Document:

zbh-ex1049_474.htm

 

Exhibit 10.49

FIRST AMENDMENT (the “First Amendment”), dated as of April 23, 2018, between ZIMMER BIOMET G.K. (the “Borrower”) and SUMITOMO MITSUI BANKING CORPORATION (the “Bank”), to the AMENDED AND RESTATED TERM LOAN AGREEMENT dated as of September 22, 2017 (the “Agreement”) between the Borrower and the Bank.

WITNESSETH

The Borrower and the Bank wish to amend the Agreement in certain respects. Unless otherwise defined in this First Amendment, capitalized terms used herein shall have the meanings ascribed to such terms in the Agreement.

Accordingly, in consideration of the premises contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.Amendment. In Section 1.01 of the Agreement (captioned, “Defined Terms”), the term “Interest Payment Date” is hereby amended and restated in its entirety to read as follows:

“Interest Payment Date” means the 15th day of each month (subject to the provisions of Section 2.06 with respect to payments on non-Business Days), commencing on November 15, 2017 and ending on the Maturity Date.

Section 2.Effectiveness. Conditioned on the truth and accuracy of the representations made in Section 3 hereof, this First Amendment shall become effective as of the date hereof when the Bank shall have received a copy of this First Amendment, duly executed by Borrower.

Section 3.Representations. The Borrower reaffirms the representations and warranties in the Agreement as made as of the date hereof and confirms that both before and after giving effect to this First Amendment there is and will be no Event of Default under the Agreement. The Borrower makes the representations and warranties in the Agreement with respect to its execution and delivery as to the execution and delivery of this First Amendment.

Section 4.Ratification. The Agreement shall remain in full force and effect in its original form, without novation, when this First Amendment shall become effective, except as the Agreement is specifically amended by the terms of this First Amendment.

Section 5.Cross-references. Upon the effectiveness of this First Amendment, any reference to the Agreement shall mean the Agreement as amended hereby.

Section 6.Governing Law. This First Amendment shall be considered an agreement under the laws in effect in the State of New York and for all purposes shall be construed in accordance with such laws without giving effect to the conflict of laws provisions contained therein.

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first written above.

 

			
	
ZIMMER BIOMET G.K.

	
 

	
 

	
By:
	
/s/ Daniel P. Florin

	
 
	
Name:
	
 

	
 
	
Title:
	
 

 

			
	
SUMITOMO MITSUI BANKING CORPORATION

	
 

	
 

	
By:
	
/s/ James D. Weinstein

	
 
	
Name:
	
James D. Weinstein

	
 
	
Title:
	
Managing Director

 

-2-Exhibit 4.6

American
International Group, Inc.

Description of Registrant’s Securities

As of December 31, 2019, AIG has the following classes
of securities registered under Section 12 of the Securities Exchange Act of
1934 (the “Exchange Act”): (i) our common stock; (ii) warrants scheduled to
expire on January 19, 2021; (iii) stock purchase rights; (iv) depositary shares
(the “Depositary Shares”), each representing a 1/1,000th interest in a share of
5.85% non-cumulative perpetual preferred stock, Series A (the “Series A
Preferred Stock”); (v) 5.75% Series A-2 Junior Subordinated Debentures and
4.875% Series A-3 Junior Subordinated Debentures.  All of our registered
securities are listed on the New York Stock Exchange.

I.                  
 Common Stock, Par Value $2.50 Per Share 

The following description of the Company’s common
stock and the relevant provisions of the Company’s amended and restated
certificate of incorporation and amended and restated bylaws are summaries and
are qualified in their entirety by reference to the Company’s amended and
restated certificate of incorporation and amended and restated bylaws.

General

Under our amended and restated certificate of
incorporation, we are authorized to issue 5,000,000,000 shares of common stock
a par value of $2.50 per share. All of the outstanding shares of our common
stock are fully paid and nonassessable. 

Dividends

Subject to the prior rights of the holders of shares
of preferred stock that may be issued and outstanding, the holders of common
stock are entitled to receive dividends when, as and if declared by our board
of directors out of funds legally available for the payment of dividends.

Ranking

Subject to the prior rights of the holders of shares
of preferred stock that may be issued and outstanding, in the event of
dissolution of AIG, the holders of common stock are entitled to share ratably
in all assets legally available for distribution to our stockholders. 

Voting
Rights

Each holder of common stock is entitled to one vote
for each share held of record on all matters presented to a vote at a
shareholders meeting, including the election of directors (except for preferred
stock directors, as defined below under “Description of Preferred Stock—Voting
Rights—Right to Elect Two Directors on Nonpayment of Dividends”). Holders of
common stock have no cumulative voting rights or preemptive rights to purchase
or subscribe for any additional shares of common stock or other securities, and
there are no conversion rights or redemption or sinking fund provisions with
respect to the common stock. Authorized but unissued shares of common stock may
be issued without shareholder approval, subject to NYSE listing rules.

 

 

Certification

AIG has adopted direct company registration of its
common stock. Holders of shares of common stock will not receive stock
certificates evidencing their share ownership. Instead, they are provided with
a statement reflecting the number of shares registered in their accounts.

The transfer agent for our common stock is Equiniti Trust
Company, as successor to Wells Fargo Shareowner Services, a former division of
Wells Fargo Bank, N.A.

II.               
 Warrants (expiring January 19, 2021)

On January 19, 2011, we issued to the holders of record of our
common stock on January 13, 2011, by means of a dividend, 10-year warrants (the
“Dividend Warrants”) to purchase a total of up to 74,997,777.598 shares of our
common stock at an initial exercise price of $45.00 per share. The exercise
price and number of shares of common stock receivable upon warrant exercise are
subject to anti-dilution adjustment under the following circumstances: (i) the
issuance of our common stock as a dividend or distribution to all holders of
our common stock, or a subdivision or combination of our common stock, (ii) the
issuance to all holders of our common stock of certain rights, options or
warrants entitling them for a period expiring 60 days or less from the date of
issuance of such rights, options or warrants to purchase shares of our common
stock at less than the then-current market price of our common stock, (iii) the
dividend or other distribution to holders of our common stock of shares of
capital stock of the Company (other than our common stock), rights to acquire
capital stock of the Company or evidences of the Company’s indebtedness or the
Company’s assets issuance of capital stock as dividend, (iv) a distribution
consisting exclusively of cash to all holders of our common stock that exceeds
a certain annual threshold, or (v) we conduct a tender offer in which the
number of shares of our common stock purchased exceeds 30% of the number of
shares of our common stock outstanding on the tender offer expiration date and
the consideration for the tender offer exceeds the value weighted average price
per share of our common stock on the trading day next succeeding the tender
offer expiration date. For a complete description of the circumstances
triggering the anti-dilution adjustment and the applicable anti-dilution
adjustment formulas, see Section 4 of the Warrant Agreement, dated January 6,
2011, between Wells Fargo Bank, N.A., as Warrant Agent, and us. The exercise
price and number of shares of common stock receivable upon warrant exercise
have previously been adjusted and we expect that the exercise price and number
of shares of common stock receivable upon warrant exercise will be adjusted
prior the Dividend Warrants expiration date. As of December 31, 2019, there
were 55,951,659 Dividend Warrants outstanding. The Dividend Warrants expire on
January 19, 2021.

III.            
 Stock Purchase Rights

Our board of directors adopted our Tax Asset Protection Plan on
March 9, 2011 and amendments thereto on January 8, 2014 and December 14, 2016,
all of which were ratified by our shareholders at our annual meetings of shareholders
for 2011, 2014 and 2017, respectively; and as further amended by our board of
directors on December 11, 2019, which the board intends to submit to our
shareholders for ratification at our 2020 annual meeting of stockholders (as so
amended, the “Tax Asset Protection Plan”). Subject to certain limited
exceptions, the Tax Asset Protection Plan is intended to act as a deterrent to
any person or group acquiring 4.99 percent or more of our outstanding common
stock (an “Acquiring Person”) without the approval of our board of directors.
Our board of directors may, in its sole discretion, exempt any person or group
from being deemed an Acquiring Person for purposes of the Tax Asset Protection
Plan with respect to which it receives, at its request, a report from our
advisors to the effect that such exemption would not create a significant risk
of material adverse tax consequences to us, or our board of directors otherwise
determines it is in our best interests. The following is a summary of the Tax 

 

 

Asset Protection Plan and does not purport to be complete.
It is qualified in its entirety by reference to the Tax Asset
Protection Plan, which we encourage you to read for additional information.

The Rights

In connection with the initial adoption of the Tax Asset
Protection Plan, our board of directors previously issued a dividend of one
right per each outstanding share of our common stock payable to our
shareholders of record as of the close of business on March 18, 2011 and to
holders of AIG common stock issued after that date. Subject to the terms,
provisions and conditions of the Tax Asset Protection Plan, if these rights
become exercisable, each right would initially represent the right to purchase
from us one ten-thousandth of a share of our Participating Preferred Stock, par
value $5.00 per share (the “Participating Preferred Stock”), for a purchase
price of $185.00 per right (the “Exercise Price”). If issued, each one
ten-thousandth of a share of Participating Preferred Stock would generally give
a shareholder approximately the same dividend, voting and liquidation rights as
does one share of our common stock. However, prior to exercise, a right does
not give its holder any rights as a shareholder, including without limitation
any dividend, voting or liquidation rights.

Exercisability

The rights are not exercisable until the earlier of (i) a public
announcement by us that a person or group has become an Acquiring Person (the
date of such public announcement is referred to herein as the “Stock
Acquisition Date”) and (ii) 10 business days after the commencement of a tender
or exchange offer by a person or group if upon consummation of the offer the person
or group would Beneficially Own 4.99 percent or more of our outstanding common
stock. We refer to the date on which the rights become exercisable as the
“Separation Time”.

Until the Separation Time, our common stock certificates (or the
registration of uncertificated shares on our stock transfer books) will
evidence the rights and may contain a notation to that effect. Any transfer of
shares of our common stock prior to the Separation Time will constitute a
transfer of the associated rights. After the Separation Time, the rights may be
transferred other than in connection with the transfer of the underlying shares
of our common stock.

If there is an Acquiring Person on the Separation Time or a person
or group becomes an Acquiring Person after the Separation Time, each holder of
a right, other than rights that are or were Beneficially Owned by an Acquiring
Person (which will be void), will thereafter have the right to receive upon
exercise of a right and payment of the Exercise Price that number of shares of
our common stock (or, at AIG’s election, Participating Preferred Stock) having
a market value of two times the exercise price of the right.

Exchange

At any time after the Stock Acquisition Date, provided the
Acquiring Person does not hold 50 percent or more of the outstanding common
stock, our board of directors may exchange the rights, other than rights that
are or were Beneficially Owned by an Acquiring Person (which will be void), in
whole or in part, at an exchange ratio equal to one share of our common stock
(or one ten-thousandth of a share of Participating Preferred Stock) per right.

Redemption

At any time until the Stock Acquisition Date, the board of
directors may redeem all of the then-outstanding rights in whole, but not in
part, at a price of $0.001 per right, subject to adjustment (the 

 

 

“Redemption Price”). Immediately upon action of the board
of directors ordering redemption of the rights, the right to exercise the
rights will terminate, and the only right of the holders of rights will be to receive
the Redemption Price.

