

Notwithstanding that the ALICO SPV is initially responsible for all MetLife 

indemnification claims and downward purchase price adjustments under the 

purchase agreement relating to the ALICO sale transaction, AIG will be 

responsible for funding in cash the amount of each such MetLife 

indemnification claim and downward purchase price adjustment on a dollarfor-dollar basis when and if paid by the ALICO SPV. If immediate 

payment in cash of any such amounts would reasonably be expected to 

materially and adversely affect AIG’s liquidity, the parties will negotiate in 

good faith alternative or deferred funding arrangements. 

Each SPV Intercompany Loan will bear interest at a rate per annum equal to 

the “preferred return” on such SPV’s AIA/ALICO Preferred Interests, will 

have a maturity date of three years after the Closing and will have such 

other terms, consistent with the terms of the Recapitalization (including 

events of default) as the parties shall agree. 

AIG and each SPV will have the option to repay, retire or take such other 

action with respect to the SPV Intercompany Loans as it sees fit once all 

AIA/ALICO Preferred Interests have been redeemed or acquired by AIG. 

 

Capital Contribution 

Obligations 

If either SPV’s AIA/ALICO Preferred Interests remain outstanding 

following the repayment in full of the SPV’s SPV Intercompany Loan, AIG 

will agree to make capital contributions to such SPV (each, an “SPV 

Capital Contribution”) upon receipt of any proceeds of, or any other 

distributions on, the Designated Pledged Assets. AIG’s obligations to make 

the SPV Capital Contributions will be supported by the same guarantees 

and collateral package as the SPV Intercompany Loans. 

Additional 

Documentation/Payment 

Waterfall Security 

Agreement 

The collateral arrangements with respect to the Designated Pledged Assets, 

in a form reasonably satisfactory to the UST, the FRBNY and AIG, will 

contain customary provisions to protect the interests of the SPVs as secured 

parties, including the application of the proceeds of the Designated Pledged 

Assets to the repayment of the SPV Intercompany Loans and any SPV 

Capital Contributions. This documentation shall provide, among other 

things, that unless otherwise directed by the holder of the AIA Preferred 

Interests and the ALICO Preferred Interests, any proceeds or any other 

distributions received in respect of the Designated Pledged Assets will be 

allocated pro rata to the AIA SPV and the ALICO SPV based on the 

relative aggregate outstanding liquidation preferences of the AIA Preferred 

Interests and ALICO Preferred Interests at that time, either as repayment of 

the relevant SPV Intercompany Loan or as an SPV Capital Contribution.

The holders of the AIA/ALICO Preferred Interests will be party to or third 

party beneficiaries of the collateral documentation, including the payment 
6 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

waterfall and cross guarantees and AIG’s obligations to make SPV Capital 

Contributions. If AIG is not the pledgor of a component of the Designated 

Pledged Assets, then the pledgor of such component will be a limited 

recourse guarantor of the SPV Intercompany Loans to the extent of such 

component. If tax or regulatory issues prevent the pledging of 100% of the 

equity interests of a Designated Pledged Asset, then in addition to any 

amount that may be pledged, the pledgor will also pledge any proceeds 

from the sale of such Designated Pledged Asset. 

Drawdown of Series F 

Closing Drawdown 

Amount, Purchase of 

AIA/ALICO Preferred 

Interests, Exchange of 

Series F Preferred Stock 

and Terms of Series G 

Preferred Stock

 

Series F Closing 

Drawdown Amount 

At the Closing, AIG will draw pursuant to the Series F Drawdown Right an 

amount (the “Series F Closing Drawdown Amount”) equal to the lesser of 

(i) the remaining balance undrawn pursuant to the Series F Drawdown 

Right (less the Series G Designated Amount) and (ii) the aggregate 

liquidation preference9

 of all AIA/ALICO Preferred Interests outstanding at 

the Closing. 

The Series F Drawdown Right will terminate and be of no further force and 

effect immediately following the Closing. 

