EX-10.1






Exhibit 10.1




 





SECURITIES PURCHASE AGREEMENT




dated as of




November 25, 2008




between




American International Group, Inc.




and




United States Department of the Treasury




 






 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Article 1
	Purchase; Closing	 	 	 	 
	1.1

	 	Purchase
	 	 	1	 
	1.2

	 	Closing
	 	 	1	 
	1.3

	 	Interpretation
	 	 	4	 
	 
	 	 	 	 	 	 
	Article 2
	Representations and Warranties
	 
	 	 	 	 	 	 
	2.1

	 	Disclosure
	 	 	4	 
	2.2

	 	Representations and Warranties of the Company
	 	 	5	 
	 
	 	 	 	 	 	 
	Article 3
	Covenants
	 
	 	 	 	 	 	 
	3.1

	 	Consummation of Purchase and Charter Amendment
	 	 	13	 
	3.2

	 	Expenses
	 	 	15	 
	3.3

	 	Sufficiency of Authorized Common Stock; Exchange Listing
	 	 	15	 
	3.4

	 	Certain Notifications Until Closing
	 	 	15	 
	3.5

	 	Information and Confidentiality
	 	 	15	 
	 
	 	 	 	 	 	 
	Article 4
	Additional Agreements
	 
	 	 	 	 	 	 
	4.1

	 	Purchase of Restricted Securities
	 	 	16	 
	4.2

	 	Legends
	 	 	16	 
	4.3

	 	Certain Transactions
	 	 	18	 
	4.4

	 	Transfer of Purchased Securities, the Warrant and Warrant Shares
	 	 	18	 
	4.5

	 	Registration Rights
	 	 	18	 
	4.6

	 	Voting of Warrant Shares
	 	 	30	 
	4.7

	 	Depositary Shares
	 	 	30	 
	4.8

	 	Restriction on Dividends and Repurchases
	 	 	30	 
	4.9

	 	Repurchase of Investor Securities
	 	 	31	 
	4.10

	 	Executive Compensation
	 	 	33	 
	4.11

	 	Restrictions on Lobbying
	 	 	35	 
	4.12

	 	Restrictions on Expenses
	 	 	35	 
	4.13

	 	Risk Management Committee
	 	 	36	 
	4.14

	 	Dividend Rate Adjustment
	 	 	36	 






i 









 






	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Article 5
	Miscellaneous
	5.1 	 	Termination	 	 	36	 
	5.2

	 	Survival of Representations and Warranties
	 	 	36	 
	5.3

	 	Amendment
	 	 	37	 
	5.4

	 	Waiver of Conditions
	 	 	37	 
	5.5

	 	Governing Law: Submission to Jurisdiction, Etc.
	 	 	37	 
	5.6

	 	Notices
	 	 	37	 
	5.7

	 	Definitions
	 	 	38	 
	5.8

	 	Assignment
	 	 	39	 
	5.9

	 	Severability
	 	 	39	 
	5.10

	 	Entire Agreement
	 	 	39	 
	5.11

	 	No Third Party Beneficiaries
	 	 	39	 






	 	 	 
	SCHEDULE A:

	 	ADDITIONAL TERMS AND CONDITIONS
	SCHEDULE B:

	 	CAPITALIZATION
	SCHEDULE C:

	 	LITIGATION
	SCHEDULE D:

	 	COMPLIANCE WITH LAWS
	SCHEDULE E:

	 	REGULATORY AGREEMENTS






LIST OF ANNEXES




	 	 	 
	ANNEX A:

	 	FORM OF CERTIFICATE OF DESIGNATIONS FOR PREFERRED STOCK
	ANNEX B-1:

	 	FORM OF WAIVER FOR THE SENIOR EXECUTIVE OFFICERS AND THE SENIOR PARTNERS
	ANNEX B-2:

	 	FORM OF WAIVER FOR THE COMPANY
	ANNEX C:

	 	FORM OF OPINION
	ANNEX D:

	 	FORM OF WARRANT






ii 









 





INDEX OF DEFINED TERMS




	 	 	 
	 	 	Location of
	Term	 	Definition
	Affiliate
	 	5.7(b)

	Agreement
	 	Recitals

	Appraisal Procedure
	 	4.9(c)(i)

	Bankruptcy Exceptions
	 	2.2(d)

	Benefit Plans
	 	1.2(d)(iv)

	Board of Directors
	 	2.2(f)

	Business Combination
	 	5.8

	business day
	 	1.3

	Capitalization Date
	 	2.2(b)

	Certificate of Designations
	 	1.2(d)(iii)

	Charter
	 	2.2(a)

	Closing
	 	1.2(a)

	Closing Date
	 	1.2(a)

	Code
	 	2.2(n)

	Common Stock
	 	2.1

	Company
	 	Recitals

	Company Financial Statements
	 	2.2(h)

	Company Material Adverse Effect
	 	2.1(a)

	Company Reports
	 	2.2(i)(i)

	Company Subsidiary; Company Subsidiaries
	 	2.2(i)(i)

	Control
	 	4.9(c)(iii)

	control; controlled by; under common control with
	 	5.7(b)

	Controlled Group
	 	2.2(n)

	Credit Agreement
	 	1.2(b)

	EESA
	 	1.2(d)(iv)

	Equity Interests
	 	5.7(b)

	ERISA
	 	2.2(n)

	Exchange Act
	 	2.1(b)

	Fair Market Value
	 	4.9(c)(ii)

	FRBNY
	 	1.2(b)

	Fund
	 	5.7(b)

	GAAP
	 	2.1(a)

	Governmental Entities
	 	1.2(c)

	Holder
	 	4.5(k)(i)

	Holders’ Counsel
	 	4.5(k)(ii)

	Indemnitee
	 	4.5(g)(i)

	Information
	 	3.5(b)

	Investor
	 	Recitals

	Junior Stock
	 	4.8(c)

	knowledge of the Company; Company’s knowledge
	 	5.7(c)







iii 









 






	 	 	 
	 	 	Location of
	Term	 	Definition
	Last Fiscal Year
	 	2.1(b)

	officers
	 	5.7(c)

	Parity Stock
	 	4.8(c)

	Pending Underwritten Offering
	 	4.5(l)

	Permitted Repurchases
	 	4.8(a)(ii)

	Piggyback Registration
	 	4.5(a)(iv)

	Plan
	 	2.2(n)

	Preferred Stock
	 	Recitals

	Previously Disclosed
	 	2.1(b)

	Proprietary Rights
	 	2.2(u)

	Purchase
	 	Recitals

	Purchase Price
	 	1.1

	Purchased Securities
	 	Recitals

	register; registered; registration
	 	4.5(k)(iii)

	Registrable Securities
	 	4.5(k)(iv)

	Registration Expenses
	 	4.5(k)(v)

	Regulatory Agreement
	 	2.2(s)

	Rule 144; Rule 144A; Rule 159A; Rule 405; Rule 415
	 	4.5(k)(vi)

	SEC
	 	2.1(b)

	Securities Act
	 	2.2(a)

	Selling Expenses
	 	4.5(k)(vii)

	Senior Executive Officers
	 	4.10

	Senior Partners
	 	4.10

	Series C Preferred Stock
	 	2.2(b)

	Share Dilution Amount
	 	4.8(a)(ii)

	Shelf Registration Statement
	 	4.5(a)(ii)

	Signing Date
	 	2.1(a)

	Special Registration
	 	4.5(i)

	Stockholder Proposal
	 	3.1(b)

	subsidiary
	 	5.7(a)

	Tax; Taxes
	 	2.2(o)

	Transfer
	 	4.4

	Warrant
	 	Recitals

	Warrant Shares
	 	2.2(d)








iv 











 





SECURITIES PURCHASE AGREEMENT




Recitals:




     WHEREAS, American International Group, Inc. (the “Company”) intends to issue in a private
placement 4,000,000 shares of the Series D Fixed Rate Cumulative Perpetual Preferred Stock (the
“Preferred Stock”) and a warrant (the “Warrant”, and together with the Preferred Stock, the
“Purchased Securities”) to purchase 53,798,766 shares of the Company’s common stock and the United
States Department of the Treasury (the “Investor”) intends to purchase (the “Purchase”) from the
Company the Purchased Securities; and



     WHEREAS, the Purchase will be governed by this Securities Purchase Agreement (including the
Schedules and Annexes hereto) (the “Agreement”).



     NOW, THEREFORE, in consideration of the premises, and of the representations, warranties,
covenants and agreements set forth herein, the parties agree as follows:



Article 1

Purchase; Closing




     1.1 Purchase. On the terms and subject to the conditions set forth in this Agreement, the
Company agrees to sell to the Investor, and the Investor agrees to purchase from the Company, at
the Closing (as hereinafter defined), the Purchased Securities for $40,000,000,000 (the “Purchase
Price”).



     1.2 Closing.



     (a) On the terms and subject to the conditions set forth in this Agreement, the closing of the
Purchase (the “Closing”) will take place at the location specified in Schedule A, at the
time and on the date set forth in Schedule A, or as soon as practicable thereafter, or at
such other place, time and date as shall be agreed between the Company and the Investor. The time
and date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.



     (b) Subject to the fulfillment or waiver of the conditions to the Closing in this Section 1.2,
at the Closing (i) the Company will deliver the Preferred Stock and the Warrant, in each case as
evidenced by one or more certificates dated the Closing Date and bearing appropriate legends as
hereinafter provided for, (ii) upon verification of receipt of the Preferred Stock and Warrant at
the Investor’s custodian, the Investor shall pay the Purchase Price by instructing the Federal
Reserve Bank of New York (the “FRBNY”), acting as fiscal agent of the Investor, to debit the
Investor’s General Account for the Purchase Price, and the Investor is hereby directed by the
Company to pay the Purchase Price directly to the FRBNY as a credit to the account on the books of
the FRBNY evidencing a prepayment in the amount of the Purchase Price of the Company’s indebtedness
to the FRBNY under the Credit Agreement dated as of September 22,



 









 







2008 between the Company and the
FRBNY, as amended from time to time (the “Credit Agreement”).



     (c) The respective obligations of each of the Investor and the Company to consummate the
Purchase are subject to the fulfillment (or waiver by the Investor and the Company, as applicable)
prior to the Closing of the conditions that (i) any approvals or authorizations of all United
States and other governmental, regulatory or judicial authorities (collectively, “Governmental
Entities”) required for the consummation of the Purchase shall have been obtained or made in form
and substance reasonably satisfactory to each party and shall be in full force and effect and all
waiting periods required by United States and other applicable law, if any, shall have expired and
(ii) no provision of any applicable United States or other law and no judgment, injunction, order
or decree of any Governmental Entity shall prohibit the purchase and sale of the Purchased
Securities as contemplated by this Agreement.



     (d) The obligation of the Investor to consummate the Purchase is also subject to the
fulfillment (or waiver by the Investor) at or prior to the Closing of each of the following
conditions:




     (i) (A) the representations and warranties of the Company set forth in (x) Section
2.2(g) of this Agreement shall be true and correct in all respects as though made on and as
of the Closing Date, (y) Sections 2.2(a) through (f) shall be true and correct in all
material respects as though made on and as of the Closing Date (other than representations
and warranties that by their terms speak as of another date, which representations and
warranties shall be true and correct in all material respects as of such other date) and (z)
Sections 2.2(h) through (v) (disregarding all qualifications or limitations set forth in
such representations and warranties as to “materiality”, “Company Material Adverse Effect”
and words of similar import) shall be true and correct as though made on and as of the
Closing Date (other than representations and warranties that by their terms speak as of
another date, which representations and warranties shall be true and correct as of such
other date), except to the extent that the failure of such representations and warranties
referred to in this Section 1.2(d)(i)(A)(z) to be so true and correct, individually or in
the aggregate, does not have and would not reasonably be expected to have a Company Material
Adverse Effect and (B) the Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to the Closing;




     (ii) the Investor shall have received a certificate signed on behalf of the Company by
a senior executive officer certifying to the effect that the conditions set forth in Section
1.2(d)(i) have been satisfied;




     (iii) the Company shall have duly adopted and filed with the Secretary of State of its
jurisdiction of organization or other applicable Governmental Entity the certificate of
designations for the Preferred Stock in substantially the form attached hereto as Annex A
(the “Certificate of Designations”) and such filing shall have been accepted;



2









 






     (iv) (A) the Company shall have taken all necessary action to effect such changes to
its compensation, bonus, incentive and other benefit plans, arrangements and agreements
(including golden parachute, severance and employment agreements) (collectively, “Benefit
Plans”) with respect to the Senior Executive Officers (and to the extent necessary for such
changes to be legally enforceable, each of the Senior Executive
Officers shall have duly consented in writing to such changes), as may be necessary,
during the period that the Investor owns any debt or equity securities of the Company
acquired pursuant to this Agreement or the Warrant, in order to comply with Section 111(b)
of the Emergency Economic Stabilization Act of 2008 (“EESA”), including the provisions for
Systemically Significant Failing Institutions, as implemented by guidance or regulation
thereunder, including Notice 2008-PSSFI, that has been issued and is in effect as of the
Closing Date, including provisions prohibiting severance payments to the Senior Executive
Officers, (B) the Company shall have taken all necessary action to effect such changes to
its Benefit Plans with respect to the U.S.-based Senior Partners (and to the extent
necessary for such changes to be legally enforceable, each of the U.S.-based Senior Partners
shall have duly consented in writing to such changes), as may be necessary, during the
period that the Investor owns any debt or equity securities of the Company acquired pursuant
to this Agreement or the Warrant, in order to comply with the requirements in Section 4.10
of this Agreement, (C) the Company shall have used its best efforts to take all necessary
action to effect such changes to its Benefit Plans with respect to the other Senior Partners
(and to the extent necessary for such changes to be legally enforceable, to have each of the
other Senior Partners duly consent in writing to such changes), as may be necessary, during
the period that the Investor owns any debt or equity securities of the Company acquired
pursuant to this Agreement or the Warrant, in order to comply with the requirements in
Section 4.10 of this Agreement and (D) the Investor shall have received a certificate signed
on behalf of the Company by a senior executive officer certifying to the effect that the
conditions set forth in Section 1.2(d)(iv)(A) and (B) have been satisfied;