Anti-Dilution Provisions

The Exercise Price and the number of outstanding rights are
subject to anti-dilution adjustment under the following circumstances: (i) we
declare or pay a dividend on common stock payable in common stock, (ii) we
subdivide the outstanding common stock (iii) we combine the outstanding common
stock into a smaller number of shares of common stock, or (iv) we issue or
distribute any securities or assets in respect of, in lieu of or in exchange
for common stock (other than pursuant to any non-extraordinary periodic cash
dividend or a dividend paid solely in common stock) whether by dividend, in a
reclassification or recapitalization.

Amendments

Any of the provisions
of the Tax Asset Protection Plan may be amended by our board of directors at
any time and in any manner.

Expiration

The rights issued pursuant to the Tax Asset Protection Plan will
expire on the earliest of (i) the close of business on December 11, 2022,
provided that the board of directors may determine to extend the Tax Asset
Protection Plan prior to such date as long as the extension is submitted to our
stockholders for ratification at the next succeeding annual meeting, (ii) the
time at which the rights are redeemed, (iii) the time at which the rights are
exchanged and (iv) the time at which our board of directors receives, at its
request, a report from our advisors that the Tax Attributes (as defined in the
Tax Asset Protection Plan) are utilized in all material respects or no longer
available in any material aspect or that an ownership change under Section 382 or
any applicable state law would not adversely impact in any material respect the
time period in which we could use the Tax Attributes, or materially impair the
amount of the Tax Attributes that could be used.

IV.             
 Depositary Shares (each representing a 1/1000th
interest in a share of Series A 5.85% Non-Cumulative Perpetual Preferred Stock)

The following description of our Series A 5.85%
Non-Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) and the
Depositary Shares (each representing a 1/1000th interest in a share
of Series A Preferred Stock, the “Depositary Shares”) is a summary and does not
purport to be complete. It is qualified in its entirety by reference to the
Company’s amended and restated certificate of incorporation and amended and
restated bylaws and the certificate of designations with respect to the Series
A Preferred Stock.

Description
of the Preferred Stock

General

Under our amended and restated certificate of
incorporation, we have authority to issue up to 100,000,000 shares of serial
preferred stock, par value $5.00 per share. Our board of directors (or a duly
authorized committee of the board) is authorized without further stockholder
action to cause the issuance of shares of preferred stock, including the Series
A Preferred Stock.

 

 

Any additional preferred stock may be issued from time
to time in one or more series, each with such voting powers, such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as our board (or a duly
authorized committee of the board) may determine prior to the time of issuance.
We have the right to create and issue additional classes or series of stock
ranking equally with or junior to the Series A Preferred Stock as to dividends
and distribution of assets upon our liquidation, dissolution, or winding up
without the consent of the holders of the Series A Preferred Stock, or the
holders of the related Depositary Shares

The Series A Preferred Stock represents a single
series of our authorized preferred stock. Shares of Series A Preferred Stock
are fully paid and nonassessable.

The Series A Preferred Stock do not have any
preemptive rights and is not convertible into, or exchangeable for, property or
shares of our common stock or any other class or series of our other securities
and is not subject to any sinking fund or any other obligation of us for their
repurchase or retirement.

The number of authorized shares of the Series A
Preferred Stock initially was 20,000 and the “stated amount” per share is
$25,000. The number of authorized shares may from time to time be increased
(but not in excess of the total number of authorized shares of preferred stock,
excluding shares of any other series of preferred stock authorized at the time
of such increase) or decreased (but not below the number of shares of Series A
Preferred Stock then outstanding) by resolution of the board (or a duly
authorized committee of the board), without the vote or consent of the holders
of the Series A Preferred Stock. Shares of Series A Preferred Stock that are
redeemed, purchased or otherwise acquired by us will be cancelled and will
revert to authorized but unissued shares of preferred stock undesignated as to
series.

Ranking

With respect to the payment of dividends and
distributions of assets upon any liquidation, dissolution or winding up, the
Series A Preferred Stock ranks:

•         
 senior to our common stock and any class or series of our stock
that ranks junior to the Series A Preferred Stock in the payment of dividends
or in the distribution of assets upon our voluntary or involuntary liquidation,
dissolution or winding up (for purposes of this section, together with our
common stock, “junior stock”);

•         
 senior to or on a parity with each other series of our preferred
stock we may issue (except for any senior series that may be issued upon the
requisite vote or consent of the holders of at least two thirds of the shares
of the Series A Preferred Stock at the time outstanding and entitled to vote,
voting together with any other series of preferred stock that would be
adversely affected by such issuance substantially in the same manner and
entitled to vote as a single class in proportion to their respective stated
amounts) with respect to the payment of dividends and distributions of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of
AIG; and

•         
 junior to all existing and future indebtedness and other
non-equity claims on us.

Dividends

Holders of the Series A Preferred Stock are entitled
to receive, when, as and if declared by our board (or a duly authorized
committee of the board), but only out of funds legally available therefor,
noncumulative cash dividends at the annual rate of 5.85% of the stated amount
per share, and no more, payable quarterly in arrears on the fifteenth day of
March, June, September and December, respectively, 

 

 

in
each year (for purposes of this section, each, a “dividend payment date”), with
respect to the dividend period (or portion thereof) ending on the day preceding
such respective dividend payment date, to holders of record on the
15th calendar day before such dividend payment date or such other record
date not more than 30 nor less than 10 days preceding such dividend payment
date fixed for that purpose by our board (or a duly authorized committee of the
board) in advance of payment of each particular dividend. The amount of the
dividend per share of the Series A Preferred Stock for each dividend period (or
portion thereof) is calculated on the basis of a 360-day year consisting of
twelve 30-day months. If any dividend payment date is not a business day, the
applicable dividend will be paid on the first business day following that day
without adjustment. We will not pay interest or any sum of money instead of
interest on any dividend payment that may be in arrears on the Series A
Preferred Stock.

For purposes of this section, “dividend period” means
each period commencing on (and including) a dividend payment date and
continuing to (but not including) the next succeeding dividend payment date.

For purposes of this section, a “business day” means
each Monday, Tuesday, Wednesday, Thursday or Friday on which banking
institutions in The City of New York are not authorized or obligated by law,
regulation or executive order to close.

Dividends on shares of the Series A Preferred Stock
are not cumulative and are not mandatory. If our board (or a duly authorized
committee of the board) does not declare a dividend on the Series A Preferred
Stock in respect of a dividend period, then holders of the Series A Preferred
Stock will not be entitled to receive any dividends not declared by the board
(or a duly authorized committee of the board) and no interest, or sum of money
in lieu of interest, will be payable in respect of any dividend not so
declared, whether or not our board (or a duly authorized committee of the
board) declares a dividend on the Series A Preferred Stock or any other series
of our preferred stock or on our common stock for any future dividend period.

Restrictions on Dividends, Redemption and Repurchases

So long as any share of the Series A Preferred Stock
remains outstanding, unless dividends on all outstanding shares of the Series A
Preferred Stock for the most recently completed dividend period have been paid
in full or declared and a sum sufficient for the payment thereof has been set
aside for payment, no dividend may be declared or paid or set aside for
payment, and no distribution may be made, on any junior stock, including our
common stock, other than a dividend payable solely in stock that ranks junior
to the Series A Preferred Stock in the payment of dividends and in the
distribution of assets on any liquidation, dissolution or winding up of AIG.

If our board (or a duly authorized committee of the
board) elects to declare only partial instead of full dividends for a dividend
payment date and related dividend period on the shares of Series A Preferred
Stock or any class or series of our stock that ranks on a parity with the
Series A Preferred Stock in the payment of current dividends (“dividend parity
stock”), then to the extent permitted by the terms of the Series A Preferred
Stock and each outstanding series of dividend parity stock such partial
dividends will be declared on shares of the Series A Preferred Stock and
dividend parity stock, and dividends so declared will be paid, as to any such
dividend payment date and related dividend period in amounts such that the
ratio of the partial dividends declared and paid on each such series to full
dividends on each such series is the same. As used in this paragraph, “full
dividends” means, as to any dividend parity stock that bears dividends on a
cumulative basis, the amount of dividends that would need to be declared and
paid to bring such dividend parity stock current in dividends, including
undeclared dividends for past dividend periods. To the extent a dividend period
with respect to the Series A Preferred Stock or any series of dividend parity
stock (in either case, the “first series”) coincides with more than one
dividend period with respect to another series as applicable (in either case, a
“second series”), for purposes of the immediately 

 

 

preceding
sentence, our board (or a duly authorized committee of the board) may, to the
extent permitted by the terms of each affected series, treat such dividend
period for the first series as two or more consecutive dividend periods, none
of which coincides with more than one dividend period with respect to the
second series, or may treat such dividend period(s) with respect to any
dividend parity stock and dividend period(s) with respect to the Series A
Preferred Stock for purposes of the immediately preceding sentence in any other
manner that it deems to be fair and equitable in order to achieve ratable
payments of dividends on such dividend parity stock and the Series A Preferred
Stock.

Subject to the foregoing, and not otherwise, such
dividends (payable in cash, stock or otherwise) as may be determined by our
board (or a duly authorized committee of the board) may be declared and paid on
any common stock or junior stock from time to time out of any funds legally
available therefor, and the shares of Series A Preferred Stock will not be
entitled to participate in any such dividend.

So long as any share of the Series A Preferred Stock
remains outstanding, unless dividends on all outstanding shares of the Series A
Preferred Stock for the most recently completed dividend period have been paid
in full or declared and a sum sufficient for the payment thereof has been set
aside for payment, no monies may be paid or made available for a sinking fund
for the redemption or retirement of junior stock, nor will any shares of junior
stock be purchased, redeemed or otherwise acquired for consideration by us,
directly or indirectly, other than:

•         
 as a result of (x) a reclassification of junior stock, or (y) the
exchange or conversion of one share of junior stock for or into another share
of stock that ranks junior to the Series A Preferred Stock in the payment of
dividends and in the distribution of assets on any liquidation, dissolution or
winding up of AIG; or

•         
 through the use of the proceeds of a substantially contemporaneous
sale of other shares of stock that ranks junior to the Series A Preferred Stock
in the payment of dividends and in the distribution of assets on any
liquidation, dissolution or winding up of AIG.

Redemption

The Series A Preferred Stock is perpetual and has no
maturity date. We may redeem the Series A Preferred Stock at our option:

•         
 in whole, but not in part, at any time prior to March 15, 2024,
within 90 days after the occurrence of a “rating agency event,” at a redemption
price equal to $25,500 per share of the Series A Preferred Stock (equivalent to
$25.50 per Depositary Share), plus an amount equal to any dividends per share
that have been declared but not paid prior to the redemption date (with no
amount in respect of any dividends that have not been declared prior to such
date), or

•         
 (i) in whole, but not in part, at any time prior to March 15, 2024,
within 90 days after the occurrence of a “regulatory capital event,” or (ii) in
whole or in part, from time to time, on or after March 15, 2024, in each case,
at a redemption price equal to $25,000 per share of the Series A Preferred
Stock (equivalent to $25.00 per Depositary Share), plus an amount equal to any
dividends per share that have been declared but not paid prior to the
redemption date (with no amount in respect of any dividends that have not been
declared prior to such date).