 

Purchase of AIA/ALICO 

Preferred Interests 

At the Closing, AIG will purchase from the FRBNY AIA Preferred 

Interests and ALICO Preferred Interests (the “Purchased AIA/ALICO 

Preferred Interests”) having an aggregate liquidation preference equal to 

at least the Series F Closing Drawdown Amount, at a cash purchase price 

(the “AIA/ALICO Preferred Interests Purchase Price”) equal to the 

aggregate outstanding liquidation preference of all of the Purchased 

AIA/ALICO Preferred Interests. Unless otherwise agreed by the FRBNY 

and the UST, the Purchased AIA/ALICO Preferred Interests will be 

purchased on a pro rata basis as to the AIA Preferred Interests and ALICO 

Preferred Interests based on the relative aggregate outstanding liquidation 

preferences of the AIA Preferred Interests and ALICO Preferred Interests at 

that time. AIG will fund the AIA/ALICO Preferred Interests Purchase Price 

from the Series F Closing Drawdown Amount. 

 

Amendment of SPA The parties will amend and restate the SPA to (i) exchange a portion of the 

Series F Drawdown Right for the Series G Drawdown Right (if AIG so 

elects) and (ii) provide for the exchange of the Series F Preferred Stock as 

described below. Notwithstanding such exchange, the remaining 

 9

 Taking into account, if applicable, the application of (i) any proceeds subject to the Waiver in excess of the amount 

required to be used to repay the FRBNY Credit Facility and advanced as SPV Intercompany Loans and (ii) any cash proceeds 

received from the disposal of Designated Pledged Assets prior to the Closing. 
7 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

commitment fees on the Series F Drawdown Right will nevertheless remain 

payable by AIG at the times they are currently due. 

 

Exchange of Series F 

Preferred Stock Simultaneously with the Closing, the shares of Series F Preferred Stock 

held by the UST will be exchanged for: 

• the Purchased AIA/ALICO Preferred Interests; 

• shares of Series G Preferred Stock, having the rights, preferences and 

terms described below (but only if (i) AIG has elected prior to the 

Closing to designate a portion of the Series F Drawdown Right as the 

Series G Drawdown Right and/or (ii) AIG draws on the Series F 

Drawdown Right after the date the parties announce the 

Recapitalization and prior to the Closing); and 

• approximately 167.6 million shares of AIG Common Stock. 

 

Series G Preferred Stock The Series G Preferred Stock received by the UST will have the following 

rights, preferences and terms: 

• Liquidation preference: The shares of Series G Preferred Stock will 

initially have a zero aggregate liquidation preference, except that if AIG 

draws on the Series F Drawdown Right after the date the parties 

announce the Recapitalization and prior to the Closing, the shares of 

Series G Preferred Stock will have an initial aggregate liquidation 

preference equal to the amount of such draws. Upon each drawdown, 

the aggregate liquidation preference of the shares of the Series G 

Preferred Stock will increase by an amount equal to the amount of such 

drawdown. Dividends on each share of Series G Preferred Stock will 

accrue on a daily basis at a rate of 5% per annum, compounded 

quarterly. 

• Conversion: The Series G Preferred Stock will automatically convert 

into AIG Common Stock on March 31, 2012 (the “Conversion Date”) 

following the consummation, if applicable, of the Deferred Exchange 

on the Conversion Date. The Series G Preferred Stock will be 

convertible into a variable number of shares of AIG Common Stock 

equal to (x) the aggregate liquidation preference of the Series G 

Preferred Stock, plus all accrued and unpaid dividends, divided by (y) 

the Conversion Price. The “Conversion Price” will be equal to the 

lesser of (a) 80% of the volume weighted average price of the AIG 

Common Stock over the 20 trading days prior to the announcement date 

of the Recapitalization, and (b) 80% of the volume weighted average 

price of the AIG Common Stock over the 20 trading days prior to the 

Closing Date, subject to anti-dilution protections typical in registered 

convertible securities. 