     (v) each of the Company’s Senior Executive Officers and the U.S-based Senior Partners
shall have delivered to the Investor, and the Company shall have delivered to the Investor,
a written waiver in the form attached hereto as Annex B-1 (for the Senior Executive Officers
and Senior Partners) or Annex B-2 (for the Company) releasing the Investor and the Company,
and in the case of the Company’s waiver, releasing the Investor, from any claims that such
Senior Executive Officers or Senior Partners may otherwise have against the Company or the
Investor, and in the case of the Company, any claims it may have against the Investor, in
each case as a result of the issuance, on or prior to the Closing Date, of any such guidance
or regulations or as a result of the requirements in Section 4.10 of this Agreement which
require the modification of, and the agreement of the Company hereunder to modify, the terms
of any Benefit Plans with respect to the Senior Executive Officers and, as applicable, with
respect to the Senior Partners to eliminate or modify any provisions of such Benefit Plans
that would not be in compliance with the requirements of Section 111(b) of the EESA,
including the provisions for Systemically Significant Failing Institutions, as implemented



3









 







by guidance or regulation thereunder, including Notice 2008-PSSFI, that has been issued and
is in effect as of the Closing Date, and the requirements in Section 4.10 of this Agreement;




     (vi) the Company shall have delivered to the Investor a written opinion from counsel to
the Company (which may be internal counsel), addressed to the Investor and dated as of the
Closing Date, in substantially the form attached hereto as Annex C;




     (vii) the Company shall have delivered certificates in proper form or, with the prior
consent of the Investor, evidence of shares in book-entry form, evidencing the Preferred
Stock to the Investor or its designee(s); and




     (viii) the Company shall have duly executed the Warrant in substantially the form
attached hereto as Annex D and delivered such executed Warrant to the Investor or its
designee(s).



     1.3 Interpretation.
When a reference is made in this Agreement to “Recitals,” “Articles,” “Sections,” “Annexes” or
“Schedules” such reference shall be to a Recital, Article or Section of, or Annex or Schedule to,
this Agreement. The terms defined in the singular have a comparable meaning when used in the
plural, and vice versa. References to “herein”, “hereof”, “hereunder” and the like refer to this
Agreement as a whole and not to any particular section or provision, unless the context requires
otherwise. The table of contents and headings contained in this Agreement are for reference
purposes only and are not part of this Agreement. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed followed by the words “without
limitation.” No rule of construction against the draftsperson shall be applied in connection with
the interpretation or enforcement of this Agreement, as this Agreement is the product of
negotiation between sophisticated parties advised by counsel. All references to “$” or “dollars”
mean the lawful currency of the United States of America. Except as expressly stated in this
Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation
as amended, modified, supplemented or replaced from time to time (and, in the case of statutes,
include any rules and regulations promulgated under the statute) and to any section of any statute,
rule or regulation include any successor to the section. References to a “business day” shall mean
any day except Saturday, Sunday and any day on which banking institutions in the State of New York
generally are authorized or required by law or other governmental actions to close.



Article 2

Representations and Warranties




     2.1 Disclosure.



     (a) “Company Material Adverse Effect” means a material adverse effect on (i) the business,
results of operation or financial condition of the Company and its consolidated subsidiaries taken
as a whole; provided, however, that Company Material Adverse Effect shall



4









 







not be deemed to include
the effects of (A) changes after the date of this Agreement (the “Signing Date”) in general
business, economic or market conditions (including changes generally in prevailing interest rates,
credit availability and liquidity, currency exchange rates and price levels or trading volumes in
the United States or foreign securities or credit markets), or any outbreak or escalation of
hostilities, declared or undeclared acts of war or terrorism, in each case generally affecting the
industries in which the Company and its subsidiaries operate, (B) changes or proposed changes after
the Signing Date in generally accepted accounting principles in the United States (“GAAP”) or
regulatory accounting requirements, or authoritative
interpretations thereof, (C) changes or proposed changes after the Signing Date in securities,
insurance and other laws of general applicability or related policies or interpretations of
Governmental Entities (in the case of each of these clauses (A), (B) and (C), other than changes or
occurrences to the extent that such changes or occurrences have or would reasonably be expected to
have a materially disproportionate adverse effect on the Company and its consolidated subsidiaries
taken as a whole relative to comparable U.S. insurance or financial services organizations), or
(D) changes in the market price or trading volume of the Company’s common stock, par value $2.50
per share (“Common Stock”), or any other equity, equity-related or debt securities of the Company
or its consolidated subsidiaries (it being understood and agreed that the exception set forth in
this clause (D) does not apply to the underlying reason giving rise to or contributing to any such
change); or (ii) the ability of the Company to consummate the Purchase and the other transactions
contemplated by this Agreement and the Warrant and perform its obligations hereunder or thereunder
on a timely basis.



     (b) “Previously Disclosed” means information set forth or incorporated in the Company’s Annual
Report on Form 10-K for the most recently completed fiscal year of the Company filed with the
Securities and Exchange Commission (the “SEC”) prior to the Signing Date (the “Last Fiscal Year”)
or in its other reports and forms filed with or furnished to the SEC under Sections 13(a), 14(a) or
15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) on or after the last day of the
Last Fiscal Year and prior to the Signing Date.



     2.2 Representations and Warranties of the Company. Except as Previously Disclosed, the Company represents and warrants to the Investor that as of
the Signing Date and as of the Closing Date (or such other date specified herein):



     (a) Organization, Authority and Significant Subsidiaries. The Company has been duly
incorporated and is validly existing and in good standing under the laws of its jurisdiction of
organization, with the necessary power and authority to own its properties and conduct its business
in all material respects as currently conducted; except as has not had, individually or in the
aggregate, and would not reasonably be expected to have a Company Material Adverse Effect, the
Company has been duly qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification; each subsidiary of the Company that is a
“significant subsidiary” within the meaning of Rule 1-02(w) of Regulation S-X under the Securities
Act of 1933 (the “Securities Act”) has been duly organized and is validly existing in good standing
under the laws of its jurisdiction of organization. The Restated Certificate of Incorporation of
the Company, as amended (the “Charter”) and bylaws



5









 







of the Company, copies of which have been
provided to the Investor prior to the Signing Date, are true, complete and correct copies of such
documents as in full force and effect as of the Signing Date.



     (b) Capitalization. The authorized capital stock of the Company, and the outstanding
capital stock of the Company (including securities convertible into, or exercisable or exchangeable
for, capital stock of the Company) as of the most recent fiscal month-end preceding the Signing
Date (the “Capitalization Date”) is set forth on Schedule B. The outstanding shares of
capital stock of the Company have been duly authorized and are validly
issued and outstanding, fully paid and nonassessable, and subject to no preemptive rights (and
were not issued in violation of any preemptive rights). As of the Signing Date, the Company does
not have outstanding any securities or other obligations providing the holder the right to acquire
Common Stock that is not reserved for issuance, and the Company has not made any other commitment
to authorize, issue or sell any Common Stock, except as specified on Schedule B and
including the Series C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per
share (the “Series C Preferred Stock”). Since the Capitalization Date, the Company has not issued
any shares of Common Stock, other than (i) shares issued upon the exercise of stock options or
delivered under other equity-based awards or other convertible securities or warrants which were
issued and outstanding on the Capitalization Date and disclosed on Schedule B and (ii)
shares disclosed on Schedule B.



     (c) Preferred Stock. The Preferred Stock has been duly and validly authorized, and,
when issued and delivered pursuant to this Agreement, such Preferred Stock will be duly and validly
issued and fully paid and non-assessable, will not be issued in violation of any preemptive rights,
and will rank pari passu with all other series or classes of the Company’s preferred stock, whether
or not issued or outstanding, with respect to the payment of dividends and the distribution of
assets in the event of any dissolution, liquidation or winding up of the Company.



     (d) The Warrant and Warrant Shares. The Warrant has been duly authorized and, when
executed and delivered as contemplated hereby, will constitute a valid and legally binding
obligation of the Company enforceable against the Company in accordance with its terms, except as
the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors’ rights generally and general equitable principles,
regardless of whether such enforceability is considered in a proceeding at law or in equity
(“Bankruptcy Exceptions”). The shares of Common Stock issuable upon exercise of the Warrant (the
“Warrant Shares”) have been duly authorized and reserved for issuance upon exercise of the Warrant
and when so issued in accordance with the terms of the Warrant will be validly issued, fully paid
and non-assessable.



     (e) Authorization, Enforceability.




     (i) The Company has the corporate power and authority to execute and deliver this
Agreement and the Warrant and, subject to the approval of its stockholders described in
Section 3.1(b), to carry out its obligations hereunder and thereunder (which



6









 







includes the
issuance of the Preferred Stock, Warrant and Warrant Shares). The execution, delivery and
performance by the Company of this Agreement and the Warrant and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company and its stockholders, and no further approval or
authorization is required on the part of the Company or its stockholders, except as
described in Section 3.1(b). This Agreement is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to the Bankruptcy
Exceptions.




     (ii) The execution, delivery and performance by the Company of this Agreement and the
Warrant and the consummation of the transactions contemplated
hereby and thereby and compliance by the Company with the provisions hereof and
thereof, will not (A) violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration of, or result in the
creation of, any lien, security interest, charge or encumbrance upon any of the properties
or assets of the Company or any Company Subsidiary under any of the terms, conditions or
provisions of (i) subject to the approval of the Company’s stockholders as described in
Section 3.1(b), its organizational documents or (ii) any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to which the
Company or any Company Subsidiary is a party or by which it or any Company Subsidiary may be
bound, or to which the Company or any Company Subsidiary or any of the properties or assets
of the Company or any Company Subsidiary may be subject, or (B) subject to compliance with
the statutes and regulations referred to in the next paragraph, violate any statute, rule or
regulation or any judgment, ruling, order, writ, injunction or decree applicable to the
Company or any Company Subsidiary or any of their respective properties or assets except, in
the case of clauses (A)(ii) and (B), for those occurrences that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company Material
Adverse Effect.




     (iii) Other than the filing of the Certificate of Designations with the Secretary of
State of its jurisdiction of organization or other applicable Governmental Entity, any
current report on Form 8-K required to be filed with the SEC, such filings and approvals as
are required to be made or obtained under any state “blue sky” laws, the filing of any proxy
statement contemplated by Section 3.1(b) and such as have been made or obtained, no notice
to, filing with, exemption or review by, or authorization, consent or approval of, any
Governmental Entity is required to be made or obtained by the Company in connection with the
consummation by the Company of the Purchase except for any such notices, filings,
exemptions, reviews, authorizations, consents and approvals the failure of which to make or
obtain would not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.



     (f) Anti-takeover Provisions and Rights Plan. The Board of Directors of the Company
(the “Board of Directors”) has taken all necessary action to ensure that the transactions



7









 







contemplated by this Agreement and the Warrant and the consummation of the transactions
contemplated hereby and thereby, including the exercise of the Warrant in accordance with its
terms, will be exempt from any anti-takeover or similar provisions of the Company’s Charter and
bylaws, and any other provisions of any applicable “moratorium”, “control share”, “fair price”,
“interested stockholder” or other anti-takeover laws and regulations of any jurisdiction. The
Company has taken all actions necessary to render any stockholders’ rights plan of the Company
inapplicable to this Agreement and the Warrant and the consummation of the transactions
contemplated hereby and thereby, including the exercise of the Warrant by the Investor in
accordance with its terms.



     (g) No Company Material Adverse Effect. Since the last day of the last completed
fiscal period for which the Company has filed a Quarterly Report on Form 10-Q or an Annual Report
on Form 10-K with the SEC prior to the Signing Date, no fact, circumstance, event,
change, occurrence, condition or development has occurred that, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.



     (h) Company Financial Statements. The financial statements of the Company and its
consolidated subsidiaries (collectively, the “Company Financial Statements”) included or
incorporated by reference in the Company Reports filed with the SEC since December 31, 2006,
present fairly in all material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates indicated therein (or if amended prior to the Signing
Date, as of the date of such amendment) and the consolidated results of their operations for the
periods specified therein; and except as stated therein, such financial statements (A) were
prepared in conformity with GAAP applied on a consistent basis (except as may be noted therein),
(B) have been prepared from, and are in accordance with, the books and records of the Company and
the Company Subsidiaries and (C) complied as to form, as of their respective dates of filing with
the SEC, in all material respects with the applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto.



     (i) Reports.




     (i) Since December 31, 2006, the Company and each subsidiary of the Company (each a
“Company Subsidiary” and, collectively, the “Company Subsidiaries”) has timely filed
(subject to any permitted extension) all reports, registrations, documents, filings,
statements and submissions, together with any amendments thereto, that it was required to
file with any Governmental Entity (the foregoing, collectively, the “Company Reports”) and
has paid all fees and assessments due and payable in connection therewith, except, in each
case, as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. As of their respective dates of filing, the Company
Reports complied in all material respects with all statutes and applicable rules and
regulations of the applicable Governmental Entities. In the case of each such Company
Report filed with or furnished to the SEC, such Company Report (A) did not, as of its date
or if amended prior to the Signing Date, as of the date of such amendment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements made



8









 







therein, in light of the circumstances under which they were made, not
misleading, and (B) complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act. With respect to all other Company
Reports, the Company Reports were complete and accurate in all material respects as of their
respective dates. No executive officer of the Company or any Company Subsidiary has failed
in any respect to make the certifications required of him or her under Section 302 or 906 of
the Sarbanes-Oxley Act of 2002.




