Document:

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                                                                     Exhibit 4.4

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                       AMERICAN INTERNATIONAL GROUP, INC.

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                          THIRD SUPPLEMENTAL INDENTURE

                           Dated as of March 15, 2007

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        (Supplemental to the Junior Subordinated Debt Indenture Dated as
                               of March 13, 2007)

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                              THE BANK OF NEW YORK,
                                   as Trustee

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      THIRD SUPPLEMENTAL INDENTURE, dated as of March 15, 2007, between American
International Group, Inc., a corporation duly organized and existing under the
laws of the State of Delaware (herein called the "Company"), and The Bank of New
York, a New York banking corporation, as Trustee (herein called "Trustee");

                                R E C I T A L S:

      WHEREAS, the Company has heretofore executed and delivered to the Trustee
a Junior Subordinated Debt Indenture, dated as of March 13, 2007 (the
"Indenture"), providing for the issuance from time to time of the Company's
unsecured debentures, notes or other evidences of indebtedness (herein and
therein called the "Securities"), to be issued in one or more series as provided
in the Indenture;

      WHEREAS, Section 901 of the Indenture permits the Company and the Trustee
to enter into an indenture supplemental to the Indenture to establish the form
and terms of a series of Securities;

      WHEREAS, Section 201 of the Indenture permits the form of Securities of a
series to be established in an indenture supplemental to the Indenture;

      WHEREAS, Section 301 of the Indenture permits certain terms of a series of
Securities to be established pursuant to an indenture supplemental to the
Indenture;

      WHEREAS, pursuant to Sections 201 and 301 of the Indenture, the Company
desires to provide for the establishment of a new series of Securities under the
Indenture, the form and substance of such Securities and the terms, provisions
and conditions thereof to be set forth as provided in the Indenture and this
Third Supplemental Indenture;

      WHEREAS, all things necessary to make this Third Supplemental Indenture a
valid agreement of the Company, in accordance with its terms, have been done;

      NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

      For and in consideration of the premises and the purchase of the
Securities of the series established by this Third Supplemental Indenture by the
Holders thereof, it is mutually agreed, for the equal and proportionate benefit
of all such Holders, as follows:

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                                   ARTICLE ONE

                        DEFINITIONS AND OTHER PROVISIONS
                             OF GENERAL APPLICATION

Section 1.1 Relation to Indenture

      This Third Supplemental Indenture constitutes a part of the Indenture (the
provisions of which, as modified by this Third Supplemental Indenture, shall
apply to the Debentures) in respect of the Debentures but shall not modify,
amend or otherwise affect the Indenture insofar as it relates to any other
series of Securities or modify, amend or otherwise affect in any manner the
terms and conditions of the Securities of any other series.

Section 1.2 Definitions

      For all purposes of this Third Supplemental Indenture, the capitalized
terms used herein (i) which are defined in this Section 1.2 have the respective
meanings assigned hereto in this Section 1.2 and (ii) which are defined in the
Indenture (and which are not defined in this Section 1.2) have the respective
meanings assigned thereto in the Indenture. For all purposes of this Third
Supplemental Indenture:

      1.2.1 Unless the context otherwise requires, any reference to an Article
or Section refers to an Article or Section, as the case may be, of this Third
Supplemental Indenture;

      1.2.2 The words "herein", "hereof" and "hereunder" and words of similar
import refer to this Third Supplemental Indenture as a whole and not to any
particular Article, Section or other subdivision; and

      1.2.3 (a) The terms defined in this Section 1.2.3 have the meanings
assigned to them in this Section and include the plural as well as the singular:

      "Additional Amounts" has the meaning set forth in Section 2.1(r).

      "Annual Interest Payment Date" has the meaning set forth in Section
2.1(e).

      "APM Commencement Date" means, with respect to any Deferral Period, the
earlier of (i) the first Interest Payment Date following the commencement of
such Deferral Period on which the Company pays any current interest on the
Debentures and (ii) the fifth anniversary of the commencement of such Deferral
Period.

      "APM Common Stock" means an aggregate number of shares of Common Stock,
including any shares of Common Stock held in treasury, and any shares of Common
Stock sold pursuant to the Company's dividend reinvestment or similar plan or
sold pursuant to any Employee Benefit Plan, up to the Maximum Share Number.