• Optional Redemption: AIG may redeem the Series G Preferred Stock at 

any time or times, in whole or in part, at a redemption price in cash 

equal to the liquidation preference of the Series G Preferred Stock, plus 

all accrued and unpaid dividends, without any prepayment or other 

penalty; provided, however, that for so long as the FRBNY holds 

AIA/ALICO Preferred Interests: 
8 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

− AIG shall not have the right to redeem the Series G Preferred Stock 

for cash; and 

− instead, AIG shall have the right to deliver the FRBNY cash in 

exchange for AIA/ALICO Preferred Interests having an aggregate 

liquidation preference (plus accrued and unpaid dividends) equal to 

such cash amount, and thereafter deliver to the UST the 

AIA/ALICO Preferred Interests so purchased in exchange for a 

reduction in the aggregate liquidation preference of the Series G 

Preferred Stock by a corresponding amount (such transactions to be 

consummated in a manner consistent with the steps set forth in 

clauses 3 through 6 under “Deferred Exchange of AIA/ALICO 

Preferred Interests” below). 

• Mandatory Redemption Upon Equity Offering: Net proceeds received 

by AIG in connection with any public offering for cash of its equity 

securities (whether or not such offering constitutes an “Equity Offering” 

(as defined below)) after the closing of the recapitalization will be used 

as follows: 

− first, the net proceeds will reduce on a dollar-for-dollar basis the 

remaining availability, if any, of the Series G Designated Amount 

for general corporate purposes and instead will be available solely 

for the purpose of purchasing and exchanging an equal amount of 

AIA/ALICO Preferred Interests, if any, then held by the FRBNY as 

contemplated under “Deferred Exchange of AIA/ALICO Preferred 

Interests” below; and 

− thereafter, the remaining net proceeds will be used to redeem Series 

G Preferred Stock at a redemption price equal to the liquidation 

preference, plus accrued and unpaid dividends. 

• Series G Drawdown Right: The Series G Drawdown Right may be 

drawn for general corporate purposes upon the applicable conditions to 

such drawdown being met as described below under “Conditions to 

Closing of Each Drawdown” consistent with the drawdown mechanics 

of the Series F Drawdown Right; provided that, consistent with the 

Series F Drawdown Right, AIG may not use the funds drawn to pay 

annual bonuses or other future cash performance awards to executives 

or senior partners. 

• Availability: The Series G Designated Amount will be reduced on a 

dollar-for-dollar basis (i) as described above under “Mandatory 

Redemption Upon Equity Offering” and (ii) by the aggregate amount 

AIG draws on the Series F Drawdown Right at any time after the date 

the parties announce the Recapitalization and prior to the Closing. 

• Equity Offering: Pursuant to the SPA, AIG will commit to use 

commercially reasonable efforts (after taking into account the price of 

the equity securities to be offered) to effect an underwritten public 

offering of its equity securities to raise net proceeds equal to the Series 

G Designated Amount (an “Equity Offering”) during the period 

beginning after the date AIG files its Annual Report on Form 10-K for 

the year ended December 31, 2010 and ending on June 30, 2011. 

• Duration of Series G Drawdown Right: The Series G Drawdown Right 
9 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

will expire upon the earlier of (i) the Conversion Date and (ii) such time 

that AIG has (A) been adjudicated as, or determined by any 

governmental authority having regulatory authority over AIG or its 

assets to be, insolvent, (B) become the subject of an insolvency, 

bankruptcy, dissolution, liquidation or reorganization proceeding 

(including, without limitation, under Title 11 of the United States 

Bankruptcy Code) or (C) become the subject of an appointment of a 

trustee, receiver, intervenor or conservator under the Resolution 

Authority under Dodd-Frank Wall Street Reform and Consumer 

Protection Act or under any other applicable bankruptcy, insolvency or 

similar law now or hereafter in effect (each of (A) through (C), an 

“Insolvency Trigger”); 

• Conditions to Commencement: The conditions to the commencement 

of the Series G Drawdown Right will be as follows (which are 

substantially the same as the analogous conditions relating to the 

commencement of the Series F Drawdown Right): 

− accuracy of AIG’s representations and warranties and performance 

by AIG of its obligations under the SPA; 

− a certificate of an AIG senior executive officer certifying as to the 

matters described in the preceding bullet point; 

− the filing with the Delaware Secretary of State of the certificate of 

designations for the Series G Preferred Stock; 

− delivery to the UST of an opinion of counsel in substantially the 

same form as delivered in connection with the commencement of 

the Series F Drawdown Right; 

− delivery of stock certificates for the Series G Preferred Stock; and 

− the Closing has occurred. 