For purposes of this section, “rating agency event”
means that any nationally recognized statistical rating organization within the
meaning of Section 3(a)(62) of the Exchange Act that then publishes a rating
for us (a “rating agency”) amends, clarifies or changes the criteria it uses to
assign equity credit to securities such as the Series A Preferred Stock, which
amendment, clarification or change results in:

 

 

•         
 the shortening of the length of time the Series A Preferred Stock
is assigned a particular level of equity credit by that rating agency as
compared to the length of time it would have been assigned that level of equity
credit by that rating agency or its predecessor on the initial issuance of the
Series A Preferred Stock; or

•         
 the lowering of the equity credit (including up to a lesser
amount) assigned to the Series A Preferred Stock by that rating agency as
compared to the equity credit assigned by that rating agency or its predecessor
on the initial issuance of the Series A Preferred Stock.

For purposes of this section, “regulatory capital
event” means our good faith determination that, as a result of:

•         
 any amendment to, or change in, the laws, rules or regulations of
the United States or any political subdivision of or in the United States or
any other governmental agency or instrumentality as may then have group-wide
oversight of AIG’s regulatory capital that is enacted or becomes effective
after the initial issuance of the Series A Preferred Stock,

•         
 any proposed amendment to, or change in, those laws, rules or
regulations that is announced or becomes effective after the initial issuance
of the Series A Preferred Stock, or

•         
 any official administrative decision or judicial decision or
administrative action or other official pronouncement interpreting or applying
those laws, rules or regulations that is announced after the initial issuance
of the Series A Preferred Stock,

there is
more than an insubstantial risk that the full liquidation preference (as
defined below) per share of the Series A Preferred Stock outstanding from time
to time would not qualify as capital (or a substantially similar concept) for
purposes of any group capital standard to which we are or will be subject.

In case of any redemption of only part of the shares
of Series A Preferred Stock at the time outstanding, the shares to be redeemed
will be selected either pro rata from the holders of record of the Series A
Preferred Stock in proportion to the number of shares of the Series A Preferred
Stock held by such holders or by lot. Subject to the provisions of the
certificate of designations relating to the Series A Preferred Stock, our board
(or a duly authorized committee of the board) will have full power and
authority to prescribe the terms and conditions on which shares of the Series A
Preferred Stock will be redeemed from time to time. If we will have issued
certificates for the Series A Preferred Stock and fewer than all shares
represented by any certificates are redeemed, new certificates will be issued
representing the unredeemed shares without charge to the holders thereof.

The Series A Preferred Stock is not subject to any
mandatory redemption, sinking fund or other similar provisions. Holders of the
Series A Preferred Stock have no right to require redemption of any shares of
the Series A Preferred Stock.

Liquidation
Rights

In the event of any liquidation, dissolution or
winding up of the affairs of AIG, whether voluntary or involuntary, before any
distribution or payment out of our assets may be made to or set aside for the
holders of any junior stock, holders of the Series A Preferred Stock will be
entitled to receive out of our assets legally available for distribution to our
stockholders an amount equal to the stated amount per share, together with an
amount equal to all dividends (if any) that have been declared but not paid
prior to the date of payment (without any amount in respect of dividends that
have not been declared prior to such payment date) (for purposes of this
section, the “liquidation preference”).

 

 

If our assets are not sufficient to pay the
liquidation preference in full to all holders of the Series A Preferred Stock
and all holders of any class or series of our stock that ranks on a parity with
the Series A Preferred Stock in the distribution of assets on liquidation,
dissolution or winding up of AIG (for purposes of this section, the
“liquidation preference parity stock”), the amounts paid to the holders of the
Series A Preferred Stock and to the holders of all liquidation preference
parity stock will be pro rata in accordance with the respective aggregate
liquidation preferences of the Series A Preferred Stock and all such
liquidation preference parity stock. In any such distribution, the “liquidation
preference” of any holder of our stock other than the Series A Preferred Stock
means the amount otherwise payable to such holder in such distribution
(assuming no limitation on our assets available for such distribution),
including an amount equal to any declared but unpaid dividends in the case of
any holder of stock on which dividends accrue on a noncumulative basis and, in
the case of any holder of stock on which dividends accrue on a cumulative
basis, an amount equal to any unpaid, accrued, cumulative dividends, whether or
not earned or declared, as applicable. If the liquidation preference has been
paid in full to all holders of the Series A Preferred Stock and all holders of
any liquidation preference parity stock, the holders of junior stock will be
entitled to receive all of our remaining assets according to their respective
rights and preferences.

For purposes of the liquidation rights, the merger,
consolidation or other business combination of us with or into any other
corporation, including a transaction in which the holders of the Series A Preferred
Stock receive cash or property for their shares, or the sale, conveyance,
lease, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of our assets, will not constitute a
liquidation, dissolution or winding up of AIG.

Voting
Rights

Except as indicated below or otherwise required by
law, the holders of the Series A Preferred Stock do not have any voting rights.

Right to
Elect Two Directors on Nonpayment of Dividends

If and whenever dividends payable on the Series A
Preferred Stock or any class or series of dividend parity stock having voting
rights equivalent to those described in this paragraph (for purposes of this
section, “voting parity stock”) have not been declared and paid (or, in the
case of voting parity stock bearing dividends on a cumulative basis, will be in
arrears) in an aggregate amount equal to full dividends for at least six quarterly
dividend periods or their equivalent (whether or not consecutive) (for purposes
of this section, a “nonpayment event”), the number of directors then
constituting our board will be automatically increased by two and the holders
of the Series A Preferred Stock, together with the holders of any outstanding
voting parity stock then entitled to vote for additional directors, voting
together as a single class in proportion to their respective stated amounts,
will be entitled to elect the two additional directors (for purposes of this
section, the “preferred stock directors”); provided that our board will at no
time include more than two preferred stock directors (including, for purposes
of this limitation, all directors that the holders of any series of voting
preferred stock are entitled to elect pursuant to like voting rights).

In the event that the holders of the Series A
Preferred Stock and such other holders of voting parity stock will be entitled
to vote for the election of the preferred stock directors following a
nonpayment event, such directors will be initially elected following such
nonpayment event only at a special meeting called at the request of the holders
of record of at least 20% of the stated amount of the Series A Preferred Stock
and each other series of voting parity stock then outstanding (unless such
request for a special meeting is received less than 90 days before the date
fixed for the next annual or special meeting of our stockholders, in which
event such election will be held only at such next annual or special meeting of
stockholders), and at each subsequent annual meeting of our stockholders. Such
request to call a special 

 

 

meeting for the initial
election of the preferred stock directors after a nonpayment event will be made
by written notice, signed by the requisite holders of the Series A Preferred
Stock or voting parity stock, and delivered to our secretary, or as may
otherwise be required or permitted by applicable law. If our secretary fails to
call a special meeting for the election of the preferred stock directors within
20 days of receiving proper notice, any holder of the Series A Preferred Stock
may call such a meeting at our expense solely for the election of the preferred
stock directors, and for this purpose and no other (unless provided otherwise
by applicable law) such Series A Preferred Stock holder will have access to our
stock ledger.

When (i) dividends have been paid regularly on the
Series A Preferred Stock for at least one year after a nonpayment event, and
(ii) the rights of holders of any voting parity stock to participate in
electing the preferred stock directors will have ceased, the right of holders
of the Series A Preferred Stock to participate in the election of preferred
stock directors will cease (but subject always to the revesting of such voting
rights in the case of any future nonpayment event), the terms of office of all
the preferred stock directors will immediately terminate, and the number of
directors constituting our board will automatically be reduced accordingly.

Any preferred stock director may be removed at any
time without cause by the holders of record of a majority of the outstanding
shares of the Series A Preferred Stock and voting parity stock, when they have
the voting rights described above (voting together as a single class in
proportion to their respective stated amounts). The preferred stock directors
elected at any such special meeting will hold office until the next annual
meeting of the stockholders if such office will not have previously terminated
as above provided. In case any vacancy will occur among the preferred stock
directors, a successor will be elected by our board to serve until the next
annual meeting of the stockholders on the nomination of the then remaining
preferred stock director or, if no preferred stock director remains in office,
by the vote of the holders of record of a majority of the outstanding shares of
the Series A Preferred Stock and such voting parity stock for which dividends
have not been paid, voting as a single class in proportion to their respective
stated amounts. The preferred stock directors will each be entitled to one vote
per director on any matter that will come before our board for a vote.

Other
Voting Rights

So long as any shares of the Series A Preferred Stock
are outstanding, in addition to any other vote or consent of stockholders
required by law or by our amended and restated certificate of incorporation,
the vote or consent of the holders of at least two thirds of the shares of the
Series A Preferred Stock at the time outstanding, voting together with any
other series of preferred stock that would be adversely affected in substantially
the same manner and entitled to vote as a single class in proportion to their
respective stated amounts (to the exclusion of all other series of preferred
stock), given in person or by proxy, either in writing without a meeting or by
vote at any meeting called for the purpose, will be necessary for effecting or
validating:

•         
 Amendment of Certificate of Incorporation or By-laws. Any
amendment, alteration or repeal of any provision of our amended and restated
certificate of incorporation or by-laws that would alter or change the voting
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely; provided that the amendment of the amended and restated
certificate of incorporation so as to authorize or create, or to increase the
authorized amount of, any class or series of stock that does not rank senior to
the Series A Preferred Stock in either the payment of dividends or in the
distribution of assets on any liquidation, dissolution or winding up of AIG
will not be deemed to affect adversely the voting powers, preferences or
special rights of the Series A Preferred Stock;

 

 

•         
 Authorization of Senior Stock. Any
amendment or alteration of the amended and restated certificate of
incorporation to authorize or create, or increase the authorized amount of, any
shares of any class or series or any securities convertible into shares of any
class or series of our capital stock ranking senior to the Series A Preferred
Stock in the payment of dividends or in the distribution of assets on any liquidation,
dissolution or winding up of AIG; or

•         
 Share Exchanges, Reclassifications, Mergers and Consolidations and
Other Transactions. Any consummation of  (x) a binding share
exchange or reclassification involving the Series A Preferred Stock, (y) a
merger or consolidation of AIG with another entity (whether or not a
corporation), or (z) a conversion, transfer, domestication or continuance of
AIG into another entity or an entity organized under the laws of another
jurisdiction, unless in each case (A) the shares of the Series A Preferred Stock
remain outstanding or, in the case of any such merger or consolidation with
respect to which we are not the surviving or resulting entity, or any such
conversion, transfer, domestication or continuance, the shares of Series A
Preferred Stock are converted into or exchanged for preference securities of
the surviving or resulting entity or its ultimate parent, and (B) such shares
remaining outstanding or such preference securities, as the case may be, have
such rights, preferences, privileges and voting powers, and limitations and
restrictions, and limitations and restrictions thereof, taken as a whole, as
are not materially less favorable to the holders thereof than the rights,
preferences, privileges and voting powers, and restrictions and limitations thereof,
of the Series A Preferred Stock immediately prior to such consummation, taken
as a whole.