     (ii) The records, systems, controls, data and information of the Company and the
Company Subsidiaries are recorded, stored, maintained and operated under means (including
any electronic, mechanical or photographic process, whether computerized or not) that are
under the exclusive ownership and direct control of the Company or the Company Subsidiaries
or their accountants (including all means of access thereto and therefrom), except for any
non-exclusive ownership and non-direct control that would not reasonably be expected to have
a material adverse effect on the system of internal
accounting controls described below in this Section 2.2(i)(ii). The Company (A) has
implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e)
of the Exchange Act) to ensure that material information relating to the Company, including
the consolidated Company Subsidiaries, is made known to the chief executive officer and the
chief financial officer of the Company by others within those entities, and (B) has
disclosed, based on its most recent evaluation prior to the Signing Date, to the Company’s
outside auditors and the audit committee of the Board of Directors (x) any significant
deficiencies and material weaknesses in the design or operation of internal controls over
financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably
likely to adversely affect the Company’s ability to record, process, summarize and report
financial information and (y) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company’s internal controls over
financial reporting.



     (j) No Undisclosed Liabilities. Neither the Company nor any of the Company
Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) which are not properly reflected or reserved against in the Company Financial Statements
to the extent required to be so reflected or reserved against in accordance with GAAP, except for
(A) liabilities that have arisen since the last fiscal year end in the ordinary and usual course of
business and consistent with past practice and (B) liabilities that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company Material Adverse
Effect.



     (k) Offering of Securities. Neither the Company nor any person acting on its behalf
has taken any action (including any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of any of the Purchased
Securities under the Securities Act, and the rules and regulations of the SEC promulgated
thereunder), which might subject the offering, issuance or sale of any of the Purchased Securities
to Investor pursuant to this Agreement to the registration requirements of the Securities Act.



9









 





     (l) Litigation and Other Proceedings. Except (i) as set forth on Schedule C
or (ii) as would not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, there is no (A) pending or, to the knowledge of the Company, threatened,
claim, action, suit, investigation or proceeding, against the Company or any Company Subsidiary or
to which any of their assets are subject nor is the Company or any Company Subsidiary subject to
any order, judgment or decree or (B) unresolved violation, criticism or exception by any
Governmental Entity with respect to any report or relating to any examinations or inspections of
the Company or any Company Subsidiaries.



     (m) Compliance with Laws. Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, the Company and the Company
Subsidiaries have all permits, licenses, franchises, authorizations, orders and approvals of, and
have made all filings, applications and registrations with, Governmental Entities that are required
in order to permit them to own or lease their properties and assets and to carry on their business
as presently conducted and that are material to the business of the Company or such Company
Subsidiary. Except as set forth on Schedule D, the Company and the Company
Subsidiaries have complied in all respects and are not in default or violation of, and none of
them is, to the knowledge of the Company, under investigation with respect to or, to the knowledge
of the Company, have been threatened to be charged with or given notice of any violation of, any
applicable domestic (federal, state or local) or foreign law, statute, ordinance, license, rule,
regulation, policy or guideline, order, demand, writ, injunction, decree or judgment of any
Governmental Entity, other than such noncompliance, defaults or violations that would not,
individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Except for statutory or regulatory restrictions of general application or as set forth on
Schedule D, no Governmental Entity has placed any restriction on the business or properties
of the Company or any Company Subsidiary that would, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect.



     (n) Employee Benefit Matters. Except as would not reasonably be expected to have,
either individually or in the aggregate, a Company Material Adverse Effect: (A) each “employee
benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”)) providing benefits to any current or former employee, officer or
director of the Company or any member of its “Controlled Group” (defined as any organization which
is a member of a controlled group of corporations within the meaning of Section 414 of the Internal
Revenue Code of 1986, as amended (the “Code”)) that is sponsored, maintained or contributed to by
the Company or any member of its Controlled Group and for which the Company or any member of its
Controlled Group would have any liability, whether actual or contingent (each, a “Plan”) has been
maintained in compliance with its terms and with the requirements of all applicable statutes, rules
and regulations, including ERISA and the Code; (B) with respect to each Plan subject to Title IV of
ERISA (including, for purposes of this clause (B), any plan subject to Title IV of ERISA that the
Company or any member of its Controlled Group previously maintained or contributed to in the six
years prior to the Signing Date), (1) no “reportable event” (within the meaning of Section 4043(c)
of ERISA), other than a reportable event for which the notice period referred to in Section
4043(c) of ERISA has been waived, has occurred in the three years prior to the Signing Date or is
reasonably expected to occur, (2) no



10









 







“accumulated funding deficiency” (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived, has occurred in the three
years prior to the Signing Date or is reasonably expected to occur, (3) the fair market value of
the assets under each Plan exceeds the present value of all benefits accrued under such Plan
(determined based on the assumptions used to fund such Plan) and (4) neither the Company nor any
member of its Controlled Group has incurred in the six years prior to the Signing Date, or
reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the
Plan or premiums to the PBGC in the ordinary course and without default) in respect of a Plan
(including any Plan that is a “multiemployer plan”, within the meaning of Section 4001(c)(3) of
ERISA); and (C) each Plan that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service with respect to its
qualified status that has not been revoked, or such a determination letter has been timely applied
for but not received by the Signing Date, and nothing has occurred, whether by action or by failure
to act, which could reasonably be expected to cause the loss, revocation or denial of such
qualified status or favorable determination letter.



     (o) Taxes. Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, (i) the Company and the Company Subsidiaries
have filed all federal, state, local and foreign income and franchise Tax returns required to be
filed through the Signing Date, subject to permitted extensions, and have paid all Taxes due
thereon, and (ii) no Tax deficiency has been determined adversely to the Company or any of the
Company Subsidiaries, nor does the Company have any knowledge of any Tax deficiencies. “Tax” or
“Taxes” means any federal, state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or add on minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any
Governmental Entity.



     (p) Properties and Leases. Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, the Company and the Company
Subsidiaries have good and marketable title to all real properties and all other properties and
assets owned by them, in each case free from liens, encumbrances, claims and defects (other than
liens, encumbrances, claims or defects created pursuant to the Guarantee and Pledge Agreement,
dated as of September 22, 2008, between the Company and the FRBNY) that would affect the value
thereof or interfere with the use made or to be made thereof by them. Except as would not,
individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect,
the Company and the Company Subsidiaries hold all leased real or personal property under valid and
enforceable leases with no exceptions that would interfere with the use made or to be made thereof
by them.



     (q) Environmental Liability. Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect:




     (i) there is no legal, administrative, or other proceeding, claim or action of any
nature seeking to impose, or that would reasonably be expected to result in the



11









 







imposition
of, on the Company or any Company Subsidiary, any liability relating to the release of
hazardous substances as defined under any local, state or federal environmental statute,
regulation or ordinance, including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, pending or, to the Company’s knowledge, threatened against the
Company or any Company Subsidiary;




     (ii) to the Company’s knowledge, there is no reasonable basis for any such proceeding,
claim or action; and




     (iii) neither the Company nor any Company Subsidiary is subject to any agreement,
order, judgment or decree by or with any court, Governmental Entity or third party imposing
any such environmental liability.



     (r) Risk Management Instruments. Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, all derivative
instruments, including, swaps, caps, floors and option agreements, whether entered into for the
Company’s own account, or for the account of one or more of the Company Subsidiaries or its or
their customers, were entered into (i) only in the ordinary course of business, (ii) in accordance
with prudent practices and in all material respects with all applicable laws, rules,
regulations and regulatory policies and (iii) with counterparties believed to be financially
responsible at the time; and each of such instruments constitutes the valid and legally binding
obligation of the Company or one of the Company Subsidiaries, enforceable in accordance with its
terms, except as may be limited by the Bankruptcy Exceptions. Neither the Company or the Company
Subsidiaries, nor, to the knowledge of the Company, any other party thereto, is in breach of any of
its obligations under any such agreement or arrangement other than such breaches that would not,
individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.



     (s) Agreements with Regulatory Agencies. Except as set forth on Schedule E,
neither the Company nor any Company Subsidiary is subject to any material cease-and-desist or other
similar order or enforcement action issued by, or is a party to any material written agreement,
consent agreement or memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any capital directive by, or since December 31, 2006, has
adopted any board resolutions at the request of, any Governmental Entity (other than the primary
insurance regulators with jurisdiction over the Company Subsidiaries) that currently restricts in
any material respect the conduct of its business or that in any material manner relates to its
capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends,
its credit, risk management or compliance policies or procedures, its internal controls, its
management or its operations or business. Each item in the immediately preceding sentence and
without taking into consideration of the parenthetical provided therein, is referred to herein as a
“Regulatory Agreement.” Neither the Company nor any Company Subsidiary has been advised since
December 31, 2006 by any such Governmental Entity that it is considering issuing, initiating,
ordering, or requesting any such Regulatory Agreement (other than any such Regulatory Agreement
that does not have a Company Material Adverse Effect). Except as set forth on Schedule E,
the Company and each Company Subsidiary are in compliance in all material respects with each
Regulatory Agreement to which it is party or subject, and neither the



12









 






Company nor any Company
Subsidiary has received any notice from any Governmental Entity indicating that either the Company
or any Company Subsidiary is not in compliance in all material respects with any such Regulatory
Agreement.



     (t) Insurance. The Company and the Company Subsidiaries are insured with reputable
insurers against such risks and in such amounts as the management of the Company reasonably has
determined to be prudent and consistent with industry practice. The Company and the Company
Subsidiaries are in material compliance with their insurance policies and are not in default under
any of the material terms thereof, each such policy is outstanding and in full force and effect,
all premiums and other payments due under any material policy have been paid, and all claims
thereunder have been filed in due and timely fashion, except, in each case, as would not,
individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.



     (u) Intellectual Property. Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, (i) the Company and each Company
Subsidiary owns or otherwise has the right to use, all intellectual property rights, including all
trademarks, trade dress, trade names, service marks, domain names, patents, inventions, trade
secrets, know-how, works of authorship and copyrights therein, that are used in the conduct of
their existing businesses and all rights relating to the plans, design and
specifications of any of its branch facilities (“Proprietary Rights”) free and clear of all
liens and any claims of ownership by current or former employees, contractors, designers or others
and (ii) neither the Company nor any of the Company Subsidiaries is materially infringing,
diluting, misappropriating or violating, nor has the Company or any or the Company Subsidiaries
received any written (or, to the knowledge of the Company, oral) communications alleging that any
of them has materially infringed, diluted, misappropriated or violated, any of the Proprietary
Rights owned by any other person. Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, to the Company’s knowledge, no
other person is infringing, diluting, misappropriating or violating, nor has the Company or any or
the Company Subsidiaries sent any written communications since January 1, 2006 alleging that any
person has infringed, diluted, misappropriated or violated, any of the Proprietary Rights owned by
the Company and the Company Subsidiaries.



     (v) Brokers and Finders. No broker, finder or investment banker is entitled to any
financial advisory, brokerage, finder’s or other fee or commission in connection with this
Agreement or the Warrant or the transactions contemplated hereby or thereby based upon arrangements
made by or on behalf of the Company or any Company Subsidiary for which the Investor could have any
liability.



Article 3

Covenants




     3.1 Consummation of Purchase and Charter Amendment.



     (a) Subject to the terms and conditions of this Agreement, each of the parties will use its
commercially reasonable efforts in



13









 







good faith to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable
laws, so as to permit consummation of the Purchase as promptly as practicable and otherwise to
enable consummation of the transactions contemplated hereby and shall use commercially reasonable
efforts to cooperate with the other party to that end.



     (b) The Company shall call a special meeting of its stockholders to vote on a proposal (the
“Stockholder Proposal”) to amend the Company’s Charter to allow the Preferred Stock to rank senior
to the Series C Preferred Stock and any other series of preferred stock issued by the Company. In
connection with such meeting, the Company shall prepare (and the Investor will reasonably cooperate
with the Company to prepare) and file with the SEC as promptly as practicable (but in no event more
than ten business days after the issuance of the Series C Preferred Stock) a preliminary proxy
statement, shall use its reasonable best efforts to respond to any comments of the SEC or its staff
thereon and to cause a definitive proxy statement related to such stockholders’ meeting to be
mailed to the Company’s stockholders not more than five business days after clearance thereof by
the SEC. The Company shall notify the Investor promptly of the receipt of any comments from the
SEC or its staff with respect to the proxy statement and of any request by the SEC or its staff for
amendments or supplements to such proxy statement or for additional information and will supply the
Investor with copies of all
correspondence between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to such proxy statement. If at any time prior to
such stockholders’ meeting there shall occur any event that is required to be set forth in an
amendment or supplement to the proxy statement, the Company shall as promptly as practicable
prepare and mail to its stockholders such an amendment or supplement. Each of the Investor and the
Company agrees promptly to correct any information provided by it or on its behalf for use in the
proxy statement if and to the extent that such information shall have become false or misleading in
any material respect, and the Company shall as promptly as practicable prepare and mail to its
stockholders an amendment or supplement to correct such information to the extent required by
applicable laws and regulations. The Company shall consult with the Investor prior to filing any
proxy statement, or any amendment or supplement thereto, and provide the Investor with a reasonable
opportunity to comment thereon. In the event that the approval of the Stockholder Proposal is not
obtained at such special stockholders meeting, the Company shall include a proposal to approve such
proposal at a meeting of its stockholders no less than once in each subsequent twelve-month period
beginning on January 1, 2009 until such approval is obtained or made.