• Conditions to Closing of Each Drawdown: The conditions to the closing 

of each drawdown pursuant to the Series G Drawdown Right will be as 

follows: 

− the Conversion Date has not occurred; 

− an Insolvency Trigger has not occurred; 

− on or before the applicable drawdown date, AIG has provided to the 

UST an outline, in a form reasonably satisfactory to the UST, of the 

expected uses by AIG of the drawdown amount; 

− the accuracy of certain of the representations and warranties 

contained in the SPA as of, and AIG’s performance of it obligations 

under the SPA at or prior to, the drawdown date; and 

− delivery to the UST of an opinion of counsel in substantially the 

same form as delivered in connection with a drawdown under the 

Series F Drawdown Right. 

• Ranking. The Series G Preferred Stock will rank with respect to rights 

upon the liquidation, winding-up or dissolution of AIG: 

− senior to (a) all of the AIG Common Stock and (b) to each other 
10 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

class of capital stock the terms of which expressly provide that it 

ranks junior to the Series G Preferred Stock as to dividend rights 

and rights on liquidation, winding up and dissolution of AIG; 

− on a parity with any class or series of capital stock the terms of 

which do not expressly provide that such class or series will rank 

senior or junior to the Series G Preferred Stock as to dividend rights 

and rights upon liquidation, winding-up and dissolution of AIG; 

− junior to each class or series of capital stock the terms of which 

provide that such class or series will rank senior to the Series G 

Preferred Stock; and 

− junior to all of the existing and future indebtedness and other 

obligations of AIG. 

 

Deferred Exchange of 

AIA/ALICO Preferred 

Interests 

If the FRBNY holds AIA/ALICO Preferred Interests on (i) any date on 

which the availability under the Series G Drawdown Right for general 

corporate purposes is reduced as a result of any public offering by AIG of 

its equity securities and/or (ii) the Conversion Date (to the extent there is 

any undrawn availability of the Series G Designated Amount as of the 

Conversion Date) (each, a “Deferred Exchange Date”), then the following 

transactions (collectively, a “Deferred Exchange”) will occur on such 

Deferred Exchange Date (and, in the case of the Conversion Date, 

immediately prior to the conversion of the Series G Preferred Stock into 

shares of AIG Common Stock as described above) in the order listed below, 

all of which will be deemed to occur substantially contemporaneously: 

1. AIG will draw pursuant to the Series G Drawdown Right in an amount 

(such amount, the “Deferred AIA/ALICO Preferred Interests 

Purchase Price”) equal to the lesser of (A) in the case of a Deferred 

Exchange referred to in clause (i) above, the amount by which the 

availability under the Series G Drawdown Right for general corporate 

purposes is reduced as a result of such public offering, and, in the case 

of a Deferred Exchange referred to in clause (ii) above, the undrawn 

availability of the Series G Designated Amount as of the Conversion 

Date, and (B) the aggregate liquidation preference of all AIA/ALICO 

Preferred Interests held by the FRBNY at such time; 

2. the aggregate liquidation preference of the Series G Preferred Stock will 

increase by an amount equal to the Deferred AIA/ALICO Preferred 

Interests Purchase Price; 

3. AIG will deliver a cash amount equal to the Deferred AIA/ALICO 

Preferred Interests Purchase Price to the FRBNY; 

4. the FRBNY will deliver AIA Preferred Interests and ALICO Preferred 

Interests (the “Deferred Purchased AIA/ALICO Preferred 

Interests”) having an aggregate liquidation preference equal to the 

Deferred AIA/ALICO Preferred Interests Purchase Price to AIG (unless 

otherwise agreed by the FRBNY and the UST, the Deferred Purchased 

AIA/ALICO Preferred Interests will be purchased on a pro rata basis as 

to the AIA Preferred Interests and ALICO Preferred Interests based on 

the relative aggregate outstanding liquidation preferences of the AIA 

Preferred Interests and ALICO Preferred Interests held by the FRBNY 
11 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

at that time); 

5. AIG will deliver the Deferred Purchased AIA/ALICO Preferred 

Interests to the UST; and 

6. the aggregate liquidation preference of the Series G Preferred Stock will 

reduce by an amount equal to the Deferred AIA/ALICO Preferred 

Interests Purchase Price. 