The foregoing voting provisions will not apply if, at
or prior to the time when the act with respect to which the vote would
otherwise be required will be effected, all outstanding shares of the Series A
Preferred Stock have been redeemed or called for redemption on proper notice
and sufficient funds have been set aside by us for the benefit of the holders
of the Series A Preferred Stock to effect the redemption.

Under current provisions of the Delaware General
Corporation Law, the holders of issued and outstanding preferred stock are
entitled to vote as a class, with the consent of the majority of the class
being required to approve an amendment to our amended and restated certificate
of incorporation if the amendment would increase or decrease the aggregate
number of authorized shares of such class or increase or decrease the par value
of the shares of such class.

Transfer
Agent and Registrar

Equiniti Trust Company is the transfer agent and
registrar for the Series A Preferred Stock.

Description of the Depositary Shares

As described above under “Description of the Series A
Preferred Stock”, we issued fractional interests in shares of the Series A
Preferred Stock in the form of the Depositary Shares. Each Depositary Share
represents a 1/1,000th interest in a share of the Series A Preferred
Stock, and is evidenced by a depositary receipt. The shares of the Series A
Preferred Stock represented by the Depositary Shares are deposited under a
deposit agreement among us, Equiniti Trust Company, as the Depositary, and the
holders from time to time of the depositary receipts evidencing the Depositary
Shares. Subject to the terms of the deposit agreement, each holder of
Depositary Shares is entitled, through the Depositary, in proportion to the
applicable fraction of a share of the Series A Preferred Stock represented by
such Depositary Shares, to all the rights and preferences of the Series A
Preferred Stock represented thereby (including dividend, voting, redemption and
liquidation rights).

 

 

Dividends and Other
Distributions

The Depositary will distribute any cash dividends or
other cash distributions received in respect of the deposited Series A
Preferred Stock to the record holders of the Depositary Shares in proportion to
the number of the Depositary Shares held by each holder on the relevant record
date. The Depositary will distribute any property received by it other than
cash to the record holders of the Depositary Shares entitled to those
distributions, unless it determines that the distribution cannot be made
proportionally among those holders or that it is not feasible to make a
distribution. In that event, the Depositary may, with our approval, sell the
property and distribute the net proceeds from the sale to the holders of the
Depositary Shares in proportion to the number of the Depositary Shares they
hold.

Record dates for the payment of dividends and other
matters relating to the Depositary Shares are the same as the corresponding
record dates for the Series A Preferred Stock.

The amounts distributed to holders of the Depositary
Shares will be reduced by any amounts required to be withheld by the Depositary
or by us on account of taxes or other governmental charges.

Redemption
of the Depositary Shares

If we redeem the Series A Preferred Stock represented
by the Depositary Shares, in whole or in part, a corresponding number of
Depositary Shares will be redeemed from the proceeds received by the Depositary
resulting from the redemption of the Series A Preferred Stock held by the
Depositary. The redemption price per Depositary Share will be equal to
1/1,000th of the redemption price per share payable with respect to the
Series A Preferred Stock, plus any declared and unpaid dividends, without
accumulation of any undeclared dividends, on the shares of the Series A
Preferred Stock. Whenever we redeem shares of the Series A Preferred Stock held
by the Depositary, the Depositary will redeem, as of the same redemption date,
the number of the Depositary Shares representing shares of the Series A
Preferred Stock so redeemed.

In case of any redemption of less than all of the
outstanding Depositary Shares, the Depositary Shares to be redeemed will be
selected by the Depositary pro rata or by lot. In any such case, the Depositary
will redeem the Depositary Shares only in increments of 1,000 shares and any
integral multiple thereof.

Voting of
the Depositary Shares

When the Depositary receives notice of any meeting at
which the holders of the Series A Preferred Stock are entitled to vote, the
Depositary will mail (or otherwise transmit by an authorized method) the
information contained in the notice to the record holders of the Depositary Shares.
Each record holder of Depositary Shares on the record date, which is the same
date as the record date for the Series A Preferred Stock, may instruct the
Depositary to vote the amount of the Series A Preferred Stock represented by
the holder’s Depositary Shares. Although each Depositary Share is entitled to
1/1,000th of a vote, the Depositary can only vote whole shares of Series A
Preferred Stock. To the extent possible, the Depositary will vote the amount of
the Series A Preferred Stock represented by the Depositary Shares in accordance
with the instructions it receives. We will agree to take all reasonable actions
that the Depositary determines are necessary to enable the Depositary to vote
as instructed. If the Depositary does not receive specific instructions from
the holders of any Depositary Shares, it will not vote the amount of the Series
A Preferred Stock represented by such Depositary Shares.

Form of
the Depositary Shares

 

 

The Depositary Shares were issued in book-entry form
through DTC. The Series A Preferred Stock is issued in registered form to the
Depositary.

Depositary

Equiniti Trust Company is the Depositary for the
Depositary Shares.

V.                
 5.75% Series A-2 Junior Subordinated Debentures and 4.875% Series
A-3 Junior Subordinated Debentures

The following description of the
5.75% Series A-2 Junior Subordinated Debentures, which we refer
to in this section as the “Series A-2 Junior Subordinated Debentures”, and the
4.875% Series A-3 Junior Subordinated Debentures, which we refer to in this
section as the “Series A-3 Junior Subordinated Debentures” and, together with
the Series A-2 Junior Subordinated Debentures, the “Junior Subordinated
Debentures”, is a summary and does not purport to be complete. It is qualified
in its entirety by reference to the Junior Subordinated Indenture, dated as of
March 13, 2007 (as supplemented, the “Junior Subordinated Indenture”), between
American International Group, Inc. and The Bank of New York Mellon, as trustee,
which is supplemented in the case of the Series A-2 Junior Subordinated
Debentures by the Second Supplemental Indenture, dated as of March 15, 2007,
and which is supplemented in the case of the Series A-3 Junior Subordinated
Debentures by the Third Supplemental Indenture, dated as of March 15, 2007. We
encourage you to read the above referenced indenture, as supplemented, for
additional information.

General

The Series A-2 Junior Subordinated Debentures were
originally issued in an initial aggregate principal amount of £750,000,000.  The Series A-3 Junior Subordinated Debentures were originally
issued in an initial aggregate principal amount of €1,000,000,000. We may,
without the consent of the holders of the Junior Subordinated Debentures,
increase the principal amount of each series of the Junior Subordinated
Debentures by issuing additional debentures of each series on the same terms
and conditions (except that the initial public offering price, issue date and
initial interest payment date may vary) and with the same CUSIP number, ISIN
and common code as each series of the Junior Subordinated Debentures, provided
that the total principal amount of Series A-2 Junior Subordinated Debentures
outstanding may not exceed £1,500,000,000 and the total principal amount of
Series A-3 Junior Subordinated Debentures outstanding may not exceed €2,000,000,000
and any further issues must be fungible for United States federal income tax
purposes.

We will be required to repay the principal amount of
the Junior Subordinated Debentures on March 15, 2037, or, if that date is not a
business day, on the next business day (for purposes of this section, the
“scheduled maturity date”) only to the extent that we have sold “qualifying
capital securities” during a 180-day period ending on a notice date not more
than 30 or less than 10 business days prior to the scheduled maturity date. We
will use our commercially reasonable efforts, subject to “market disruption
events,” to sell enough qualifying capital securities to permit repayment of
the Junior Subordinated Debentures in full on the scheduled maturity date. If
any amount is not paid on the scheduled maturity date, it will remain
outstanding and continue to bear interest at a floating rate and we will
continue to use our commercially reasonable efforts to sell enough qualifying
capital securities to permit the repayment of any remaining principal amount of
the Junior Subordinated Debentures in full. On March 15, 2067, we must pay any
remaining principal and interest on the Junior Subordinated Debentures in full
whether or not we have sold qualifying capital securities. The Junior
Subordinated Debentures are our unsecured, subordinated obligations and are
junior in right of payment to all of our existing and future senior and
subordinated indebtedness. Each of the Series A-2 Junior Subordinated
Debentures and the Series A-3 

 

 

Junior Subordinated
Debentures rank pari passu with each other and with our Series A-1 and A-6
through A-9 Junior Subordinated Debentures (as used in this section, the
“outstanding parity securities”).

The Junior Subordinated Debentures were issued in
fully registered form and in denominations that are even multiples of €50,000. 

Interest

The Series A-2 Junior Subordinated
Debentures will bear interest from and including March 15, 2007 to but
excluding March 15, 2017, at the annual rate of 5.75%, payable
semi-annually in arrears on March 15 and September 15 of each year.
The Series A-3 Junior Subordinated Debentures will bear interest
from and including March 15, 2007 to but excluding March 15, 2017, at
the annual rate of 4.875%, payable annually in arrears on March 15 of each
year. Commencing on March 15, 2017, the Series A-2 Junior
Subordinated Debentures will bear interest from and including March 15,
2017 at a rate equal to three-month Sterling LIBOR plus 1.705% and the
Series A-3 Junior Subordinated Debentures will bear interest from and
including March 15, 2017 at a rate equal to three-month EURIBOR plus
1.73%, each payable quarterly in arrears on each March 15, June 15, September 15
and December 15. We refer to these dates as “interest payment dates” and
we refer to the period beginning on and including March 15, 2007 and
ending on but excluding the first interest payment date and each successive
period beginning on and including an interest payment date and ending on but
excluding the next interest payment date as an “interest period.” The amount of
interest payable for any interest period ending on or prior to March 15,
2017 will be computed on the basis of the number of days from and including the
date on which the interest begins to accrue during the relevant interest period
to but excluding the scheduled date on which the interest is payable, divided
by the number of days in the relevant interest period (including the first day
but excluding the last day of such interest period). The amount of interest
payable for any interest period commencing on or after March 15, 2017 will
be computed on the basis of, in the case of the Series A-2 Junior
Subordinated Debentures, a 365-day year, and in the case of the
Series A-3 Junior Subordinated Debentures, a 360-day year
and the actual number of days elapsed. In the event that any interest payment
date on or before March 15, 2017 would otherwise fall on a day that is not
a business day, the interest payment due on that date will be postponed to the
next day that is a business day and no interest will accrue as a result of that
postponement. In the event that any interest payment date after March 15,
2017 would otherwise fall on a day that is not a business day, that interest
payment date will be postponed to the next day that is a business day; however,
if the postponement would cause the day to fall in the next calendar month, the
interest payment date will instead be brought forward to the immediately preceding
business day.

Accrued interest that is not paid on the applicable
interest payment date will bear additional interest, to the extent permitted by
law, at the interest rate in effect from time to time, from the relevant
interest payment date, compounded on each subsequent interest payment date.