     (c) None of the information supplied by the Company or any of the Company Subsidiaries for
inclusion in any proxy statement in connection with any such stockholders meeting of the Company
will, at the date it is filed with the SEC, when first mailed to the Company’s stockholders and at
the time of any stockholders meeting, and at the time of any amendment or supplement thereof,
contain any untrue statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which they are made, not
misleading.



14









 





     3.2 Expenses.
Unless otherwise provided in this Agreement or the Warrant, each of the parties hereto will
bear and pay all costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated under this Agreement or the Warrant, including fees and expenses of its
own financial or other consultants, investment bankers, accountants and counsel.



     3.3 Sufficiency of Authorized Common Stock; Exchange Listing.



     (a) During the period from the Closing Date until the date on which the Warrant has been fully
exercised, the Company shall at all times have reserved for issuance, free of preemptive or similar
rights, a sufficient number of authorized and unissued Warrant Shares to effectuate such exercise.
Nothing in this Section 3.3 shall preclude the Company from satisfying its obligations in respect
of the exercise of the Warrant by delivery of shares of Common Stock which are held in the treasury
of the Company. As soon as reasonably practicable following the Closing, the Company shall, at its
expense, cause the Warrant Shares to be listed on the same national securities exchange on which
the Common Stock is listed, subject to official notice of issuance, and shall maintain such listing
for so long as any Common Stock is listed on such exchange.



     (b) If requested by the Investor, the Company shall promptly use its reasonable best efforts
to cause the Preferred Stock to be approved for listing on a national securities exchange as
promptly as practicable following such request.



     3.4 Certain Notifications Until Closing.
From the Signing Date until the Closing, the Company shall promptly notify the Investor of (i)
any fact, event or circumstance of which it is aware and which would reasonably be expected to
cause any representation or warranty of the Company contained in this Agreement to be untrue or
inaccurate in any material respect or to cause any covenant or agreement of the Company contained
in this Agreement not to be complied with or satisfied in any material respect and (ii) except as
Previously Disclosed, any fact, circumstance, event, change, occurrence, condition or development
of which the Company is aware and which, individually or in the aggregate, has had or would
reasonably be expected to have a Company Material Adverse Effect; provided, however, that delivery
of any notice pursuant to this Section 3.4 shall not limit or affect any rights of or remedies
available to the Investor; provided, further, that a failure to comply with this Section 3.4 shall
not constitute a breach of this Agreement or the failure of any condition set forth in Section 1.2
to be satisfied unless the underlying Company Material Adverse Effect or material breach would
independently result in the failure of a condition set forth in Section 1.2 to be satisfied.



     3.5 Information and Confidentiality.



     (a) Until such time as the Investor ceases to own any Preferred Stock, or except as otherwise
agreed, the Company shall provide the Investor (i) the information required to be provided by the
Company to FRBNY pursuant to Section 5.04 of the Credit Agreement and within the time periods for
delivery thereof specified in the Credit Agreement and (ii) the notices required by Section 5.05 of
the Credit Agreement and within the time periods for delivery



15









 







thereof specified in the Credit
Agreement. After the termination of the Credit Agreement, such informational and notice
requirements as are provided in Section 5.04 and Section 5.05 of the Credit Agreement shall remain
in full force and effect until such time as the Investor no longer owns any Preferred Stock. In
addition, until such time as the Investor ceases to own any debt or equity securities pursuant to
this Agreement or the Warrant, or except as otherwise agreed, the Company shall provide the
Investor a bi-annual report on the steps taken by the Company to comply in all respects with
Section 111(b) of the EESA, including the provisions for Systemically Significant Failing
Institutions, as implemented by any guidance or regulation thereunder, including Notice 2008-PSSFI,
and with Section 4.10 of this Agreement. In addition, the Company shall promptly provide the
Investor such other information and notices as the Investor may reasonably request from time to
time.



     (b) The Investor will use reasonable best efforts to hold, and will use reasonable best
efforts to cause its agents, consultants, contractors and advisors to hold, in confidence all
non-public records, books, contracts, instruments, computer data and other data and information
(collectively, “Information”) concerning the Company furnished or made available to it by the
Company or its representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (i) previously known by such party on a non-confidential
basis, (ii) in the public domain through no fault of such party or (iii) later lawfully acquired
from
other sources by the party to which it was furnished (and without violation of any other
confidentiality obligation)); provided that nothing herein shall prevent the Investor from
disclosing any Information to the extent required by applicable laws or regulations or by any
subpoena or similar legal process.



Article 4

Additional Agreements




     4.1 Purchase of Restricted Securities.
The Investor acknowledges that the Purchased Securities and the Warrant Shares have not been
registered under the Securities Act or under any state securities laws. The Investor (a) is
acquiring the Purchased Securities pursuant to an exemption from registration under the Securities
Act with no present intention to distribute them to any person in violation of the Securities Act
or any applicable U.S. state securities laws, (b) will not sell or otherwise dispose of any of the
Purchased Securities or the Warrant Shares, except in compliance with the registration requirements
or exemption provisions of the Securities Act and any applicable U.S. state securities laws, and
(c) has such knowledge and experience in financial and business matters and in investments of this
type that it is capable of evaluating the merits and risks of the Purchase and of making an
informed investment decision.



     4.2 Legends.



     (a) The Investor agrees that all certificates or other instruments representing the Warrant
and the Warrant Shares will bear a legend substantially to the following effect:




16











 






“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING
THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.”



     (b) In addition, the Investor agrees that all certificates or other instruments representing
the Preferred Stock will bear a legend substantially to the following effect:




“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT
RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS. EACH PURCHASER OF
THE SECURITIES REPRESENTED BY THIS INSTRUMENT IS NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. ANY
TRANSFEREE OF THE SECURITIES REPRESENTED BY THIS INSTRUMENT BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THE
SECURITIES REPRESENTED BY THIS INSTRUMENT EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT
WHICH IS THEN EFFECTIVE UNDER THE SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES
REPRESENTED BY THIS INSTRUMENT ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (C) TO THE ISSUER OR (D) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THE SECURITIES REPRESENTED BY THIS INSTRUMENT ARE TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.”



     (c) In the event that any Purchased Securities or Warrant Shares (i) become registered under
the Securities Act or (ii) are eligible to be transferred without restriction in accordance with
Rule 144 or another exemption from registration under the Securities Act (other than Rule 144A),
the Company shall issue new certificates or other instruments representing such



17









 







Purchased
Securities or Warrant Shares, which shall not contain the applicable legends in Sections 4.2(a) and
(b) above; provided that the Investor surrenders to the Company the
previously issued certificates or other instruments. Upon Transfer of all or a portion of the
Warrant in compliance with Section 4.4 the Company shall issue new certificates or other
instruments representing the Warrant, which shall not contain the applicable legend in Section
4.2(b) above; provided that the Investor surrenders to the Company the previously issued
certificates or other instruments.



     4.3 Certain Transactions. The Company will not merge or consolidate with, or sell, transfer or lease all or
substantially all of its property or assets to, any other party unless the successor, transferee or
lessee party (or its ultimate parent entity), as the case may be (if not the Company), expressly
assumes the due and punctual performance and observance of each and every covenant, agreement and
condition of this Agreement to be performed and observed by the Company.



     4.4 Transfer of Purchased Securities, the Warrant and Warrant Shares. Subject to compliance with applicable securities laws, the Investor shall be permitted to
transfer, sell, assign or otherwise dispose of (“Transfer”) all or a portion of the Purchased
Securities, the Warrant or Warrant Shares at any time, and the Company shall take all steps as may
be reasonably requested by the Investor to facilitate the Transfer of the Purchased Securities, the
Warrant and the Warrant Shares.



     4.5 Registration Rights.



     (a) Registration.




     (i) Subject to the terms and conditions of this Agreement, the Company covenants and
agrees that as promptly as practicable after notification from the Investor, and in any
event no later than 15 days after such notification, the Company shall prepare and file with
the SEC a Shelf Registration Statement covering all Registrable Securities (or otherwise
designate an existing Shelf Registration Statement filed with the SEC to cover the
Registrable Securities), and, to the extent the Shelf Registration Statement has not
theretofore been declared effective or is not automatically effective upon such filing, the
Company shall use reasonable best efforts to cause such Shelf Registration Statement to be
declared or become effective and to keep such Shelf Registration Statement continuously
effective and in compliance with the Securities Act and usable for resale of such
Registrable Securities for a period from the date of its initial effectiveness until such
time as there are no Registrable Securities remaining (including by refiling such Shelf
Registration Statement (or a new Shelf Registration Statement) if the initial Shelf
Registration Statement expires). So long as the Company is a well known seasoned issuer (as
defined in Rule 405 under the Securities Act) at the time of filing of the Shelf
Registration Statement with the SEC, such Shelf Registration Statement shall be designated
by the Company as an automatic Shelf Registration Statement.



18









 






     (ii) Any registration pursuant to Section 4.5(a)(i) shall be effected by means of a
shelf registration on an appropriate form under Rule 415 under the Securities Act (a “Shelf
Registration Statement”). If the Investor or any other Holder intends to
distribute any Registrable Securities by means of an underwritten offering it shall
promptly so advise the Company and the Company shall take all reasonable steps to facilitate
such distribution, including the actions required pursuant to Section 4.5(c); provided that
the Company shall not be required to facilitate an underwritten offering of Registrable
Securities unless the expected gross proceeds from such offering exceed $200 million. The
lead underwriters in any such distribution shall be selected by the Holders of a majority of
the Registrable Securities to be distributed.




     (iii) The Company shall not be required to effect a registration (including a resale of
Registrable Securities from an effective Shelf Registration Statement) or an underwritten
offering pursuant to Section 4.5(a): (A) with respect to securities that are not
Registrable Securities; or (B) if the Company has notified the Investor and all other
Holders that in the good faith judgment of the Board of Directors, it would be materially
detrimental to the Company or its securityholders for such registration or underwritten
offering to be effected at such time, in which event the Company shall have the right to
defer such registration for a period of not more than 45 days after receipt of the request
of the Investor or any other Holder; provided that such right to delay a registration or
underwritten offering shall be exercised by the Company (1) only if the Company has
generally exercised (or is concurrently exercising) similar black-out rights against holders
of similar securities that have registration rights and (2) not more than three times in any
12-month period and not more than 90 days in the aggregate in any 12-month period.




     (iv) If during any period when an effective Shelf Registration Statement is not
available, the Company proposes to register any of its equity securities, other than a
registration pursuant to Section 4.5(a)(i) or a Special Registration, and the registration
form to be filed may be used for the registration or qualification for distribution of
Registrable Securities, the Company will give prompt written notice to the Investor and all
other Holders of its intention to effect such a registration (but in no event less than ten
days prior to the anticipated filing date) and will include in such registration all
Registrable Securities with respect to which the Company has received written requests for
inclusion therein within ten business days after the date of the Company’s notice (a
“Piggyback Registration”). Any such person that has made such a written request may
withdraw its Registrable Securities from such Piggyback Registration by giving written
notice to the Company and the managing underwriter, if any, on or before the fifth business
day prior to the planned effective date of such Piggyback Registration. The Company may
terminate or withdraw any registration under this Section 4.5(a)(iv) prior to the
effectiveness of such registration, whether or not Investor or any other Holders have
elected to include Registrable Securities in such registration.




     (v) If the registration referred to in Section 4.5(a)(iv) is proposed to be
underwritten, the Company will so advise Investor and all other Holders as a part of the
written notice given pursuant to Section 4.5(a)(iv). In such event, the right of Investor



19









 







and all other Holders to registration pursuant to Section 4.5(a) will be conditioned upon
such persons’ participation in such underwriting and the inclusion of such person’s
Registrable Securities in the underwriting if such securities are of the same class of
securities as the securities to be offered in the underwritten offering, and each such
person will (together with the Company and the other persons distributing their securities
through such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company; provided that
the Investor (as opposed to other Holders) shall not be required to indemnify any person in
connection with any registration. If any participating person disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice to the
Company, the managing underwriters and the Investor (if the Investor is participating in the
underwriting).




     (vi) If either (x) the Company grants “piggyback” registration rights to one or more
third parties to include their securities in an underwritten offering under a Shelf
Registration Statement pursuant to Section 4.5(a)(ii) or (y) a Piggyback Registration under
Section 4.5(a)(iv) relates to an underwritten offering on behalf of the Company, and in
either case the managing underwriters advise the Company that in their reasonable opinion
the number of securities requested to be included in such offering exceeds the number which
can be sold without adversely affecting the marketability of such offering (including an
adverse effect on the per share offering price), the Company will include in such offering
only such number of securities that in the reasonable opinion of such managing underwriters
can be sold without adversely affecting the marketability of the offering (including an
adverse effect on the per share offering price), which securities will be so included in the
following order of priority: (A) first, in the case of a Piggyback Registration under
Section 4.5(a)(iv), the securities the Company proposes to sell, (B) then the Registrable
Securities of the Investor and all other Holders who have requested inclusion of Registrable
Securities pursuant to Section 4.5(a)(ii) or Section 4.5(a)(iv), as applicable, pro rata on
the basis of the aggregate number of such securities or shares owned by each such person and
(C) lastly, any other securities of the Company that have been requested to be so included,
subject to the terms of this Agreement; provided, however, that if the Company has, prior to
the Signing Date, entered into an agreement with respect to its securities that is
inconsistent with the order of priority contemplated hereby then it shall apply the order of
priority in such conflicting agreement to the extent that it would otherwise result in a
breach under such agreement.