Notwithstanding the terms of the Series G Preferred Stock described above 

under “Series G Preferred Stock”, for purposes of a Deferred Exchange: 

• the only condition to the drawdown of all or a portion of the Series G 

Unused Availability in connection with such Deferred Exchange is that 

the Deferred Purchased AIA/ALICO Preferred Interests will be 

delivered to the UST at the closing of such Deferred Exchange; and 

• the availability of the Series G Drawdown Right will be equal to the 

Deferred AIA/ALICO Preferred Interests Purchase Price. 

 

Subordination Agreement If the aggregate Purchased AIA/ALICO Preferred Interests (including any 

Deferred Purchased AIA/ALICO Preferred Interests) do not constitute all of 

the AIA/ALICO Preferred Interests outstanding, the FRBNY will have the 

right, pursuant to a subordination agreement entered into among AIG, AIA 

SPV, ALICO SPV, the UST and the FRBNY, to receive distributions on its 

remaining AIA/ALICO Preferred Interests up to the aggregate outstanding 

liquidation preferences of all AIA/ALICO Preferred Interests held by the 

FRBNY before the UST will be entitled to receive any distributions on the 

AIA/ALICO Preferred Interests. In furtherance of the foregoing, AIG will 

agree to cause AIA SPV and ALICO SPV to make distributions on 

AIA/ALICO Preferred Interests to the FRBNY until the aggregate 

outstanding liquidation preferences of all AIA/ALICO Preferred Interests 

held by the FRBNY have been paid in full, and thereafter make all 

distributions on the AIA/ALICO Preferred Interests to the UST. Each of 

the FRBNY and the UST will agree that, to the extent it receives any 

distributions inconsistent with the preceding sentence, it will promptly 

return such distributions to the AIA SPV or ALICO SPV, as the case may 

be, or direct such distributions directly to the other party. 

 

Exchange of Equity Units Shortly after AIG files its Quarterly Report on Form 10-Q for the quarter 

ended September 30, 2010, AIG will conduct a registered exchange offer in 

which it will offer shares of AIG Common Stock and cash for the equity 

units mandatorily exchangeable for shares of AIG Common Stock that it 

previously issued on May 16, 2008.10 AIG intends to file a registration 

statement on Form S-4 relating to the exchange prior to the filing of such 

Quarterly Report with the expectation that the Form S-4 will become 

effective shortly following the filing of such Quarterly Report. 

 10 The number of shares of AIG Common Stock will be the number that holders would receive under the stock 

purchase contracts underlying the equity units and the cash payments will be designed to compensate holders for the interim 

payments (interest on the underlying debentures and contract adjustment payments on the underlying stock purchase contracts) 

to which they would otherwise be entitled. 
12 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

 

Exchange Series C 

Preferred Stock for AIG 

Common Stock; 

Distribution of AIG 

Common Stock Resulting 

from Exchange 

At the Closing, the Series C Preferred Stock will be exchanged for 

approximately 562.9 million shares of AIG Common Stock. Immediately 

after such exchange, the Trust will distribute at the Closing all of the shares 

of AIG Common Stock issued in connection with such exchange to the UST 

and thereafter the Trust will be dissolved in accordance with the terms of 

the trust agreement.11

 

Exchange of Outstanding 

Liquidation Preferences 

of Series E and Series F 

Preferred Stock for AIG 

Common Stock 

At the Closing, the Series E Preferred Stock will be exchanged for 

approximately 924.5 million shares of AIG Common Stock and the 

aggregate liquidation preference of the Series F Preferred Stock outstanding 

as of the date the parties announce the Recapitalization will be exchanged 

for approximately 167.6 million shares12 of AIG Common Stock. 