For the purposes of calculating interest due on
the Series A-2 Junior Subordinated Debentures after
March 15, 2017:

·        
 “Three-month Sterling LIBOR,” with respect to
any quarterly interest period, will be the rate (expressed as a percentage per
annum) for deposits in pounds Sterling for a three-month period that appears on
Reuters Screen LIBOR01 as of 11:00 a.m., London time, on the first day of such
interest period. If three-month Sterling LIBOR cannot be determined as
described above, the rate for such interest period will be determined on the
basis of the rates at which deposits in pounds Sterling are offered by four
leading banks selected by the calculation agent, at approximately 11:00 a.m.,
London time, on the first day of such interest period, to prime banks in the
London interbank market for a period 

 

 

of three months
commencing on the first day of such interest period. These quotations will be
based upon a principal amount that is representative of a single transaction in
pounds Sterling in such market at the time. If two or more quotations are
provided, three-month Sterling LIBOR for the interest period will be the
arithmetic mean of the quotations. If fewer than two quotations are provided,
three-month Sterling LIBOR will be the arithmetic mean of the rates quoted by
major banks in London, selected by the calculation agent, at approximately
11:00 a.m., London time, on the first day of such interest period. The rates
quoted will be for loans in pounds Sterling for a three-month period to leading
European banks commencing on the first day of such interest period. Rates
quoted must be based on a principal amount that is representative of a single
transaction in pounds Sterling in such market at that time. If fewer than three
banks are quoting rates, three-month Sterling LIBOR for the applicable period
will be the same as for the immediately preceding interest period, or, in the
case of the quarterly interest period beginning on March 15, 2017, three-month
Sterling LIBOR will be 5.53%.

·        
 “Calculation agent” means AIG Financial Products Corp., or any
other firm appointed by us, acting as calculation agent.

·        
 A “London banking day” means any day on which dealings in pounds
Sterling are transacted in the London interbank market.

·        
 “Reuters Screen LIBOR01” means the display designated on Reuters
Screen LIBOR01 or any successor service or page for the purpose of displaying
LIBOR offered rates of major banks, as determined by the calculation agent.

For the purposes of calculating interest due on
the Series A-3 Junior Subordinated Debentures after
March 15, 2017:

·        
 “Three-month EURIBOR,”  with
respect to any quarterly interest period, will be the rate (expressed as a
percentage per annum) for deposits in euro for a three-month period that
appears on Reuters Screen EURIBOR01 as of 11:00 a.m., Brussels time, on
the second TARGET settlement day (as defined below for purposes of this
section) immediately preceding the first day of such interest period. If the
Reuters Screen EURIBOR01 does not include such a rate or is unavailable on such
date, the calculation agent (as defined below for purposes of this section)
will request the principal London office of each of four major banks in the
Euro-zone inter-bank market, as selected by the calculation agent (after
consultation with us), to provide such bank’s offered quotation (expressed as a
percentage per annum) as of approximately 11:00 am., Brussels time, on such
date, to prime banks in the Euro-zone inter-bank market for deposits in an
amount in euro that is representative for a single transaction in such market
and for a three-month period beginning on the day that is two TARGET settlement
days after such date. If at least two such offered quotations are so provided,
the rate for the interest period will be the arithmetic mean of such
quotations. If fewer than two such quotations are so provided, the calculation
agent will request each of three major banks in London, as selected by the
calculation agent, to provide such bank’s rate (expressed as a percentage per
annum), as of approximately 11:00 a.m., London time, on such date. Rates
quoted will be for loans in euro to leading European banks for a three-month
period beginning on the day that is two TARGET settlement days after such date
based on a principal amount that is representative of a single transaction in
that market at that time. If at least two such rates are so provided, the rate
for the interest period will be the arithmetic mean of such rates. If fewer
than two such rates are so provided then the rate for the interest period will
be 

 

 

the rate in effect with respect to the immediately
preceding interest period, or, in the case of the quarterly interest period
beginning on March 15, 2017, three-month EURIBOR will be 3.879%.

·        
 “Calculation agent” means AIG Financial Products Corp., or any
other firm appointed by us, acting as calculation agent.

·        
 A “TARGET settlement day” means a day on which the Trans-European
Automated Real-Time Gross Settlement Express Transfer (TARGET) System is open.

·        
 “Reuters Screen EURIBOR01” means the display designated on Reuters
Screen EURIBOR01 or any successor service or page for the purpose of displaying
EURIBOR offered rates of major banks, as determined by the calculation agent.

All percentages resulting from any calculation of
three-month Sterling LIBOR or three-month EURIBOR will be rounded upward or
downward, as appropriate, to the next higher or lower one hundred-thousandth of
a percentage point (for example, 9.876541% (or .09876541) would be rounded down
to 9.87654% (or .0987654) and 9.876545% (or .09876545) would be rounded up to
9.87655% (or .0987655)). All amounts used in or resulting from any calculation
will be rounded upward or downward, as appropriate, to the nearest cent, with
one-half cent or more being rounded upward. The establishment of three-month
Sterling LIBOR or three-month EURIBOR for each interest period by the
calculation agent shall (in the absence of manifest error) be final and
binding.

In determining three-month Sterling LIBOR or
three-month EURIBOR during a particular interest period, the calculation agent
may obtain rate quotes from various banks or dealers active in the relevant
market. Those reference banks and dealers may include the calculation agent
itself and our other affiliates.

Option to
Defer Interest Payments

We may elect at one or more times to defer payment of
interest on the Junior Subordinated Debentures for one or more consecutive
interest periods that do not exceed 10 years. We may defer payment of
interest prior to, on or after the scheduled maturity date. We may not defer
interest beyond March 15, 2067 or the earlier redemption date of any Junior
Subordinated Debentures being redeemed. We currently do not intend to exercise
our option to defer interest on the Junior Subordinated Debentures.

Deferred interest on the Junior Subordinated
Debentures will bear interest at the then applicable interest rate, compounded
on each interest payment date, subject to applicable law. As used in this
section, a “deferral period” refers to the period beginning on an interest
payment date with respect to which we elect to defer interest and ending on the
earlier of (i) the tenth anniversary of that interest payment date and
(ii) the next interest payment date on which we have paid all accrued and
previously unpaid interest on the Junior Subordinated Debentures.

We have agreed in the Junior Subordinated Indenture
that:

·        
 immediately following the first interest payment date during the
deferral period on which we elect to pay current interest or, if earlier, the
fifth anniversary of the beginning of the deferral period, we will be required
to use commercially reasonable efforts to sell “common stock,” “qualifying
warrants” and “qualifying non-cumulative preferred stock” pursuant to the
alternative payment mechanism, unless we have delivered notice of a “market
disruption event,” and apply the “eligible proceeds,” as these terms are
defined 

 

 

in the Third Supplemental Indenture to the
Junior Subordinated Indenture, to the payment of any deferred interest (and
compounded interest) on the next interest payment date, and this requirement
will continue in effect until the end of the deferral period; and

·        
 we will not pay deferred interest on the Junior Subordinated
Debentures (and compounded interest thereon) prior to the final maturity date
from any source other than eligible proceeds, unless otherwise required by an
applicable regulatory authority, the deferral period is terminated on the
interest payment date following certain business combinations described below
or an event of default has occurred and is continuing.

We may pay current interest at all times from any
available funds.

If we are involved in a merger, consolidation,
amalgamation, binding share exchange or conveyance, transfer or lease of assets
substantially as an entirety to any other person or a similar transaction (a “business
combination”) where immediately after the consummation of the business
combination more than 50% of the surviving or resulting entity’s voting stock
is owned by the shareholders of the other party to the business combination or
continuing directors cease for any reason to constitute a majority of the
directors of the surviving or resulting entity, then the foregoing rules will
not apply to any deferral period that is terminated on the next interest
payment date following the date of consummation of the business combination.
For purposes of this section, “continuing director” means a director who was a
director of AIG at the time the definitive agreement relating to the
transaction was approved by the AIG board of directors.

Although our failure to comply with the foregoing
rules with respect to the alternative payment mechanism and payment of interest
during a deferral period will be a breach of the Junior Subordinated Indenture,
it will not constitute an event of default under the Junior Subordinated Indenture
or give rise to a right of acceleration or similar remedy.

We will give the holders of the Junior Subordinated
Debentures and the indenture trustee written notice of our election to begin a
deferral period at least one business day before the record date for the next
interest payment date. However, our failure to pay interest on any interest
payment date will itself constitute the commencement of a deferral period
unless we pay such interest within five business days after the interest
payment date, whether or not we provide a notice of deferral. A failure to pay
interest will not give rise to an event of default unless we fail to pay
interest, including compounded interest, in full for a period of 30 days
after the conclusion of a 10-year period following the commencement
of any deferral period.

If we have paid all deferred interest on
the Junior Subordinated Debentures, we can again defer interest payments
on the Junior Subordinated Debentures as described above. The Junior
Subordinated Indenture does not limit the number or frequency of interest
deferral periods.

 

Dividend and Other Payment Stoppages during Interest
Deferral and under Certain Other Circumstances

We have agreed that, so long as any Junior
Subordinated Debentures remain outstanding, if an event of default has occurred
and is continuing or we have given notice of our election to defer interest
payments but the related deferral period has not yet commenced or a deferral
period is continuing, then we will not, and will not permit any of our
subsidiaries to:

 

 

·        
 declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any shares of
our capital stock;

·        
 make any payment of principal of, or interest or premium, if any,
on, or repay, purchase or redeem any of our debt securities that upon our
liquidation rank pari passu with, or junior to, the Junior
Subordinated Debentures; or

·        
 make any guarantee payments regarding any guarantee by us of the
junior subordinated debt securities of any of our subsidiaries if the guarantee
ranks pari passu with, or junior in interest to,
the Junior Subordinated Debentures.

The
restrictions listed above do not apply to:

·        
 purchases, redemptions or other acquisitions of shares of our
capital stock in connection with:

•         
 any employment benefit plan or other compensatory contract or
arrangement; or the Assurance Agreement, dated as of June 27, 2005, by AIG
in favor of eligible employees and relating to specified obligations of Starr
International Company, Inc. (as such agreement may be amended, supplemented,
extended, modified or replaced from time to time); or

•         
 a dividend reinvestment, stock purchase plan or other similar
plan;

·        
 any exchange or conversion of any class or series of our capital
stock (or any capital stock of a subsidiary of AIG) for any class or series of
our capital stock or of any class or series of our indebtedness for any class
or series of our capital stock; or

·        
 the purchase of fractional interests in shares of our capital
stock in accordance with the conversion or exchange provisions of such capital
stock or the security being converted or exchanged; or

·        
 any declaration of a dividend in connection with any stockholders’
rights plan, or the issuance of rights, equity securities or other property
under any stockholders’ rights plan, or the redemption or repurchase of rights
in accordance with any stockholders’ rights plan; or

·        
 any dividend in the form of equity securities, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise of
the warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks on a parity with or junior to such equity
securities; or

·        
 any payment during a deferral period of current interest in
respect of our debt securities that upon our liquidation rank pari
passu with the Junior Subordinated Debentures that is made pro
rata to the amounts due on such pari passu securities
and on the Junior Subordinated Debentures and any payments of deferred interest
on pari passu securities that, if not made, would cause us to
breach the terms of the instrument governing such pari passu securities; or 

·        
 any payment of principal in respect of pari passu securities
having an earlier scheduled maturity date than the Junior Subordinated
Debentures, as required under a provision of 

 

 

such pari
passu securities that is substantially the same as the repayment
provisions for the Junior Subordinated Debentures or any such payment in
respect of pari passu securities having the same scheduled
maturity date as the Junior Subordinated Debentures that is made on a pro
rata basis among one or more series of such securities and the Junior
Subordinated Debentures; or

·        
 any repayment or redemption of a security necessary to avoid a
breach of the instrument governing the same.