     (b) Expenses of Registration. All Registration Expenses incurred in connection with
any registration, qualification or compliance hereunder shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder shall be borne by the holders of
the securities so registered pro rata on the basis of the aggregate offering or sale price of the
securities so registered.



     (c) Obligations of the Company. The Company shall use its reasonable best efforts,
for so long as there are Registrable Securities outstanding, to take such actions as are in its
control to become a well-known seasoned issuer (as defined in Rule 405 under the Securities Act)



20









 







and once the Company becomes a well-known seasoned issuer to take such actions as are in its
control to remain a well-known seasoned issuer. In addition, whenever required to effect the
registration of any Registrable Securities or facilitate the distribution of Registrable Securities
pursuant to an effective Shelf Registration Statement, the Company shall, as expeditiously as
reasonably practicable:




     (i) Prepare and file with the SEC, not later than fifteen (15) days after the request,
a registration statement with respect to such Registrable Securities and use all
commercially reasonable efforts to cause such registration statement to become effective, or
prepare and file with the SEC not later than ten (10) days after the request a prospectus
supplement with respect to a proposed offering of such Registrable Securities pursuant to an
effective registration statement, subject to Section 4.5(d), and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, use all
commercially reasonable efforts to keep such registration statement effective and keep such
prospectus supplement current until the securities described therein are no longer
Registrable Securities.




     (ii) Prepare and file with the SEC such amendments and supplements to the applicable
registration statement and the prospectus or prospectus supplement used in connection with
such registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.




     (iii) Furnish to the Holders and any underwriters such number of copies of the
applicable registration statement and each such amendment and supplement thereto (including
in each case all exhibits) and of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable Securities owned or
to be distributed by them.




     (iv) Use its reasonable best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders or any managing
underwriter(s), to keep such registration or qualification in effect for so long as such
registration statement remains in effect, and to take any other action which may be
reasonably necessary to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such Holder; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or jurisdictions.




     (v) Notify each Holder of Registrable Securities at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of any event
as a result of which the applicable prospectus, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to



21









 







be stated therein
or necessary to make the statements therein not misleading in light of the circumstances
then existing.




     (vi) Give written notice to the Holders:




     (A) when any registration statement filed pursuant to Section 4.5(a) or any
amendment thereto has been filed with the SEC (except for any amendment effected by
the filing of a document with the SEC pursuant to the
Exchange Act) and when such registration statement or any post-effective
amendment thereto has become effective;




     (B) of any request by the SEC for amendments or supplements to any
registration statement or the prospectus included therein or for additional
information;




     (C) of the issuance by the SEC of any stop order suspending the effectiveness
of any registration statement or the initiation of any proceedings for that
purpose;




     (D) of the receipt by the Company or its legal counsel of any notification
with respect to the suspension of the qualification of the Common Stock for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose;




     (E) of the happening of any event that requires the Company to make changes in
any effective registration statement or the prospectus related to the registration
statement in order to make the statements therein not misleading (which notice
shall be accompanied by an instruction to suspend the use of the prospectus until
the requisite changes have been made); and




     (F) if at any time the representations and warranties of the Company contained
in any underwriting agreement contemplated by Section 4.5(c)(x) cease to be true
and correct.




     (vii) Use its reasonable best efforts to prevent the issuance or obtain the withdrawal
of any order suspending the effectiveness of any registration statement referred to in
Section 4.5(c)(vi)(C) at the earliest practicable time.




     (viii) Upon the occurrence of any event contemplated by Section 4.5(c)(v)or
4.5(c)(vi)(E), promptly prepare a post-effective amendment to such registration statement or
a supplement to the related prospectus or file any other required document so that, as
thereafter delivered to the Holders and any underwriters, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading. If the Company notifies the Holders in accordance with Section 4.5(c)(vi)(E)



22









 







to suspend the use of the prospectus until the requisite changes to the prospectus have been
made, then the Holders and any underwriters shall suspend use of such prospectus and use
their reasonable best efforts to return to the Company all copies of such prospectus (at the
Company’s expense) other than permanent file copies then in such Holders’ or underwriters’
possession. The total number of days that any such suspension may be in effect in any
12-month period shall not exceed 90 days.




     (ix) Use reasonable best efforts to procure the cooperation of the Company’s transfer
agent in settling any offering or sale of Registrable Securities, including with
respect to the transfer of physical stock certificates into book-entry form in
accordance with any procedures reasonably requested by the Holders or any managing
underwriter(s).




     (x) If an underwritten offering is requested pursuant to Section 4.5(a)(ii), enter into
an underwriting agreement in customary form, scope and substance and take all such other
actions reasonably requested by the Holders of a majority of the Registrable Securities
being sold in connection therewith or by the managing underwriter(s), if any, to expedite or
facilitate the underwritten disposition of such Registrable Securities, and in connection
therewith in any underwritten offering (including making members of management and
executives of the Company available to participate in “road shows”, similar sales events and
other marketing activities), (A) make such representations and warranties to the Holders
that are selling stockholders and the managing underwriter(s), if any, with respect to the
business of the Company and its subsidiaries, and the Shelf Registration Statement,
prospectus and documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in customary form, substance and scope, and, if true, confirm the
same if and when requested, (B) use its reasonable best efforts to furnish the underwriters
with opinions of counsel to the Company, addressed to the managing underwriter(s), if any,
covering the matters customarily covered in such opinions requested in underwritten
offerings, (C) use its reasonable best efforts to obtain “cold comfort” letters from the
independent certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any business acquired by the Company for which
financial statements and financial data are included in the Shelf Registration Statement)
who have certified the financial statements included in such Shelf Registration Statement,
addressed to each of the managing underwriter(s), if any, such letters to be in customary
form and covering matters of the type customarily covered in “cold comfort” letters, (D) if
an underwriting agreement is entered into, the same shall contain indemnification provisions
and procedures customary in underwritten offerings (provided that the Investor shall not be
obligated to provide any indemnity), and (E) deliver such documents and certificates as may
be reasonably requested by the Holders of a majority of the Registrable Securities being
sold in connection therewith, their counsel and the managing underwriter(s), if any, to
evidence the continued validity of the representations and warranties made pursuant to
clause (A) above and to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.



23









 







     (xi) Make available for inspection by a representative of Holders that are selling
stockholders, the managing underwriter(s), if any, and any attorneys or accountants retained
by such Holders or managing underwriter(s), at the offices where normally kept, during
reasonable business hours, financial and other records, pertinent corporate documents and
properties of the Company, and cause the officers, directors and employees of the Company to
supply all information in each case reasonably requested (and of the type customarily
provided in connection with due diligence conducted in connection with a registered public
offering of securities) by any such representative, managing underwriter(s), attorney or
accountant in connection with such Shelf Registration Statement.




     (xii) Use reasonable best efforts to cause all such Registrable Securities to be listed
on each national securities exchange on which similar securities issued by the Company are
then listed or, if no similar securities issued by the Company are then listed on any
national securities exchange, use its reasonable best efforts to cause all such Registrable
Securities to be listed on such securities exchange as the Investor may designate.




     (xiii) If requested by Holders of a majority of the Registrable Securities being
registered and/or sold in connection therewith, or the managing underwriter(s), if any,
promptly include in a prospectus supplement or amendment such information as the Holders of
a majority of the Registrable Securities being registered and/or sold in connection
therewith or managing underwriter(s), if any, may reasonably request in order to permit the
intended method of distribution of such securities and make all required filings of such
prospectus supplement or such amendment as soon as practicable after the Company has
received such request.




     (xiv) Timely provide to its security holders earning statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.



     (d) Suspension of Sales. Upon receipt of written notice from the Company that a registration
statement, prospectus or prospectus supplement contains or may contain an untrue statement of a
material fact or omits or may omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that circumstances exist that make
inadvisable use of such registration statement, prospectus or prospectus supplement, the Investor
and each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable
Securities until the Investor and/or Holder has received copies of a supplemented or amended
prospectus or prospectus supplement, or until the Investor and/or such Holder is advised in writing
by the Company that the use of the prospectus and, if applicable, prospectus supplement may be
resumed, and, if so directed by the Company, the Investor and/or such Holder shall deliver to the
Company (at the Company’s expense) all copies, other than permanent file copies then in the
Investor and/or such Holder’s possession, of the prospectus and, if applicable, prospectus
supplement covering such Registrable Securities current at the time of receipt of such notice. The
total number of days that any such suspension may be in effect in any 12-month period shall not
exceed 90 days.



24









 





     (e) Termination of Registration Rights. A Holder’s registration rights as to any securities
held by such Holder (and its Affiliates, partners, members and former members) shall not be
available unless such securities are Registrable Securities.



     (f) Furnishing Information.




     (i) Neither the Investor nor any Holder shall use any free writing prospectus (as
defined in Rule 405) in connection with the sale of Registrable Securities without the prior
written consent of the Company.




     (ii) It shall be a condition precedent to the obligations of the Company to take any
action pursuant to Section 4.5(c) that Investor and/or the selling Holders and the
underwriters, if any, shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of disposition
of such securities as shall be required to effect the registered offering of their
Registrable Securities.



     (g) Indemnification.




     (i) The Company agrees to indemnify each Holder and, if a Holder is a person other than
an individual, such Holder’s officers, directors, employees, agents, representatives and
Affiliates, and each Person, if any, that controls a Holder within the meaning of the
Securities Act (each, an “Indemnitee”), against any and all losses, claims, damages,
actions, liabilities, costs and expenses (including reasonable fees, expenses and
disbursements of attorneys and other professionals incurred in connection with
investigating, defending, settling, compromising or paying any such losses, claims, damages,
actions, liabilities, costs and expenses), joint or several, arising out of or based upon
any untrue statement or alleged untrue statement of material fact contained in any
registration statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto or any documents incorporated therein by
reference or contained in any free writing prospectus (as such term is defined in Rule 405)
prepared by the Company or authorized by it in writing for use by such Holder (or any
amendment or supplement thereto); or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that the Company shall
not be liable to such Indemnitee in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises out of or
is based upon (A) an untrue statement or omission made in such registration statement,
including any such preliminary prospectus or final prospectus contained therein or any such
amendments or supplements thereto or contained in any free writing prospectus (as such term
is defined in Rule 405) prepared by the Company or authorized by it in writing for use by
such Holder (or any amendment or supplement thereto), in reliance upon and in conformity
with information regarding such Indemnitee or its plan of distribution or ownership
interests which was furnished in writing to the Company by such Indemnitee for use in
connection with such registration statement, including any



25









 







such preliminary prospectus or
final prospectus contained therein or any such amendments or supplements thereto, or (B)
offers or sales effected by or on behalf of such Indemnitee “by means of” (as defined in
Rule 159A) a “free writing prospectus” (as defined in Rule 405) that was not authorized in
writing by the Company.




     (ii) If the indemnification provided for in Section 4.5(g)(i) is unavailable to an
Indemnitee with respect to any losses, claims, damages, actions, liabilities, costs or
expenses referred to therein or is insufficient to hold the Indemnitee harmless as
contemplated therein, then the Company, in lieu of indemnifying such Indemnitee, shall
contribute to the amount paid or payable by such Indemnitee as a result of such losses,
claims, damages, actions, liabilities, costs or expenses in such proportion as is
appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the
Company, on the other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, actions, liabilities, costs or expenses as well as any other
relevant
equitable considerations. The relative fault of the Company, on the one hand, and of
the Indemnitee, on the other hand, shall be determined by reference to, among other factors,
whether the untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company or by the Indemnitee and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission; the Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 4.5(g)(ii) were determined by pro rata
allocation or by any other method of allocation that does not take account of the equitable
considerations referred to in Section 4.5(g)(i). No Indemnitee guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from the Company if the Company was not guilty of such fraudulent
misrepresentation.



     (h) Assignment of Registration Rights. The rights of the Investor to registration of
Registrable Securities pursuant to Section 4.5(a) may be assigned by the Investor to a transferee
or assignee of Registrable Securities with a liquidation preference or, in the case of Registrable
Securities other than Preferred Stock, a market value, no less than an amount equal $200 million;
provided, however, the transferor shall, within ten days after such transfer, furnish to the
Company written notice of the name and address of such transferee or assignee and the number and
type of Registrable Securities that are being assigned. For purposes of this Section 4.5(h),
“market value” per share of Common Stock shall be the last reported sale price of the Common Stock
on the national securities exchange on which the Common Stock is listed or admitted to trading on
the last trading day prior to the proposed transfer, and the “market value” for the Warrant (or any
portion thereof) shall be the market value per share of Common Stock into which the Warrant (or
such portion) is exercisable less the exercise price per share.