 

Registration Rights The UST will be afforded registration rights with respect to the shares of 

AIG Common Stock issued in connection with the Recapitalization on 

terms substantially consistent with those relating to the Series C Preferred 

Stock contained in the Series C Preferred Stock purchase agreement, subject 

to appropriate modifications relating to AIG’s obligations to effect an 

Equity Offering described above, the exchange of equity units described 

above and the exchange of hybrid securities described below, including 

appropriate lock-up arrangements covering the registrable shares. The 

UST’s registration rights will be assignable to third-party purchasers of 

registrable securities and, as part of the definitive documentation for the 

Recapitalization, AIG and the UST will agree to appropriate limitations on 

the exercise of those rights by third-party purchasers. 

 

Exchange of Hybrid 

Securities

Within an agreed upon period after the Closing, AIG will use its reasonable 

efforts to conduct a registered exchange offer and/or a Section 3(a)(9) 

exchange offer for one or more series of its outstanding hybrid securities. 

 

UST’s Outstanding 

Warrants 

The outstanding warrants currently held by the UST will remain 

outstanding following the Recapitalization; provided, however, that 

notwithstanding anything in the anti-dilution provision of such warrants to 

the contrary, no adjustment will be made to the number of shares of AIG 

Common Stock subject to, or the exercise price of, such warrants as a result 

of the Recapitalization. 

 

Issuance of Warrants to 

Existing Holders of AIG 

Common Stock 

After the Closing, AIG will issue to the holders of AIG Common Stock

prior to the Closing, by means of a dividend, 10-year warrants to purchase 

up to 75 million shares of AIG Common Stock in the aggregate at an 

exercise price of $45.00 per share. 

Conditions to the The consummation of the Recapitalization will be subject to the following 

 11 Potential amendments of the trust agreement to be discussed. 

12 Calculated based on the aggregate liquidation preference of the Series F Preferred Stock currently outstanding. 
13 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

Recapitalization material conditions: 

1. (i) the borrowings under the SPV Intercompany Loans and (ii) the 

Excess Cash Proceeds available at the Closing will be sufficient to 

repay at the Closing all remaining principal, accrued and unpaid 

interest, fees and other amounts owing under the FRBNY Credit 

Facility in full; 

2. the FRBNY shall have received evidence reasonably satisfactory to it 

that, immediately after the Closing, the FRBNY would not hold 

AIA/ALICO Preferred Interests having an aggregate liquidation 

preference in excess of $6 billion; 

3. stockholder approval for the issuance of the shares of AIG Common 

Stock and Series G Preferred Stock (which is convertible into AIG 

Common Stock) in connection with the Recapitalization in accordance 

with the rules of the New York Stock Exchange; 

4. the rating profile of AIG, the primary insurance companies of Chartis, 

Inc. and the primary insurance companies of SunAmerica Financial 

Group, taking into account the Recapitalization, shall be reasonably 

acceptable to the FRBNY, the UST, the Trust and AIG;

5. AIG shall have in place at the Closing available cash and third party 

financing commitments in amounts and on terms reasonably acceptable 

to the FRBNY, the UST and AIG; 

6. AIG has not drawn on the Series F Drawdown Right after the date the 

parties announce the Recapitalization and prior to the Closing by an 

amount in excess of $2 billion, unless waived by the FRBNY and the 

UST in their sole discretion; 

7. AIG shall have achieved its year-end 2010 targets for the de-risking of 

AIG FP as set forth in AIG’s AIG FP Contingent Liquidity Plan. 

8. absence of any law or order prohibiting the Closing and receipt of all 

material regulatory approvals and material third party consents required 

to consummate the Recapitalization; 

9. approval for listing of the shares of AIG Common Stock to be issued in 

the Recapitalization on the New York Stock Exchange; and 

10. material performance by each other party of its covenants and the 

accuracy as of the Closing of the representations and warranties made 

by each such other party. 

 

Termination If the Closing does not occur on or prior to March 15, 2011 (the “End 

Date”), any of AIG, the FRBNY, the UST or the Trust may terminate the 

Recapitalization. 