In addition, if any deferral period lasts longer than
one year, neither we nor any of our subsidiaries will be permitted to purchase,
redeem or otherwise acquire any securities ranking junior to or pari
passu with any APM qualifying securities (for purposes of this
section, as defined below under “Alternative Payment Mechanism”) the proceeds
of which were used to settle deferred interest during the relevant deferral
period until the first anniversary of the date on which all deferred interest
has been paid, subject to the exceptions listed above. However, if we are
involved in a business combination where immediately after its consummation
more than 50% of the surviving or resulting entity’s voting stock is owned by
the shareholders of the other party to the business combination or continuing
directors cease for any reason to constitute a majority of the surviving or
resulting entity’s board of directors, then the one-year restriction on
repurchases described in the previous sentence will not apply to any deferral
period that is terminated on the next interest payment date following the date
of consummation of the business combination.

Alternative Payment Mechanism

Obligations
and Limitations Applicable to All Deferral Periods

Subject to the conditions described under “Option to
Defer Interest Payments” above and to the exclusions described in “Market
Disruption Events” below, if we defer interest on the Junior Subordinated
Debentures, we will be required, commencing not later than (i) the first
interest payment date on which we elect to pay current interest or (ii) if
earlier, the business day following the fifth anniversary of the commencement
of the deferral period, to issue “APM qualifying securities,” as defined below
for purposes of this section, subject to the limits described below, until we
have raised an amount of “eligible proceeds,” as defined below for purposes of
this section, at least equal to the aggregate amount of accrued and unpaid
deferred interest on the Junior Subordinated Debentures. We refer to this
period as the “APM period” and to this method of funding the payment of accrued
and unpaid interest as the “alternative payment mechanism.”

We have agreed to apply eligible proceeds raised
during any deferral period pursuant to the alternative payment mechanism to pay
deferred interest on the Junior Subordinated Debentures.

“Eligible proceeds,” for each relevant interest
payment date, means the net proceeds (after underwriters’ or placement agents’
fees, commissions or discounts and other expenses relating to the issuance or
sale) that AIG has received during the 180 days prior to the related distribution
date from the issuance of APM qualifying securities to persons that are not
subsidiaries of AIG.

“APM qualifying securities” means common stock,
qualifying warrants and qualifying non-cumulative preferred stock.

“Common stock,” under the alternative payment
mechanism, means shares of AIG common stock, including treasury stock and
shares of common stock sold pursuant to AIG’s dividend reinvestment plan and
employee benefit plans up to the “maximum share number,” as defined below.

 

 

“Qualifying
warrants” means net share settled warrants to purchase shares of common stock
that:

·        
 have an exercise price greater than the “current stock market
price” of our common stock as of their date of pricing;

·        
 we are not entitled to redeem for cash and the holders are not
entitled to require us to repurchase for cash in any circumstances; and

·        
 do not entitle the holders thereof to purchase a number of shares
of our common stock in excess of the then applicable “maximum warrant number,”
as defined below.

We intend to issue qualifying warrants with exercise
prices at least 10% above the current stock market price of our common stock on
the date of pricing of the warrants. The “current stock market price” of our
common stock on any date is the closing sale price per share (or if no closing
sale price is reported, the average of the bid and ask prices or, if more than
one in either case, the average of the average bid and the average ask prices)
on that date as reported in composite transactions by the New York Stock
Exchange or, if our common stock is not then listed on the New York Stock
Exchange, as reported by the principal U.S. securities exchange on which
our common stock is traded. If our common stock is not listed on any
U.S. securities exchange on the relevant date, the “current stock market
price” will be the average of the mid-point of the bid and ask prices for our
common stock on the relevant date from each of at least three nationally
recognized independent investment banking firms selected by us for this
purpose.

“Qualifying non-cumulative preferred stock” means our
non-cumulative perpetual preferred stock that (i) contains no remedies
other than “permitted remedies” and (ii)(a) is redeemable, but is subject to
“intent-based replacement disclosure,” as such terms are defined in the
Replacement Capital Covenant with respect to each series of Junior Subordinated
Debentures, and has a provision that prohibits AIG from making any
distributions thereon upon its failure to satisfy one or more financial tests
set forth therein or (b) is subject to a replacement capital covenant
substantially similar to the replacement capital covenant applicable to the
Junior Subordinated Debentures. We are not permitted to issue qualifying
non-cumulative preferred stock for the purpose of paying deferred interest to
the extent the net proceeds of such issuance applied to pay interest on the
Junior Subordinated Debentures pursuant to the alternative payment mechanism,
together with the net proceeds of all prior issuances of qualifying
non-cumulative preferred stock applied during the current and all prior
deferral periods, would exceed 25% of the aggregate principal amount of the
Junior Subordinated Debentures initially issued under the junior debt indenture
(the “preferred stock issuance cap”).

The “maximum share number” will initially equal
100 million and the “maximum warrant number” will initially equal
100 million. If the number of issued and outstanding shares of our common
stock is changed into a different number of shares or a different class by
reason of any stock split, reverse stock split, stock dividend,
reclassification, recapitalization, split-up, combination, exchange
of shares or other similar transaction, then the maximum share number and the
maximum warrant number will be correspondingly adjusted. We may, at our
discretion and without the consent of the holders of the Junior Subordinated
Debentures, increase the maximum share number or the maximum warrant number or
both (including through the increase of our authorized share capital, if
necessary) if we determine that such increase is necessary to allow us to issue
sufficient common stock and/or qualifying warrants to pay deferred
interest on the Junior Subordinated Debentures.

Additional Limitations Applicable to the First Five
Years of Any Deferral Period

We may become subject to the alternative payment
mechanism prior to the fifth anniversary of the commencement of a deferral
period if we elect to pay current interest prior to such date. In such event, 

 

 

we are not required to issue shares of common stock or
qualifying warrants under the alternative payment mechanism for the purpose of
paying deferred interest during the first five years of that deferral period to
the extent the number of shares of common stock issued and the number of shares
of common stock subject to such qualifying warrants, together with the number
of shares of common stock previously issued and the number of shares of common
stock subject to qualifying warrants previously issued during such deferral
period to pay interest on the Junior Subordinated Debentures pursuant to the
alternative payment mechanism would, in the aggregate, exceed 2% of the total
number of issued and outstanding shares of our common stock as of the date of
our then most recent publicly available consolidated financial statements (the
“stock and warrant issuance cap”).

Once we reach the stock and warrant issuance cap for a
deferral period, we will not be required to issue more shares of common stock
or qualifying warrants under the alternative payment mechanism during the first
five years of such deferral period even if the stock and warrant issuance cap
subsequently increases because of a subsequent increase in the number of
outstanding shares of our common stock. The stock and warrant issuance cap will
cease to apply after the fifth anniversary of the commencement of any deferral
period, at which point we must pay any deferred interest regardless of the time
at which it was deferred, using the alternative payment mechanism, subject to
the limitations described under “Obligations and Limitations Applicable to All
Deferral Periods” above and any market disruption event. In addition, if the
stock and warrant issuance cap is reached during a deferral period and we
subsequently pay all deferred interest, the stock and warrant issuance cap will
cease to apply at the termination of such deferral period, reset to zero and
will not apply again unless and until we start a new deferral period. The
preferred stock issuance cap, however, does not reset to zero even if we pay
all deferred interest and the net proceeds from sales of qualifying
non-cumulative preferred stock applied pursuant to the alternative payment mechanism
during such deferral period and all prior deferral periods cumulate as
qualifying non-cumulative preferred stock is issued to pay deferred interest.

Remedies and Market Disruptions

Although our failure to comply with our obligations
with respect to the alternative payment mechanism will breach a covenant under
the Junior Subordinated Indenture, it will not constitute an event of default
thereunder or give rise to a right of acceleration or similar remedy.

If, due to a market disruption event or otherwise, we
were able to raise some, but not all, eligible proceeds necessary to pay all
deferred interest on any interest payment date, we will apply any available
eligible proceeds to pay accrued and unpaid interest on the applicable interest
payment date in chronological order based on the date each payment was first
deferred, and you will be entitled to receive your pro rata share
of any amounts so paid. If, in addition to the Junior Subordinated Debentures,
other pari passu securities are outstanding under which we are
obligated to sell common stock, qualifying warrants or qualifying
non-cumulative preferred stock and apply the net proceeds to the payment of
deferred interest or distributions, then on any date and for any period the
amount of net proceeds received by us from those sales and available for
payment of the deferred interest and distributions shall be applied to the
Junior Subordinated Debentures and those other pari passu securities
on a pro rata basis up to, in the case of common stock, the
stock and warrant issuance cap and the maximum share number, in the case of
qualifying warrants, the stock and warrant issuance cap and the maximum warrant
number and, in the case of qualifying non-cumulative preferred stock, the
preferred stock issuance cap (or comparable provisions in the instruments
governing those pari passu securities) in proportion to the
total amounts that are due on the Junior Subordinated Debentures and such pari
passu securities. The Junior Subordinated Debentures permit pro
rata payments to be made on any other series so long as we deposit
with our paying agent or segregate and hold in trust for payment the pro
rata proceeds applicable to such series that we have not paid.

 

 

Market Disruption Events

A “market disruption event” means, for purposes of
sales of APM qualifying securities pursuant to the alternative payment
mechanism or sales of qualifying capital securities, as applicable
(collectively, the “permitted securities”), the occurrence or existence of any
of the following events or sets of circumstances:

·        
 trading in securities generally (or in our shares specifically) on
the New York Stock Exchange or any other national securities exchange, or in
the over-the-counter market, on which our capital stock is then
listed or traded shall have been suspended or its settlement generally shall
have been materially disrupted or minimum prices shall have been established on
any such exchange or market by the relevant regulatory body or governmental
agency having jurisdiction that materially disrupts or otherwise has a material
adverse effect on trading in, or the issuance and sale of, permitted securities;

·        
 we would be required to obtain the consent or approval of our
stockholders or a regulatory body (including, without limitation, any
securities exchange) or governmental authority to issue permitted securities
and we fail to obtain that consent or approval notwithstanding our commercially
reasonable efforts to obtain that consent or approval;

·        
 an event occurs and is continuing as a result of which the
offering document for the offer and sale of permitted securities would, in our
reasonable judgment, contain an untrue statement of a material fact or omit to
state a material fact required to be stated in that offering document or
necessary to make the statements in that offering document not
misleading, provided that one or more events described under
this bullet point shall not constitute a market disruption event with respect
to a period of more than 90 days in any 180-day period;

·        
 we reasonably believe that the offering document for the offer and
the sale of permitted securities would not be in compliance with a rule or
regulation of the Securities and Exchange Commission (for reasons other than
those referred to in the immediately preceding bullet point) and we are unable
to comply with such rule or regulation or such compliance is unduly burdensome,
provided that one or more events described under this bullet point shall not
constitute a market disruption event with respect to a period of more than
90 days in any 180-day period;

·        
 a banking moratorium shall have been declared by the federal or
state authorities of the United States that results in a disruption of any of
the markets on which our securities are trading;

·        
 a material disruption shall have occurred in commercial banking or
securities settlement or clearance services in the United States;

·        
 the United States shall have become engaged in hostilities, there
shall have been an escalation in hostilities involving the United States, there
shall have been a declaration of a national emergency or war by the United
States or there shall have occurred any other national or international
calamity or crisis such that market trading in our capital stock has been
materially disrupted; or

·        
 there shall have occurred such a material adverse change in
general domestic or international economic, political or financial conditions,
including without limitation as a 

 

 

result of terrorist
activities, or the effect of international conditions on the financial markets
in the United States, that materially disrupts the capital markets such as to
make it, in our judgment, impracticable or inadvisable to proceed with the
offer and sale of the permitted securities.