     (i) Clear Market. With respect to any underwritten offering of Registrable Securities
by the Investor or other Holders pursuant to this Section 4.5, the Company agrees not to effect
(other than pursuant to such registration or pursuant to a Special Registration) any public sale or
distribution, or to file any Shelf Registration Statement (other than such registration or a
Special Registration) covering, in the case of an underwritten offering of Common Stock or
Warrants,



26









 







any of its equity securities or, in the case of an underwritten offering of Preferred
Stock, any preferred stock of the Company, or, in each case, any securities convertible into or
exchangeable or exercisable for such securities, during the period not to exceed ten days prior and
60 days following the effective date of such offering or such longer period up to 90 days as may be
requested by the managing underwriter for such underwritten offering. The Company also agrees to
cause such of its directors and senior executive officers to execute and deliver customary lock-up
agreements in such form and for such time period up to 90 days as may be requested by the managing
underwriter. “Special Registration” means the registration of (A) equity securities and/or options
or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or successor form) or
(B) shares of equity securities and/or options or other rights in respect thereof to be offered to
directors, members of management, employees, consultants, customers, lenders or vendors of the
Company or Company Subsidiaries or in connection with dividend reinvestment plans.



     (j) Rule 144; Rule 144A. With a view to making available to the Investor and Holders
the benefits of certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to use its
reasonable best efforts to:




     (i) make and keep public information available, as those terms are understood and
defined in Rule 144(c)(1) or any similar or analogous rule promulgated under the Securities
Act, at all times after the Signing Date;




     (ii) (A) file with the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act, and (B) if at any time the Company is not
required to file such reports, make available, upon the request of any Holder, such
information necessary to permit sales pursuant to Rule 144A (including the information
required by Rule 144A(d)(4) under the Securities Act);




     (iii) so long as the Investor or a Holder owns any Registrable Securities, furnish to
the Investor or such Holder forthwith upon request: a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 under the Securities Act, and of
the Exchange Act; a copy of the most recent annual or quarterly report of the Company; and
such other reports and documents as the Investor or Holder may reasonably request in
availing itself of any rule or regulation of the SEC allowing it to sell any such securities
to the public without registration; and




     (iv) take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act.



     (k) As used in this Section 4.5, the following terms shall have the following respective
meanings:



27









 






     (i) “Holder” means the Investor and any other holder of Registrable Securities to whom
the registration rights conferred by this Agreement have been transferred in compliance with
Section 4.5(h) hereof.




     (ii) “Holders’ Counsel” means one counsel for the selling Holders chosen by Holders
holding a majority interest in the Registrable Securities being registered.




     (iii) “Register,” “registered,” and “registration” shall refer to a registration
effected by preparing and (A) filing a registration statement in compliance with the
Securities Act and applicable rules and regulations thereunder, and the declaration or
ordering of effectiveness of such registration statement or (B) filing a prospectus and/or
prospectus supplement in respect of an appropriate effective registration statement on Form
S-3.




     (iv) “Registrable Securities” means (A) all Preferred Stock, (B) the Warrant (subject
to Section 4.5(p)) and (C) any equity securities issued or issuable directly or indirectly
with respect to the securities referred to in the foregoing clauses ((A) or (B) by way of
conversion, exercise or exchange thereof, including the Warrant Shares, or share dividend or
share split or in connection with a combination of shares, recapitalization,
reclassification, merger, amalgamation, arrangement, consolidation or other
reorganization, provided that, once issued, such securities will not be Registrable
Securities when (1) they are sold pursuant to an effective registration statement under the
Securities Act, (2) except as provided below in Section 4.5(o), they may be sold pursuant to
Rule 144 without limitation thereunder on volume or manner of sale, (3) they shall have
ceased to be outstanding or (4) they have been sold in a private transaction in which the
transferor’s rights under this Agreement are not assigned to the transferee of the
securities. No Registrable Securities may be registered under more than one registration
statement at any one time.




     (v) “Registration Expenses” mean all expenses incurred by the Company in effecting any
registration pursuant to this Agreement (whether or not any registration or prospectus
becomes effective or final) or otherwise complying with its obligations under this Section
4.5, including all registration, filing and listing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, expenses incurred in
connection with any “road show”, the reasonable fees and disbursements of Holders’ Counsel,
and expenses of the Company’s independent accountants in connection with any regular or
special reviews or audits incident to or required by any such registration, but shall not
include Selling Expenses.




     (vi) “Rule 144”, “Rule 144A”, “Rule 159A”, “Rule 405” and “Rule 415” mean, in each
case, such rule promulgated under the Securities Act (or any successor provision), as the
same shall be amended from time to time.




     (vii) “Selling Expenses” mean all discounts, selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities and fees and disbursements



28









 







of counsel
for any Holder (other than the fees and disbursements of Holders’ Counsel included in
Registration Expenses).



     (l) At any time, any holder of Securities (including any Holder) may elect to forfeit its
rights set forth in this Section 4.5 from that date forward; provided, that a Holder forfeiting
such rights shall nonetheless be entitled to participate under Section 4.5(a)(iv) — (vi) in any
Pending Underwritten Offering to the same extent that such Holder would have been entitled to if
the holder had not withdrawn; and provided, further, that no such forfeiture shall terminate a
Holder’s rights or obligations under Section 4.5(f) with respect to any prior registration or
Pending Underwritten Offering. “Pending Underwritten Offering” means, with respect to any Holder
forfeiting its rights pursuant to this Section 4.5(l), any underwritten offering of Registrable
Securities in which such Holder has advised the Company of its intent to register its Registrable
Securities either pursuant to Section 4.5(a)(ii) or 4.5(a)(iv) prior to the date of such Holder’s
forfeiture.



     (m) Specific Performance. The parties hereto acknowledge that there would be no
adequate remedy at law if the Company fails to perform any of its obligations under this Section
4.5 and that the Investor and the Holders from time to time may be irreparably harmed by any such
failure, and accordingly agree that the Investor and such Holders, in addition to any other remedy
to which they may be entitled at law or in equity, to the fullest extent permitted and enforceable
under applicable law shall be entitled to compel specific performance of the
obligations of the Company under this Section 4.5 in accordance with the terms and conditions
of this Section 4.5.



     (n) No Inconsistent Agreements. The Company shall not, on or after the Signing Date,
enter into any agreement with respect to its securities that may impair the rights granted to the
Investor and the Holders under this Section 4.5 or that otherwise conflicts with the provisions
hereof in any manner that may impair the rights granted to the Investor and the Holders under this
Section 4.5. In the event the Company has, prior to the Signing Date, entered into any agreement
with respect to its securities that is inconsistent with the rights granted to the Investor and the
Holders under this Section 4.5 (including agreements that are inconsistent with the order of
priority contemplated by Section 4.5(a)(vi)) or that may otherwise conflict with the provisions
hereof, the Company shall use its reasonable best efforts to amend such agreements to ensure they
are consistent with the provisions of this Section 4.5.



     (o) Certain Offerings by the Investor. In the case of any securities held by the
Investor that cease to be Registrable Securities solely by reason of clause (2) in the definition
of “Registrable Securities,” the provisions of Sections 4.5(a)(ii), clauses (iv), (ix) and
(x)-(xii) of Section 4.5(c), Section 4.5(g) and Section 4.5(i) shall continue to apply until such
securities otherwise cease to be Registrable Securities. In any such case, an “underwritten”
offering or other disposition shall include any distribution of such securities on behalf of the
Investor by one or more broker-dealers, an “underwriting agreement” shall include any purchase
agreement entered into by such broker-dealers, and any “registration statement” or “prospectus”
shall include any offering document approved by the Company and used in connection with such
distribution.



29









 





     (p) Registered Sales of the Warrant. The Holders agree to sell the Warrant or any
portion thereof under the Shelf Registration Statement only beginning 30 days after notifying the
Company of any such sale, during which 30-day period the Investor and all Holders of the Warrant
shall take reasonable steps to agree to revisions to the Warrant to permit a public distribution of
the Warrant, including entering into a warrant agreement and appointing a warrant agent.



     4.6 Voting of Warrant Shares. Notwithstanding anything in this Agreement to the contrary, the Investor shall not exercise
any voting rights with respect to the Warrant Shares.



     4.7 Depositary Shares. Upon request by the Investor in connection with a proposed transfer of the Preferred Stock,
the Company shall promptly enter into a depositary arrangement, pursuant to customary agreements
reasonably satisfactory to the Investor and with a depositary reasonably acceptable to the
Investor, pursuant to which the Preferred Stock may be deposited and depositary shares, each
representing a fraction of a Preferred Stock as specified by the Investor, may be issued. From and
after the execution of any such depositary arrangement, and the deposit of any Preferred Stock
pursuant thereto, the depositary shares issued pursuant thereto shall be deemed “Preferred Stock”
and, as applicable, “Registrable Securities” for purposes of this Agreement.



     4.8 Restriction on Dividends and Repurchases.



     (a) Prior to the earlier of (x) the fifth anniversary of the Closing Date and (y) the date on
which the Preferred Stock has been redeemed in whole or the Investor has transferred all of the
Preferred Stock to third parties which are not Affiliates of the Investor, neither the Company nor
any Company Subsidiary shall, without the consent of the Investor:




     (i) declare or pay any dividend or make any distribution on the Common Stock (other
than (A) regular quarterly cash dividends of not more than the amount of the last quarterly
cash dividend per share declared or, if lower, publicly announced an intention to declare,
on the Common Stock prior to November 25, 2008, as adjusted for any stock split, stock
dividend, reverse stock split, reclassification or similar transaction, (B)) dividends
payable solely in shares of Common Stock and (C) dividends or distributions of rights or
Junior Stock in connection with a stockholders’ rights plan); or




     (ii) redeem, purchase or acquire any shares of Common Stock or other capital stock or
other equity securities of any kind of the Company, or any trust preferred securities issued
by the Company or any Affiliate of the Company, other than (A) redemptions, purchases or
other acquisitions of the Preferred Stock, (B) redemptions, purchases or other acquisitions
of shares of Common Stock or other Junior Stock, in each case in this clause (B) in
connection with the administration of any employee benefit plan in the ordinary course of
business (including purchases to offset the Share Dilution Amount (as defined below)
pursuant to a publicly announced repurchase plan) and consistent with past practice;
provided that any purchases to offset the Share Dilution Amount shall in no event exceed the
Share Dilution Amount, (C) any redemption or



30









 







repurchase of rights pursuant to any
stockholders’ rights plan, (D) the acquisition by the Company or any of the Company
Subsidiaries of record ownership in Junior Stock or Parity Stock for the beneficial
ownership of any other persons (other than the Company or any other Company Subsidiary),
including as trustees or custodians (the “Permitted Repurchases”), and (E)the exchange or
conversion of Junior Stock for or into other Junior Stock or of Parity Stock or trust
preferred securities for or into other Parity Stock (with the same or lesser aggregate
liquidation amount) or Junior Stock, in each case set forth in this clause (E), solely to
the extent required pursuant to binding contractual agreements entered into prior to the
Signing Date or any subsequent agreement for the accelerated exercise, settlement or
exchange thereof for Common Stock. “Share Dilution Amount” means the increase in the number
of diluted shares outstanding (determined in accordance with GAAP, and as measured from the
date of the Company’s most recently filed Company Financial Statements prior to the Closing
Date) resulting from the grant, vesting or exercise of equity-based compensation to
employees and equitably adjusted for any stock split, stock dividend, reverse stock split,
reclassification or similar transaction.



     (b) Until such time as the Investor ceases to own any Preferred Stock, the Company shall not
repurchase any Preferred Stock from any holder thereof, whether by means of open market purchase,
negotiated transaction, or otherwise, other than Permitted Repurchases, unless it offers to
repurchase a ratable portion of the Preferred Stock then held by the Investor on the same terms and
conditions.



     (c) “Junior Stock” means Common Stock, the Series C Preferred Stock (after the Company’s
stockholders approve the amendment described in Section 3.1(b) to the Charter to have the Preferred
Stock rank senior to the Series C Preferred Stock) and any other class or series of stock of the
Company the terms of which expressly provide that it ranks junior to the Preferred Stock as to
dividend rights and/or as to rights on liquidation, dissolution or winding up of the Company.
“Parity Stock” means the Series C Preferred Stock (before the Company’s stockholders approve the
Charter amendment referred to above) and any class or series of stock of the Company the terms of
which do not expressly provide that such class or series will rank senior or junior to the
Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up
of the Company (in each case without regard to whether dividends accrue cumulatively or
non-cumulatively).



     4.9 Repurchase of Investor Securities.



     (a) Following the redemption in whole of the Preferred Stock held by the Investor or the
Transfer by the Investor of all of the Preferred Stock to one or more third parties not affiliated
with the Investor and so long as the Investor does not Control the Company, the Company may
repurchase, in whole or in part, at any time any other equity or debt securities of the Company
owned by the Investor or the Warrant or Warrant Shares and then held by the Investor, upon notice
given as provided in clause (b) below, at the Fair Market Value of the equity security. For the
avoidance of doubt, while there is Board of Directors control (or the potential to gain Board of
Directors control as a result of existing contractual rights) by the



31









 







Investor (or any affiliate of
the Investor), the Company may not exercise its rights under this Section 4.9.



     (b) Notice of every repurchase of equity securities of the Company held by the Investor shall
be given at the address and in the manner set forth for such party in Section 5.6. Each notice of
repurchase given to the Investor shall state: (i) the number and type of securities to be
repurchased, (ii) the Board of Directors’ determination of Fair Market Value of such securities and
(iii) the place or places where certificates representing such securities are to be surrendered for
payment of the repurchase price. The repurchase of the securities specified in the notice shall
occur as soon as practicable following the determination of the Fair Market Value of the
securities.