 

Closing Steps At the Closing, the following transactions will occur in the order listed 

below, all of which will be deemed to occur substantially 

contemporaneously: 

1. the proceeds subject to the Waiver will be released, the SPVs will make 

SPV Intercompany Loans to AIG in the amounts specified above, and 

the remaining proceeds, if any, will be distributed to the holders of the 
14 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

AIA/ALICO Preferred Interests in accordance with the terms of the 

SPVs’ limited liability company agreements as described above; 

2. AIG will draw the Series F Closing Drawdown Amount pursuant to the 

Series F Drawdown Right; 

3. the FRBNY Credit Facility will be repaid in full from (i) the borrowing 

under the SPV Intercompany Loans and (ii) the Excess Cash Proceeds 

available at the Closing; 

4. unless the UST and the FRBNY direct in writing that any cash proceeds 

received prior to the Closing in connection with the disposal of any 

Designated Pledged Asset (or distributions thereon) constitute “Excess 

Cash Proceeds”, such cash proceeds will be applied at the Closing to 

repay a portion of the SPV Intercompany Loans, and distributed in 

accordance with the terms of the SPVs’ limited liability company 

agreements; 

5. AIG will deliver the AIA/ALICO Preferred Interests Purchase Price to 

the FRBNY; 

6. the FRBNY will deliver all of the Purchased AIA/ALICO Preferred 

Interests to AIG; 

7. to the extent applicable, the right to draw an amount equal to the Series 

G Designated Amount pursuant to Series F Drawdown Right will be 

exchanged for the Series G Drawdown Right; 

8. AIG will deliver to the UST: (i) the Purchased AIA/ALICO Preferred 

Interests, (ii) approximately 1,092.1 million shares of AIG Common 

Stock (representing the shares of AIG Common Stock to be issued in 

exchange for the Series E Preferred Stock and the Series F Preferred 

Stock held by the UST) and (iii) if applicable, the shares of Series G 

Preferred Stock; 

9. AIG will deliver approximately 562.9 million shares of AIG Common 

Stock (representing the shares of AIG Common Stock to be issued in 

exchange for the Series C Preferred Stock) to the Trust; 

10. the UST will deliver all shares of Series E Preferred Stock and Series F 

Preferred Stock to AIG; 

11. the Trust will deliver all shares of Series C Preferred Stock to AIG; and 

12. the Trust will deliver all shares of AIG Common Stock issued upon the 

exchange of the Series C Preferred Stock to the UST and thereafter the 

Trust will be dissolved in accordance with the terms of the trust 

agreement. 

 

Governance Documentation to include approval/consent rights and other covenants and 

agreements, including, but not limited to, the following: 

• AIG: Until such time as no obligation of AIG or any of its subsidiaries 

arising from financial assistance provided under the Troubled Asset 

Relief Program remains outstanding (excluding any period during 

which the federal government only holds warrants to purchase AIG 

Common Stock, but including any period during which the federal 

government owns (i) any AIG Common Stock issued in exchange for 
15 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

the Series E Preferred Stock, the Series F Preferred Stock or the Series 

G Preferred Stock or (ii) any of the Purchased AIA/ALICO Preferred 

Interests), AIG will remain subject to the covenants from the Series E 

Exchange Agreement and the Series F Purchase Agreement and: 

− AIG and its board of directors must work in good faith with the 

UST to ensure corporate governance arrangements satisfactory to 

the UST; 

− AIG will continue to be subject to all applicable laws, including the 

Employ American Workers Act and the Emergency Economic 

Stabilization Act of 2008 (including all guidance and regulations 

related thereto); 

− for so long as American General Finance, Inc. is a subsidiary of 

AIG, AIG will ensure that MorEquity, Inc. (a subsidiary of 

American General Finance, Inc.) continues to participate in the 

Home Affordable Modification Program (to the extent MorEquity, 

Inc. is eligible to participate in such program); 

− AIG must maintain its written policy on lobbying, government 

ethics and political activity; 

− AIG must maintain its written policy on corporate expenses; and 

− AIG must maintain a risk management committee of its board of 

directors. 