We will be excused from our obligations under the
alternative payment mechanism in respect of any interest payment date if we
provide written certification to the indenture trustee (which the indenture
trustee will promptly forward upon receipt to each holder of record of Junior
Subordinated Debentures) no more than 30 and no less than 10 business days in
advance of that interest payment date certifying that:

·        
 a market disruption event occurred after the immediately preceding
interest payment date; and

·        
 either (a) the market disruption event continued for the
entire period from the business day immediately following the preceding
interest payment date to the business day immediately preceding the date on
which that certification is provided or (b) the market disruption event
continued for only part of this period, but we were unable after commercially
reasonable efforts to raise sufficient eligible proceeds during the rest of
that period to pay all accrued and unpaid interest.

We will not be excused from our obligations under the
alternative payment mechanism or our obligations in connection with the
repayment of principal if we determine not to pursue or complete the sale of
permitted securities due to pricing, dividend rate or dilution considerations.

Limitation on Claims in the Event of Our Bankruptcy,
Insolvency or Receivership

The Junior Subordinated Indenture provides that a
holder of Junior Subordinated Debentures, by that holder’s acceptance of the
Junior Subordinated Debentures, agrees that in the event of our bankruptcy,
insolvency or receivership prior to the redemption or repayment of such
holder’s Junior Subordinated Debentures, that holder of Junior
Subordinated Debentures will only have a claim for deferred and unpaid interest
(including compounded interest thereon) to the extent such interest (including
compounded interest thereon) relates to the earliest two years of the portion
of the deferral period for which interest has not so been paid.

Early Redemption

The Junior Subordinated Debentures:

·        
 are redeemable, in whole, but not in part, at our option at any
time prior to March 15, 2017, and, in whole or in part, on any interest
payment date on or after March 15, 2017, as described below;

·        
 are redeemable at any time, in whole but not in part, upon the
occurrence of a “rating agency event” or a “tax event”, as described below;

·        
 are redeemable at any time, in whole but not in part, if we become
obligated to pay additional amounts, as described below under “Additional
Amounts”; and

·        
 are not subject to any sinking fund, a holder’s right to require
us to purchase such holder’s Junior Subordinated Debentures or similar
provisions;

 

 

provided that any redemption of
Junior Subordinated Debentures will be subject to the restrictions described in
the Replacement Capital Covenant with respect to each series of Junior
Subordinated Debentures.

In the case of a redemption on or after March 15,
2017, or if we become obligated to pay “additional amounts” other than as a
result of an event that would, upon receipt of the opinion required under “tax
event,” constitute a tax event, the redemption price will be equal to 100% of
the principal amount of the applicable series of Junior Subordinated
Debentures, plus accrued interest thereon to the date of redemption.

In the case of a redemption prior to March 15,
2017, the redemption price will be equal to:

·        
 100% of the principal amount of the applicable series of Junior
Subordinated Debentures; or

·        
 as determined by the calculation agent, if greater, the sum of the
present values of the remaining scheduled payments of principal (assuming for
this purpose that the Junior Subordinated Debentures are to be redeemed at
their principal amount on March 15, 2017) discounted from
March 15, 2017, and interest thereon that would have been payable to and
including March 15, 2017 (not including any portion of any payment of
interest accrued to the redemption date) discounted from the relevant interest
payment date to the redemption date on, in the case of the Series A-2 Junior
Subordinated Debentures, a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Sterling gross redemption yield (as
determined by reference to the middle market price) at 11:00 a.m., London time,
on the reference date of the Sterling reference bond, and in the case of the
Series A-3 Junior Subordinated Debentures, an annual basis at the then current
yield on the comparable Bundesobligationen issue plus (i) 0.50% in the
case of any redemption in whole upon the occurrence of a “rating agency event”
or a “tax event” or (ii) 0.15% or 0.25% for the Series A-2 Junior
Subordinated Debentures and Series A-3 Junior Subordinated Debentures,
respectively, in all other cases;

plus, in either case, accrued interest on the Junior
Subordinated Debentures to the date of redemption.

If we
redeem or repay the Junior Subordinated Debentures when any deferred interest
remains unpaid, the unpaid deferred interest (including compounded interest
thereon) may only be paid pursuant to the alternative payment mechanism, as
described under “Alternative Payment Mechanism” above.

The definitions of certain terms used in the paragraph
above are listed below.

“Comparable Bundesobligationen issue” means the 3.750%
German Bundesobligationen due January 4, 2017 or, if such security is no
longer in issue, the German Bundesobligationen security selected by an
independent investment bank selected by the calculation agent as having a
maturity comparable to the term remaining from the redemption date to
March 15, 2017 that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity.

“Reference date” means the date which is three
business days prior to the date fixed for redemption. 

“Sterling gross redemption yield” means, the gross
redemption yield on such security (as calculated by the calculation agent on
the basis set out in the United Kingdom Debt Management Office 

 

 

in the paper “Formulae for Calculating Gilt Prices from
Yields” page 4, Section One: Price/Yield Formulae “Conventional
Gilts; Double-dated and Undated Gilts with Assumed (or Actual) Redemption on a
Quasi-Coupon Date” (published on June 8, 1998 and updated on March 15,
2002 and as further updated or amended) on a semi-annual compounding basis
(converted on an annualized yield and rounded up (if necessary) to four decimal
places)). 

“Sterling reference bond” means the 4.00% Treasury
Stock due September 7, 2016, or if such stock is no longer in issue such
other United Kingdom government stock with a maturity date as near as possible
to March 15, 2017, as the calculation agent may, with the advice of the
Sterling reference market makers, determine to be appropriate by way of
substitution for the 4.00% Treasury Stock due September 7, 2016. 

“Sterling reference market makers” means three brokers
or market makers of gilts selected by the calculation agent. 

For
purposes of the above, a “tax event” means that we have requested and received
an opinion of counsel experienced in such matters to the effect that, as a
result of any:

·        
 amendment to or change in the laws or regulations of the United
States or any political subdivision or taxing authority of or in the United
States that is enacted or becomes effective after the date of the prospectus
supplement relating to the Junior Subordinated Debentures;

·        
 proposed change in those laws or regulations that is announced
after the date of the prospectus supplement relating to the Junior Subordinated
Debentures;

·        
 official administrative decision or judicial decision or
administrative action or other official pronouncement interpreting or applying
those laws or regulations that is announced after the date of the prospectus
supplement relating to the Junior Subordinated Debentures; or

·        
 threatened challenge asserted in connection with an audit of us,
or a threatened challenge asserted in writing against any other taxpayer that
has raised capital through the issuance of securities that are substantially
similar to the Junior Subordinated Debentures;

there is more than an insubstantial risk that interest
payable by us on the Junior Subordinated Debentures is not, or will not be,
deductible by us, in whole or in part, for United States federal income tax
purposes.

For purposes of the above, a “rating agency event”
means a change by any nationally recognized statistical rating organization
within the meaning of Rule 15c3-1 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), that currently
publishes a rating for us (a “rating agency”) to its equity credit criteria for
securities such as the Junior Subordinated Debentures, as such criteria was in
effect on the date of the prospectus supplement relating to the Junior
Subordinated Debentures (the “current criteria”), which change results in a
lower equity credit being given to the Junior Subordinated Debentures as of the
date of such change than the equity credit that would have been assigned to the
Junior Subordinated Debentures as of the date of such change by such rating
agency pursuant to its current criteria.

If less than all of the applicable series of the
Junior Subordinated Debentures are to be redeemed at any time, selection of
Junior Subordinated Debentures of the applicable series for redemption will be
made by the indenture trustee under the Junior Subordinated Indenture in
compliance with the rules and 

 

 

requirements of the New
York Stock Exchange or the principal securities exchange, if any, on which such
series of the Junior Subordinated Debentures is listed at the time of
redemption or, if the such series of the Junior Subordinated Debentures is not
so listed or that exchange prescribes no method of selection, on a pro
rata basis, by lot or by such other method as the indenture trustee
may deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of such series of the Junior
Subordinated Debenture; provided that Junior Subordinated Debentures with a
principal amount of €50,000 or less will not be redeemed in part.

We will issue a notice of redemption at least 10 but
not more than 60 days before the redemption date. If any Junior
Subordinated Debentures are to be redeemed in part only, the notice of
redemption will state the portion of the principal amount thereof to be
redeemed. A new Junior Subordinated Debenture in principal amount equal to the
unredeemed portion thereof will be issued and delivered to the indenture
trustee, or its nominee, or, in the case of Junior Subordinated Debentures in
definitive form, issued in the name of the holder thereof, in each case upon
cancellation of the original Junior Subordinated Debenture.

Additional Amounts

Subject to the exemptions and limitations set forth
below, we will pay additional amounts (“additional amounts”) on the Junior
Subordinated Debentures with respect to any beneficial owner of the Junior
Subordinated Debentures that is a non U.S. person to ensure that each net
payment to that non U.S. person on the Junior Subordinated Debentures that
it beneficially owns will not be less, due to the payment of
U.S. withholding tax, than the amount then otherwise due and payable. For
this purpose, a “net payment” on a Junior Subordinated Debenture means a
payment by us or any paying agent, including payment of principal and interest,
after deduction for any present or future tax, assessment, or other
governmental charge on the additional amounts. As used in this section, “U.S.”
means the United States of America, including each state of the United
States and the District of Columbia, its territories, its possessions, and
other areas within its jurisdiction. Additional amounts are included in the
interest on the Junior Subordinated Debentures.

We will not be required to make any payment of any
tax, assessment or other governmental charge imposed by any government,
political subdivision, or taxing authority of that government, except as
provided in the prior paragraph. In addition, if we become obligated to pay
additional amounts, other than as a result of an event that would, upon receipt
of the opinion required under “tax event,” constitute a tax event, we may
redeem the Junior Subordinated Debentures at any time in whole but not in part
at 100% of their principal amount plus accrued and unpaid interest through the
date of redemption as described above under “Early Redemption.”

We will not be required to pay additional amounts, however,
in any of the circumstances described in items (1) through
(13) below.

(1) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is imposed or withheld solely
by reason of the beneficial owner:

·        
 having a relationship with the U.S. as a citizen, resident,
or otherwise;

·        
 having had such a relationship in the past; or

·        
 being considered as having had such a relationship.

 

 

(2)
Additional amounts will not be payable if a payment on the Junior Subordinated
Debentures is reduced as a result of any tax, assessment or other governmental
charge that is imposed or withheld solely by reason of the beneficial owner:

·        
 being treated as present in or engaged in a trade or business in
the U.S.;

·        
 being treated as having been present in or engaged in a trade or
business in the U.S. in the past; or

·        
 having or having had a permanent establishment in the U.S.