     (c) As used in this Section 4.9, the following terms shall have the following respective
meanings:




     (i) “Appraisal Procedure” means a procedure whereby two independent appraisers, one
chosen by the Company and one by the Investor, shall mutually agree upon the Fair Market
Value. Each party shall deliver a notice to the other appointing its appraiser within 10
days after the Appraisal Procedure is invoked. If within 30 days after appointment of the
two appraisers they are unable to agree upon the Fair Market Value, a third independent
appraiser shall be chosen within 10 days thereafter by the mutual consent of such first two
appraisers. The decision of the third appraiser so appointed and chosen shall be given
within 30 days after the selection of such third appraiser. If three appraisers shall be
appointed and the determination of one appraiser is disparate from the middle determination
by more than twice the amount by which the other determination is
disparate from the middle determination, then the determination of such appraiser shall
be excluded, the remaining two determinations shall be averaged and such average shall be
binding and conclusive upon the Company and the Investor; otherwise, the average of all
three determinations shall be binding upon the Company and the Investor. The costs of
conducting any Appraisal Procedure shall be borne by the Company.




     (ii) “Fair Market Value” means, with respect to any security, the fair market value of
such security as determined by the Board of Directors, acting in good faith in reliance on
an opinion of a nationally recognized independent investment banking firm retained by the
Company for this purpose and certified in a resolution to the Investor. If the Investor
does not agree with the Board of Directors’ determination, it may object in writing within
10 days of receipt of the Board of Directors’ determination. In the event of such an
objection, an authorized representative of the Investor and the chief executive officer of
the Company shall promptly meet to resolve the objection and to agree upon the Fair Market
Value. If the chief executive officer and the authorized representative are unable to agree
on the Fair Market Value during the 10-day period following the delivery of the Investor’s
objection, the Appraisal Procedure may be invoked by either party to determine the Fair
Market Value by delivery of a written notification thereof not later than the 30th day after
delivery of the Investor’s objection.




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     (iii) “Control” means the power to direct the management and policies of the Company,
directly or indirectly, whether through the ownership of voting securities, by contract, by
the power to control the Board of Directors or otherwise.



     4.10 Executive Compensation.



     (a) Until such time as the Investor ceases to own any debt or equity securities of the Company
acquired pursuant to this Agreement or the Warrant, the Company shall take all necessary action to
ensure that its Benefit Plans with respect to the Senior Executive Officers comply in all respects
with Section 111(b) of the EESA, including the provisions for Systemically Significant Failing
Institutions, as implemented by any guidance or regulation thereunder, including Notice 2008-PSSFI,
that has been issued and is in effect as of the Closing Date, including but not limited to
provisions prohibiting severance payments to Senior Executive Officers, and shall not adopt any new
Benefit Plan with respect to its Senior Executive Officers that does not comply therewith. “Senior
Executive Officers” means the Company’s “senior executive officers” as defined in subsection
111(b)(3) of the EESA and regulations issued thereunder, including the rules set forth in 31 CFR
Part 30, that have been issued and are in effect as of the Closing Date.



     (b) (1) In addition, the Company shall, until such time as the Investor ceases to own any debt
or equity securities of the Company acquired pursuant to this Agreement or the Warrant, take all
necessary action to limit any “golden parachute payments” to the employees of the Company and the
Company Subsidiaries who as of the Closing Date participate in the Company’s Senior Partners Plan
(other than the Senior Executive Officers) (the “Senior Partners”) to the amounts permitted by the
regulations relating to participants in the EESA Capital Purchase Program and the guidelines and
rules relating thereto, including the rules set forth in 31 CFR Part 30, that have been issued and
are in effect as of the Closing Date, as if such Senior Partners were Senior Executive Officers for
purposes of the EESA (except that equity denominated awards settled solely in equity shall not be
included in such limit on “golden parachute payments” to Senior Partners).




          (2) In furtherance of the Company’s commitment to limit golden parachute payments to
Senior Partners as set forth in Section 4.10(b)(1), and to ensure compliance with the
provisions of the EESA Capital Purchase Program and the guidelines and regulations relating
thereto applicable to Senior Partners pursuant to Section 4.10(b)(1), it is further agreed
that the Company shall take all necessary action to ensure that the sum of (A) a Senior
Partner’s annual bonus for 2009, (B) all retention payments paid or payable to such Senior
Partner under any retention arrangement between the Senior Partner and the Company for any
period ending on or prior to March 31, 2010 and (C) any and all amounts paid or payable to
such Senior Partner in connection with the termination of such Senior Partner’s employment
prior to March 31, 2010 which would be taken into account in applying the compensation
limitation under Section 4.10(b)(1) above, other than any payments pursuant to outstanding
awards under the Company’s Senior Partners Plan, shall not exceed 3.5 times the sum of such
Senior Partner’s base salary and target annual bonus for 2008. For this purpose, actual
annual bonus for 2009



33









 







and target annual bonus for 2008 will include supplemental bonus and
quarterly cash payments under the Company’s historic quarterly bonus program consistent with, and in
amounts not exceeding, past practice.




          (3) Notwithstanding the other provisions of this Section 4.10(b), the Company’s
obligations under this Section 4.10(b) shall be on a best efforts basis with respect to the
Senior Partners who are not U.S.-based to the extent of its existing Benefit Plans. Without
derogation of the condition set forth in Section 1.2(d)(v), the Company shall use its best
efforts to obtain from all the Senior Partners and deliver to the Investor prior to the
Closing or as promptly as possible thereafter a waiver in the form attached hereto as Annex
B-1.



     (c) Unless the Investor ceases to own any debt or equity securities of the Company acquired
pursuant to this Agreement or the Warrant, the Company shall take all necessary action to ensure
that the annual bonus pools payable to the Senior Executive Officers and the Senior Partners in
respect of each of 2008 and 2009 shall not exceed the average of the annual bonus pools paid to the
Senior Executive Officers and the Senior Partners for 2006 and 2007 (in each case exclusive of the
Company’s historic quarterly bonus program including but not limited to supplemental bonus and
quarterly cash payments, the amount of which will not increase for any participant) and subject to
appropriate adjustment for new hires and departures.



     (d) For the reasons set forth in Section 4.10(b)(2) above and in furtherance thereof, the
Company shall, as soon as practicable, take all necessary action to amend its Executive Severance
Plan, effective not later than March 11, 2010, to require that the benefits thereunder will be
reduced by any remuneration attributable to a participant’s subsequent employment during the
relevant severance period.



     (e) The Company confirms that none of (i) the proceeds of the Purchase Price nor (ii) the
funds provided to the Company under the Credit Agreement (collectively “the Funds”), shall be used
to pay annual bonuses, or other future cash performance awards to executives of the Company or
Senior Partners. The parties desire that this confirmation be auditable and agree that there are a
number of appropriate methods for verifying this confirmation (particularly in light of expected
business changes at the Company). Until the date that any annual bonuses in respect of 2009 are
paid, it is agreed that the test for the foregoing will be that, at the time when any annual
bonuses or cash performance awards granted after the date of this Agreement are paid to executive
officers or Senior Partners, the Company will have received aggregate dividends, distributions and
other payments from its subsidiaries subsequent to September 16, 2008 greater than the aggregate
amount of such annual bonuses, such cash performance awards and amounts paid pursuant to AIG’s
historic quarterly bonus program (including but not limited to supplemental bonus and quarterly
cash payments, the amount of which will not increase for any participant) paid to executive
officers and Senior Partners subsequent to that date. At and after the date that any annual
bonuses in respect of 2009 are paid, the test for the foregoing confirmation will be that, at the
time when any annual bonuses or cash performance awards granted after the date of this Agreement
are vested or otherwise earned by executive officers or Senior Partners, the aggregate adjusted net
income for the relevant year (being the year in which



34









 







or in respect of which such bonuses or awards
are vested or so earned) of the insurance company subsidiaries of the Company included for such
year in the consolidated financial statements of the Company, excluding any such adjusted net
income that was dividended or otherwise
distributed to the Company and taken into account in satisfying the test under the prior
sentence, shall exceed the aggregate amount of such annual bonuses, such cash performance awards
and amounts pursuant to AIG’s historic quarterly bonus program (including but not limited to
supplemental bonus and quarterly cash payments, the amount of which will not increase for any
participant), in each case vested or otherwise earned in or in respect of such year. Each party
agrees to negotiate in good faith and promptly at the request of the other to develop additional or
alternative appropriate formulations to test for this confirmation.



     (f) The Company confirms that none of the Funds shall be used to pay any electively deferred
compensation in respect of or otherwise resulting from the termination of the deferred compensation
plans by the Company or the Company subsidiaries as described in Item 5.02 of the Company’s Current
Report on Form 8-K dated November 18, 2008.



     4.11 Restrictions on Lobbying. Until such time as the Investor ceases to own any Preferred Stock, the Company shall continue
to maintain and implement its comprehensive written policy on lobbying, governmental ethics and
political activity and distribute such policy to all Company employees and lobbying firms involved
in any such activity. Any material amendments to such policy shall require the prior written
consent of the Investor until the Investor no longer owns any Preferred Stock, and any material
deviations from such policy, whether in contravention thereof or pursuant to waivers provided for
thereunder, shall promptly be reported to the Investor. Such policy shall, at a minimum, (i)
require compliance with all applicable law; (ii) apply to the Company, the Company Subsidiaries and
affiliated foundations; (iii) govern (a) the provision of items of value to any government
officials; (b) lobbying and (c) political activities and contributions; and (iv) provide for (a)
internal reporting and oversight and (b) mechanisms for addressing non-compliance with the policy.



     4.12 Restrictions on Expenses. Until such time as the Investor ceases to own any Preferred Stock, the Company shall continue
to maintain and implement its comprehensive written policy on corporate expenses and distribute
such policy to all Company employees. Any material amendments to such policy shall require the
prior written consent of the Investor until such time as the Investor no longer owns any Preferred
Stock, and any material deviations from such policy, whether in contravention thereof or pursuant
to waivers provided for thereunder, shall promptly be reported to the Investor. Such policy shall,
at a minimum: (i) require compliance with all applicable law; (ii) apply to the Company and the
Company Subsidiaries; (iii) govern (a) the hosting, sponsorship or other payment for conferences
and events, (b) the use of corporate aircraft, (c) travel accommodations and expenditures, (d)
consulting arrangements with outside service providers, (e) any new lease or acquisition of real
estate, (f) expenses relating to office or facility renovations or relocations and (g) expenses
relating to entertainment or holiday parties; and (iv) provide for (a) internal reporting and
oversight and (b) mechanisms for addressing non-compliance with the policy.



35









 





     4.13 Risk Management Committee. Within 30 days of the Closing Date, and until such time as the Investor ceases to own any
Preferred Stock, the Warrant or any other equity or debt securities of the Company, the Company
shall establish and maintain a risk management committee of the Board of Directors that will
oversee the major risks involved in the Company’s business operations and review the Company’s
actions to mitigate and manage those risks.



     4.14 Dividend Rate Adjustment. The dividend rate on the Preferred Stock beneficially owned at the time by the Investor is
subject to adjustment in the sole discretion of the Secretary of the Department of the Treasury in
light of, inter alia, then-prevailing economic conditions and the financial condition of the
Company, with the objective of protecting the U.S. taxpayer.



Article 5

Miscellaneous




     5.1 Termination. This Agreement may be terminated at any time prior to the Closing:



     (a) by either the Investor or the Company if the Closing shall not have occurred by the 30th
calendar day following the Signing Date; provided, however, that in the event the Closing has not
occurred by such 30th calendar day, the parties will consult in good faith to determine whether to
extend the term of this Agreement, it being understood that the parties shall be required to
consult only until the fifth day after such 30th calendar day and not be under any obligation to
extend the term of this Agreement thereafter; provided, further, that the right to terminate this
Agreement under this Section 5.1(a) shall not be available to any party whose breach of any
representation or warranty or failure to perform any obligation under this Agreement shall have
caused or resulted in the failure of the Closing to occur on or prior to such date; or



     (b) by either the Investor or the Company in the event that any Governmental Entity shall have
issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable; or



     (c) by the mutual written consent of the Investor and the Company.


In the event of termination of this Agreement as provided in this Section 5.1, this Agreement shall
forthwith become void and there shall be no liability on the part of either party hereto except
that nothing herein shall relieve either party from liability for any breach of this Agreement.




     5.2 Survival of Representations and Warranties. All covenants and agreements, other than those which by their terms apply in whole or in part
after the Closing, shall terminate as of the Closing. The representations and warranties of the
Company made herein or in any certificates delivered in connection with the Closing shall survive
the Closing without limitation.



36









 





     5.3 Amendment. No amendment of any provision of this Agreement will be effective unless made in writing and
signed by an officer or a duly authorized representative of each party; provided that the Investor
may unilaterally amend any provision of this Agreement to the extent required to comply with any
changes after the Signing Date in applicable federal statutes. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative of any rights or
remedies provided by law.



     5.4 Waiver of Conditions. The conditions to each party’s obligation to consummate the Purchase are for the sole benefit
of such party and may be waived by such party in whole or in part to the extent permitted by
applicable law. No waiver will be effective unless it is in a writing signed by a duly authorized
officer of the waiving party that makes express reference to the provision or provisions subject to
such waiver.



     5.5 Governing Law: Submission to Jurisdiction, Etc. This Agreement, and the rights and obligations of the parties hereunder, shall be governed by,
and construed and interpreted in accordance with, United States federal law and not the law of any
State. To the extent that a court looks to the laws of any State to determine or define the United
States federal law, it is the intention of the parties hereto that such court shall look only to
the laws of the State of New York without regard to the rules of conflicts of laws. Each of the
parties hereto agrees (a) to submit to the exclusive jurisdiction and venue of the United States
District Court for the District of Columbia and the United States Court of Federal Claims for any
and all actions, suits or proceedings arising out of or relating to this Agreement or the Warrant
or the transactions contemplated hereby or thereby, and (b) that notice may be served upon (i) the
Company at the address and in the manner set forth for notices to the Company in Section 5.6 and
(ii) the Investor in accordance with federal law. To the extent permitted by applicable law, each
of the parties hereto hereby unconditionally waives trial by jury in any legal action or proceeding
relating to this Agreement or the Warrant or the transactions contemplated hereby or thereby.