• AIA SPV and ALICO SPV: Appropriate modifications to the SPV 

arrangements in light of the Waiver, the SPV Intercompany Loans and 

SPV Capital Contributions, including: 

− providing that all proceeds received by each SPV in connection 

with the repayment of an SPV Intercompany Loan or the receipt of 

SPV Capital Contributions will be considered a “qualifying event” 

requiring mandatory distributions; 

− eliminating all restrictions on distributions and other actions (e.g., 

rights to demand liquidity events, etc.) if the holder of the 

AIA/ALICO Preferred Interests or any of its affiliates control (or 

have the right to obtain control of) AIG; 

− providing that all significant action consent rights, rights to demand 

liquidity rights, observer rights, etc. applicable to the AIA/ALICO 

Preferred Interests (including, in the case of the ALICO SPV, the 

right to force a sale of MetLife securities) will remain applicable 

notwithstanding the repayment in full of such SPV Preferred 

Interests until the AIA/ALICO Preferred Interests at both SPVs 

have been repaid in full; 

− providing for the management and payment/reimbursement by AIG 

of MetLife purchase price adjustments and post-closing 

indemnification claims related to the sale of ALICO to MetLife; 

and 

− granting the holder of the AIA/ALICO Preferred Interests the right 

to enforce SPV Intercompany Loans and SPV Capital 
16 

(NY) 07865/002/RECAPITALIZATION/Recapitalization.Summary.Terms.doc

Contributions. 

• Designated Pledged Assets: Holder of the AIA/ALICO Preferred 

Interests to have negative covenants, certain consent rights and 

liquidity/monetization rights relating to the Designated Pledged Assets 

substantively equivalent to the rights under the SPVs’ limited liability 

company agreements to be agreed in the Recapitalization 

documentation taking into account regulatory and other relevant 

considerations under applicable law. 

• Information and Related Rights: 

− Until such time as no obligation of AIG or any of its subsidiaries 

arising from financial assistance provided under the Troubled Asset 

Relief Program remains outstanding (excluding any period during 

which the federal government only holds warrants to purchase AIG 

Common Stock, but including any period during which the federal 

government owns (x) any AIG Common Stock issued in exchange 

for the Series E Preferred Stock, the Series F Preferred Stock or the 

Series G Preferred Stock or (y) any of the Purchased AIA/ALICO 

Preferred Interests), (i) AIG will continue to provide the UST with 

the financial information, reports, notices and inspection rights 

currently provided and (ii) the UST will be entitled to board 

observer rights; and 

− For so long as the FRBNY holds AIA/ALICO Preferred Interests, 

AIG will provide the FRBNY with board-level information rights 

with respect to AIG (relating to any of the Designated Pledged 

Assets, the SPVs or any of their assets), the AIA SPV and the 

ALICO SPV, and any other information reasonably requested by 

the FRBNY relating to any of the foregoing (but excluding any 

privileged information). 

• Indemnification and Expenses: 

− From and after the Closing, AIG will pay all reasonable out-ofpocket expenses of the FRBNY and the UST relating to, or 

otherwise arising out of, (i) the Recapitalization, (ii) the financial 

assistance provided under the Troubled Asset Relief Program, (iii) 

the FRBNY Credit Facility, (iv) the federal government’s 

ownership of any securities (whether before or after the Closing) of 

AIG or any of its subsidiaries and (v) the transaction documents 

relating to the foregoing, including the consideration, exercise, 

enforcement or protection of any rights granted therein or 

compliance with any obligations thereunder. 

− Unless otherwise agreed to by the parties, following the Closing the 

trustees of the Trust shall be provided with expense reimbursement 

and indemnification at least as protective as what is currently 

provided under the AIG Credit Facility Trust Agreement, 

notwithstanding any termination of the FRBNY Credit Facility or 

the AIG Credit Facility Trust Agreement. 

Definitive 

Documentation 

The transactions contemplated hereby are subject to definitive 

documentation to be mutually agreed by the parties.