(3) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is imposed or withheld solely
by reason of the beneficial owner being or having been a:

·        
 personal holding company;

·        
 foreign private foundation or other foreign tax-exempt
organization;

·        
 passive foreign investment company;

·        
 controlled foreign corporation; or

·        
 corporation that has accumulated earnings to avoid
U.S. federal income tax.

(4) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is imposed or withheld solely
by reason of the beneficial owner owning or having owned, actually or
constructively, 10% or more of the total combined voting power of all classes
of our stock entitled to vote.

(5) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is imposed or withheld solely
by reason of the beneficial owner being a bank (i) purchasing Junior
Subordinated Debentures in the ordinary course of its lending business or
(ii) that is neither (A) buying the Junior Subordinated Debentures
for investment purposes only nor (B) buying the Junior Subordinated Debentures
for resale to a third-party that either is not a bank or holding the Junior
Subordinated Debentures for investment purposes only.

For purposes of items (1) through (5) above,
“beneficial owner” includes a fiduciary, settlor, partner, member, shareholder
or beneficiary of the holder if the holder is an estate, trust, partnership,
limited liability company, corporation or other entity, or a person holding a
power over an estate or trust administered by a fiduciary holder.

(6) Additional amounts will not be payable to any
beneficial owner of a Junior Subordinated Debenture that is:

·        
 a fiduciary;

·        
 a partnership;

·        
 a limited liability company;

 

 

·        
 another fiscally transparent entity; or

·        
 not the sole beneficial owner of the Junior Subordinated
Debenture, or any portion of the Junior Subordinate Debenture.

However, this exception to the obligation to pay
additional amounts will apply only to the extent that a beneficiary or settlor
in relation to the fiduciary, or a beneficial owner, partner, or member of the
partnership, limited liability company or other fiscally transparent entity,
would not have been entitled to the payment of an additional amount had the
beneficiary, settlor, beneficial owner, partner, or member received directly
its beneficial or distributive share of the payment.

(7) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is imposed or withheld by
reason of the failure of the beneficial owner or any other person to comply
with applicable certification, identification, documentation or other
information reporting requirements. This exception to the obligation to pay
additional amounts will apply only if compliance with these reporting
requirements is required as a precondition to exemption from such tax,
assessment or other governmental charge by statute or regulation of the
U.S. or by an applicable income tax treaty to which the U.S. is a party.

(8) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is collected or imposed by
any method other than by withholding from a payment on the applicable Junior
Subordinated Debentures by us or any withholding agent (within the meaning of
the applicable rules).

(9) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is imposed or withheld by
reason of the presentation by the beneficial owner for payment more than
30 days after the date on which such payment becomes due or is duly
provided for, whichever occurs later.

(10) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any:

·        
 estate tax;

·        
 inheritance tax;

·        
 gift tax;

·        
 sales tax;

·        
 excise tax;

·        
 transfer tax;

·        
 wealth tax;

·        
 personal property tax; or

·        
 similar tax, assessment, withholding, deduction or other
governmental charge.

 

 

(11) Additional
amounts will not be payable if a payment on the Junior Subordinated Debentures
is reduced as a result of any tax, assessment or other governmental charge
required to be withheld by any withholding agent (within the meaning of the
applicable rules) from a payment of principal or interest on the Junior
Subordinated Debentures if that payment can be made without such withholding by
any other withholding agent.

(12) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
tax, assessment or other governmental charge that is required to be made
pursuant to any EU Directive on the taxation of savings income or any law implementing
or complying with, or introduced to conform to, any such Directive.

(13) Additional amounts will not be payable if a
payment on the Junior Subordinated Debentures is reduced as a result of any
combination of items (1) through (12) above.

As used in this section the term “non U.S. person”
means any person who, for U.S. federal income tax purposes is:

·        
 a nonresident alien individual;

·        
 a foreign corporation;

·        
 a foreign partnership, one or more of the members of which, for
U.S. federal income tax purposes, is a foreign corporation, a nonresident
alien individual or a nonresident alien fiduciary of a foreign estate or
trust; or

·        
 a nonresident alien fiduciary of an estate or trust that is not
subject to U.S. federal income tax on a net income basis on income or gain
from a Junior Subordinated Debenture.

Events of Default

The following events are “events of default” with
respect to each series of Junior Subordinated Debentures:

·        
 default in the payment of interest, including compounded interest,
in full on such series of Junior Subordinated Debenture for a period of 30 days
after the conclusion of a 10-year period following the commencement
of any deferral period; or

·        
 default in the payment of the principal on such series of Junior
Subordinated Debenture at the final maturity date or upon a call for
redemption; or

·        
 certain events of bankruptcy, insolvency and reorganization
involving AIG.

Remedies If an Event of Default Occurs

All remedies available upon the occurrence of an event
of default under the junior debt indenture will be subject to the restrictions
described below under “Subordination.” If an event of default occurs, the
indenture trustee will have special duties. In that situation, the indenture
trustee will be obligated to use its rights and powers under the junior debt indenture,
and to use the same degree of care and skill in doing so, that a prudent person
would use in that situation in conducting his or her own affairs. If an event
of default of the type described in the first bullet point in the definition of
that term has occurred and has not been cured, the indenture trustee or the
holders of at least 25% in principal amount of the applicable 

 

 

series of Junior Subordinated Debentures may declare the
entire principal amount of all the then outstanding Junior Subordinated
Debentures of such series to be due and immediately payable. This is called a
declaration of acceleration of maturity. If an event of default described in
the third bullet point in the definition has occurred, the principal amount of
all then outstanding Junior Subordinated Debentures will immediately become due
and payable. In the case of any other default or breach of the Junior
Subordinated Indenture by AIG, including an event of default under the second
bullet point in the definition of that term, there is no right to declare the
principal amount of the applicable series of Junior Subordinated Debentures
immediately due and payable.

The holders of a majority in aggregate outstanding
principal amount of each series of Junior Subordinated Debentures may, on
behalf of the holders of such series of Junior Subordinated Debentures,
waive any default or event of default, except an event of default under the
second or third bullet point above or a default with respect to a covenant or
provision which under the Junior Subordinated Indenture cannot be modified or
amended without the consent of the holder of the applicable outstanding Junior
Subordinated Debenture.

Except in cases of an event of default, where the
indenture trustee has the special duties described above, the indenture trustee
is not required to take any action under the junior debt indenture at the
request of any holders unless the holders offer the indenture trustee
reasonable protection from expenses and liability called an indemnity. If
indemnity reasonably satisfactory to the indenture trustee is provided, the
holders of a majority in principal amount of the applicable series of
outstanding Junior Subordinated Debentures may direct the time, method and
place of conducting any lawsuit or other formal legal action seeking any remedy
available to the indenture trustee. These majority holders may also direct the
indenture trustee in performing any other action under the Junior Subordinated
Indenture with respect to the applicable series of Junior Subordinated
Debentures.

Before holders bypass the indenture trustee and bring
their own lawsuit or other formal legal action or take other steps to enforce
their rights or protect their interests under the Junior Subordinated
Indenture, the following must occur:

·        
 a holder of the applicable series of Junior Subordinated
Debentures must give the indenture trustee written notice that an event of
default has occurred and remains uncured;

·        
 the holders of 25% in principal amount of the applicable series of
Junior Subordinated Debentures must make a written request that the indenture
trustee take action because of the default, and they must offer reasonable
indemnity to the indenture trustee against the cost, expenses and liabilities
of taking that action; and

·        
 the indenture trustee must have not taken action for 60 days
after receipt of the above notice and offer of indemnity.

We will give to the indenture trustee every year a
written statement of certain of our officers certifying that to their knowledge
we are in compliance with the Junior Subordinated Indenture, or else specifying
any default.

Subordination

Holders of the Junior Subordinated Debentures should
recognize that contractual provisions in the junior debt indenture may prohibit
us from making payments on the Junior Subordinated Debentures. The Junior
Subordinated Debentures are subordinate and junior in right of payment, to the
extent and in 

 

 

the manner stated in the junior debt
indenture, to all of our senior debt, as defined in the Junior Subordinated
Indenture.

The Junior Subordinated Indenture defines “senior debt”
as all indebtedness and obligations of, or guaranteed or assumed by, us:

·        
 for borrowed money;

·        
 evidenced by bonds, debentures, notes or other similar
instruments; and

·        
 that represent obligations to policyholders of insurance or
investment contracts

in each case, whether existing now or in the future,
and all amendments, renewals, extensions, modifications and refundings of any
indebtedness or obligations of that kind. Senior debt will also include: any
subordinated or junior subordinated debt that by its terms is not
expressly pari passu or subordinated to the Junior
Subordinated Debentures; all guarantees of securities issued by any trust,
partnership or other entity affiliated with us that is, directly or indirectly,
our financing vehicle; and intercompany debt. The Junior Subordinated
Debentures will rank pari passu with the outstanding parity
securities. The junior debt indenture does not restrict or limit in any way our
ability to incur senior debt. 

Senior debt excludes:

·        
 trade accounts payable and accrued liabilities arising in the
ordinary course of business; and

·        
 the outstanding parity securities and any other indebtedness,
guarantee or other obligation that is specifically designated as being
subordinate, or not superior, in right of payment to the Junior Subordinated
Debentures.

As a result, except upon the occurrence of an event
described in the next paragraph, the Junior Subordinated Debentures will rank
equally with trade accounts payable and accrued liabilities.

The Junior Subordinated Indenture provides that,
unless all principal of and any premium or interest on the senior debt has been
paid in full, no payment or other distribution may be made with respect to any
Junior Subordinated Debentures in the following circumstances:

·        
 in the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization, assignment for creditors or other
similar proceedings or events involving us or our assets; or

·        
 any event of default with respect to any senior debt for borrowed
money having at the relevant time an aggregate outstanding principal amount of
at least $100 million has occurred and is continuing and has been
accelerated (unless the event of default has been cured or waived or ceased to
exist and such acceleration has been rescinded); or

·        
 in the event the Junior Subordinated Debentures have been declared
due and payable prior to March 15, 2067.

If the indenture trustee under the Junior Subordinated
Indenture or any holders of the Junior Subordinated Debentures receive any
payment or distribution that is prohibited under the subordination 

 

 

provisions, then the indenture trustee or the holders
will have to repay that money to the holders of the senior debt.

The subordination provisions do not prevent the
occurrence of an event of default. This means that the indenture trustee under
the Junior Subordinated Indenture and the holders of the Junior Subordinated
Debentures can take action against us, but they will not receive any money
until the claims of the holders of senior debt have been fully satisfied.

Concerning the Trustee

The Bank of New York Mellon is the trustee under the
Junior Subordinated Indenture and also the paying agent and the transfer agent
and registrar for the Series A-9 Junior Subordinated Debentures. We have
entered, and from time to time may continue to enter, into banking or other
relationships with The Bank of New York Mellon or its affiliates. 

Payment and Paying Agents

The paying agent for the Junior Subordinated
Debentures will initially be the indenture trustee.

Notices 

We and the indenture trustee will send notices
regarding the Junior Subordinated Debentures only to holders, using their
addresses as listed in the indenture trustee’s records.

Governing Law

The Junior Subordinated Indenture and the Junior
Subordinated Debentures are be governed by, and construed in accordance with,
the laws of the State of New York.

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