     5.6 Notices. Any notice, request, instruction or other document to be given hereunder by any party to the
other will be in writing and will be deemed to have been duly given (a) on the date of delivery if
delivered personally, or by facsimile, upon confirmation of receipt, or (b) on the second business
day following the date of dispatch if delivered by a recognized next day courier service. All
notices to the Company shall be delivered to the address set forth below, or pursuant to such other
instruction as may be designated in writing by the Company to the Investor. All notices to the
Investor shall be delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the Investor to the Company.



37









 




If to the Investor:



United States Department of the Treasury

1500 Pennsylvania Avenue, NW, Room 2312

Washington, D.C. 20220

Attention: Assistant General Counsel (Banking and Finance)

Facsimile: (202) 622-1974



If to the Company:



American International Group, Inc.

70 Pine Street, New York, New York 10270

Attention: General Counsel

Facsimile: (212) 785-2175

Telephone: (212) 770-7000



with a copy to:



Sullivan & Cromwell LLP

125 Broad Street, New York, New York 10004

Attention: Robert W. Reeder III, Michael M. Wiseman

Telephone: (212) 558-4000




     5.7 Definitions.



     (a) When a reference is made in this Agreement to a subsidiary of a person, the term
"subsidiary” means any corporation, partnership, joint venture, limited liability company or other
entity (x) of which such person or a subsidiary of such person is a general partner or (y) of which
a majority of the voting securities or other voting interests, or a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a majority of the
board of directors or persons performing similar functions with respect to such entity, is directly
or indirectly owned by such person and/or one or more subsidiaries thereof; provided that no Fund
shall be a subsidiary for purposes of this Agreement.



     (b) The term “Fund” means any investment vehicle managed by the Company or an Affiliate of the
Company and created in the ordinary course of the Company’s asset management business for the
purpose of selling Equity Interests in such investment vehicle to third parties. “Equity
Interests” means shares of capital stock, partnership interests, membership interests in a limited
liability company, beneficial interests in a trust or other equity interests in any entity, and any
option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any
such equity interest.



     (c) The term “Affiliate” means, with respect to any person, any person directly or indirectly
controlling, controlled by or under common control with, such other person. For purposes of this
definition, “control” (including, with correlative meanings, the terms “controlled



38









 







by” and “under
common control with”) when used with respect to any person, means the possession, directly or
indirectly, of the power to cause the direction of management and/or policies of such person,
whether through the ownership of voting securities by contract or otherwise.



     (d) The terms “knowledge of the Company” or “Company’s knowledge” mean the actual knowledge
after reasonable and due inquiry of the “officers” (as such term is defined in Rule 3b-2 under the
Exchange Act, but excluding any Vice President or Secretary) of the Company.



     5.8 Assignment. Neither this Agreement nor any right, remedy, obligation nor liability arising hereunder or by
reason hereof shall be assignable by any party hereto without the prior written consent of the
other party, and any attempt to assign any right, remedy, obligation or liability hereunder without
such consent shall be void, except (a) an assignment, in the case of a Business Combination, as
defined below, where such party is not the surviving entity, or a sale of substantially all of its
assets, to the entity which is the survivor of such Business Combination or the purchaser in such
sale and (b) as provided in Section 4.5. “Business Combination” means merger, consolidation,
statutory share exchange or similar transaction that requires the approval of the Company’s
stockholders.



     5.9 Severability. If any provision of this Agreement or the Warrant, or the application thereof to any person or
circumstance, is determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or unenforceable, will remain
in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long
as the economic or legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination, the parties shall negotiate in
good faith in an effort to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.



     5.10 Entire Agreement. This Agreement (including the Annexes and Schedules hereto) constitutes the entire agreement,
and supersedes all other prior agreements, understandings, representations and warranties, both
written and oral, between the parties, with respect to the subject matter hereof.



     5.11 No Third Party Beneficiaries. Nothing contained in this Agreement, expressed or implied, is intended to confer upon any
person or entity other than the Company and the Investor any benefit, right or remedies, except
that the provisions of Section 4.5 shall inure to the benefit of the persons referred to in that
Section.



[Signature Page Follows]





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     In witness whereof, this Agreement has been duly executed and delivered by the duly authorized
representatives of the parties hereto as of the date written below.



	 	 	 	 	 
	 	AMERICAN INTERNATIONAL GROUP, INC.

 	 
	 	By:  	/s/
David L. Herzog	 
	 	 	Name:  	David L. Herzog	 
	 	 	Title:  	Executive Vice President and 
Chief Financial
Officer	 
	 
	 	UNITED STATES DEPARTMENT OF THE TREASURY

 	 
	 	By:  	/s/
Neel Kashkari	 
	 	 	Name:  	Neel Kashkari	 
	 	 	Title:  	Interim Assistant Secretary
for Financial
Stability	 
	 



Date: November 25, 2008




 









 







SCHEDULE A




ADDITIONAL TERMS AND CONDITIONS




Company Information:



Name of the Company: American International Group, Inc.



Corporate or other organizational form: Corporation



Jurisdiction of Organization: Delaware




Terms of the Purchase:





     Series of Preferred Stock Purchased: Series D Fixed Rate Cumulative Perpetual Preferred
Stock


Per Share Liquidation Preference of Preferred Stock: $10,000



Number of Shares of Preferred Stock Purchased: 4,000,000



Dividend Payment Dates on the Preferred Stock: February 1, May 1, August 1 and November 1



Number of Warrant Shares: 53,798,766



Exercise Price of the Warrant: Initially $2.50 per share of Common Stock




Closing:




	 	 	 
	Location of Closing:

	 	Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004
	 
	 	 
	Time of Closing:

	 	3:00 p.m., New York time
	 
	 	 
	Date of Closing:

	 	November 25, 2008






 









 





SCHEDULE B




CAPITALIZATION




Capitalization Date: October 31, 2008




Common Stock





Par value: $2.50 per share




Total Authorized: 5,000,000,000




Outstanding: 2,689,938,313




Subject to warrants, options, convertible securities, etc.: Up to 154,738,080 shares are
reserved for issuance pursuant to the Purchase Contract Agreement between the Company and
The Bank of New York, as Purchase Contract Agent, dated as of May 16, 2008




Reserved for benefit plans and other issuances: 169,420,587




Remaining authorized but unissued: 2,310,061,687




Shares issued after Capitalization Date (other than pursuant to warrants, options,
convertible securities, etc. as set forth above): 22,524



Serial Preferred Stock





Par value: $5.00 per share




Total Authorized: 6,000,000




Outstanding (by series): None




Reserved for issuance: 100,000




Remaining authorized but unissued: 5,900,000



 









 





SCHEDULE C




LITIGATION



List any exceptions to the representation and warranty in Section 2.2(l) of the Securities Purchase
Agreement.



If none, please so indicate by checking the box: þ.




 









 








SCHEDULE D




COMPLIANCE WITH LAWS



List any exceptions to the representation and warranty in the second sentence of Section 2.2(m) of
the Agreement.



If none, please so indicate by checking the box: þ.



List any exceptions to the representation and warranty in the last sentence of Section 2.2(m) of
the Securities Purchase Agreement.



If none, please so indicate by checking the box: þ.




 









 








SCHEDULE E




REGULATORY AGREEMENTS



List any exceptions to the representation and warranty in Section 2.2(s) of the Agreement.




If none, please so indicate by checking the box: þ.



 









 





ANNEX A




FORM OF CERTIFICATE OF DESIGNATIONS




[SEE ATTACHED]




 









 





ANNEX B-1




FORM OF WAIVER FOR THE SENIOR EXECUTIVE OFFICERS

AND THE SENIOR PARTNERS




     In consideration for the benefits I will receive as a result of the participation of American
International Group, Inc. (together with its subsidiaries and affiliates, the “Company”) in the
United States Department of the Treasury’s Program for Systemically Significant Failing
Institutions (as set forth in Notice 2008-PSSFI) and any other economic stabilization program
implemented by the Department of the Treasury under the Emergency Economic Stabilization Act of
2008 (the “Act”) either prior to or subsequent to the date of this letter from me (any such
program, including the Program for Systemically Significant Failing Institutions, an “EESA
Program”), I hereby voluntarily waive any claim against any of the United States and the Company,
the Company’s Board of Directors, any individual member of the Company’s Board of Directors and the
Company’s officers, employees, representatives and agents for any changes to my compensation or
benefits that are required to comply with the regulations issued by the Department of the Treasury
in connection with an EESA Program, including without limitation the regulations issued on October
20, 2008, as well as the limitations under the letter agreement between me and the Company dated
November 12, 2008 regarding the term sheet agreement between the Company and United States
Department of the Treasury (the “Limitations”).



     I acknowledge that the aforementioned regulations and Limitations may require modification of
the compensation, bonus, incentive and other benefit plans, arrangements, policies and agreements
(including so-called “golden parachute” agreements), whether or not in writing, that I may have
with the Company or in which I may participate as they relate to the period the United States holds
any equity or debt securities of the Company acquired through an EESA Program, including without
limitation the Program for Systemically Significant Failing Institutions, or for any other period
applicable under such EESA Program or Limitations, as the case may be.



     This waiver includes all claims I may have under the laws of the United States or any state
related to the requirements imposed by the aforementioned regulations and Limitations, including
without limitation a claim for any compensation or other payments or benefits I would otherwise
receive, any challenge to the process by which the aforementioned regulations or Limitations are or
were adopted and any tort or constitutional claim about the effect of these regulations or
Limitations on my employment relationship.


Intending to be legally bound, I have executed this Waiver




as of this ___th day of November, 2008.




	 	 	 	 	 
	 	 	 
	
 	 	 
	 
	Name:  	 	 	 
	 	 	 



 









 






	 	 	 	 	 



ANNEX B-2




FORM OF WAIVER FOR THE COMPANY



In consideration for the benefits that it will receive as a result of its participation in the
United States Department of the Treasury’s Programs for Systemically Significant Failing
Institutions (as set forth in Notice 2008-PSSFI) and any other economic stabilization program
implemented by the Department of the Treasury under the Emergency Economic Stabilization Act of
2008 (the “EESA”) either prior to or subsequent to the date of this letter (any such program,
including the Programs for Systemically Significant Failing Institutions, an “EESA Program”),
American International Group, Inc. (together with its subsidiaries and affiliates, the “Company”)
hereby voluntarily waives any claim against the United States for any changes to compensation or
benefits of the Company’s employees that are required to comply with the regulations issued by the
Department of the Treasury in connection with an EESA Program, including without limitation the
regulations issued on October 14, 2008 and the requirements of Section 4.10 of the Securities
Purchase Agreement dated as of November 25, 2008 between the Company and the United States
Department of the Treasury.



The Company acknowledges that the aforementioned regulations and such requirements may require
modification of the compensation, bonus, incentive and other benefit plans, arrangements, policies
and agreements (including so-called “golden parachute” agreements), whether or not in writing, that
the Company may have with its employees or in which such employees may participate as the
regulations and such requirements relate to the period the United States holds any equity or debt
securities of the Company acquired through an EESA Program, including without limitation the
Programs for Systemically Significant Failing Institutions Program, or for any other period
applicable under such EESA Program.



This waiver includes all claims the Company may have under the laws of the United States or any
state related to the requirements imposed by the aforementioned regulations and such requirements,
including without limitation a claim for any compensation or other payments or benefits the
Company’s employees would otherwise receive, any challenge to the process by which the
aforementioned regulations are or were adopted and any tort or constitutional claim about the
effect of these regulations on the Company’s employment relationship with its employees.




 









 








ANNEX C




FORM OF OPINION





     (a) The Company has been duly incorporated and is an existing corporation in good standing
under the laws of the state of its incorporation.



     (b) The Preferred Stock has been duly and validly authorized, and, when issued and delivered
pursuant to the Agreement, the Preferred Stock will be validly issued and fully paid and
non-assessable, will not be issued in violation of any preemptive rights.



     (c) The Warrant has been duly authorized and, when executed and delivered as contemplated
hereby, will constitute a valid and legally binding obligation of the Company enforceable against
the Company in accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws affecting
the creditors’ rights and general equitable principles, regardless of whether such enforceability
is considered in a proceeding at law or in equity.



     (d) The shares of Common Stock issuable upon exercise of the Warrant have been duly authorized
and reserved for issuance upon exercise of the Warrant and when so issued in accordance with the
terms of the Warrant will be validly issued, fully paid and non-assessable.



     (e) The Company has the corporate power and authority to execute and deliver the Agreement and
the Warrant to carry out its obligations thereunder (which includes the issuance of the Preferred
Stock, Warrant and Warrant Shares).



     (f) The execution, delivery and performance by the Company of the Agreement and the Warrant
and the consummation of the transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of the Company and its stockholders, and no further approval
or authorization is required on the part of the Company, other than the vote of the stockholders
described in Section 3.1(b) of the Agreement.



     (g) The Agreement is a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the creditors’ rights and general
equitable principles, regardless of whether such enforceability is considered in a proceeding at
law or in equity; provided, however, such counsel need express no opinion with respect to Section
3.1(b) or Section 4.5(g) or the severability provisions of the Agreement insofar as Section 3.1(b)
or Section 4.5(g)is concerned.



 









 





ANNEX D




FORM OF WARRANT




[SEE ATTACHED]