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      "APM Qualifying Securities" means APM Common Stock, Qualifying Warrants
and Qualifying Non-Cumulative Preferred Stock.

      "Assurance Agreement" means the agreement of the Company, dated as of June
27, 2005, 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).

      "Bankruptcy Event" means an Event of Default set forth in Sections 501(5)
or (6) of the Indenture.

      "Beneficial Owner" means a beneficial owner of the Debentures for U.S.
federal income tax purposes.

      "Business Combination" means 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.

      "Business Day" is any day, other than (i) a Saturday, Sunday or other day
on which banking institutions in The City of New York are authorized or required
by law or executive order to remain closed or (ii) a day that is not a TARGET
settlement day.

      "Calculation Agent" means AIG Financial Products Corp., or any other
Person appointed by the Company, acting as calculation agent for the Debentures.
Any successor or substitute Calculation Agent may be an Affiliate of the
Company. All calculations and determinations by the Calculation Agent shall be
final and binding on the Holders of the Debentures and the Company absent
manifest error.

      "Capital Stock" for any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) shares issued by that Person.

      "Commercially Reasonable Efforts" means, for purposes of selling
Qualifying Capital Securities, commercially reasonable efforts to complete the
offer and sale of Qualifying Capital Securities to third parties that are not
Subsidiaries of the Company in public offerings or private placements. The
Company shall not be considered to have made Commercially Reasonable Efforts to
effect a sale of Qualifying Capital Securities if it determines not to pursue or
complete such sale due to pricing, coupon, dividend rate or dilution
considerations.

      "Common Stock" means the common stock, par value $2.50 per share, of the
Company.

      "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

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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.

      "Continuing Director" means a director who was a director of the Company
at the time of the initial approval of the definitive agreement relating to a
Business Combination transaction by the Company's Board of Directors.

      "Current Stock Market Price" of the APM Common Stock on any date shall
mean (i) 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 the
Common Stock is not then listed on the New York Stock Exchange, as reported by
the principal U.S. securities exchange on which the Common Stock is traded, or
(ii) if the Common Stock is not listed on any U.S. securities exchange on the
relevant date, the average of the mid-point of the last bid and ask prices for
the Common Stock on the relevant date from each of at least three nationally
recognized independent investment banking firms selected by the Company for this
purpose.

      "Debentures" has the meaning set forth in Section 2.1(a).

      "Deferral Period" means each period beginning on an Interest Payment Date
with respect to which the Company either (A) elects pursuant to Section 2.1(g)
to defer all or part of any interest payment due on an Interest Payment Date or
(B) fails to pay all or any part of any interest payment due on an Interest
Payment Date within five Business Days after the Interest Payment Date and
ending on the earlier of (i) the tenth anniversary of such Interest Payment Date
and (ii) the next Interest Payment Date on which the Company has paid all
accrued and previously unpaid interest on the Debentures.

      "Eligible APM Proceeds" means, with respect to any Interest Payment Date,
the net proceeds (after underwriters' or placement agents' fees, commissions or
discounts and other expenses relating to the issuance or sale) that the Company
has received during the 180-days prior to the related Interest Payment Date from
the issuance or sale of APM Qualifying Securities to Persons that are not
Subsidiaries. This includes, without limitation, sales pursuant to any dividend
reinvestment or similar plan and sales made pursuant to any Employee Benefit
Plan.

      "Eligible Repayment Proceeds" means, with respect to any Repayment Date,
the Applicable Percentage of the net proceeds the Company has received from the
issuance of Qualifying Capital Securities that the Company has sold during a
180-day period ending on a notice date not more than 30 or less than 10 Business
Days prior to such Repayment Date.

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      "Employee Benefit Plan" means any written or oral purchase, savings,
option, bonus, appreciation, profit sharing, thrift, incentive, pension or
similar plan or arrangement or any written or oral compensatory contract or
arrangement.

      "Enforcement Event" means any one of the following events:

      (1) failure by the Company to observe, satisfy or perform any of the
covenants or agreements contained in this Third Supplemental Indenture or the
Indenture (other than (i) any covenant or agreement in the Indenture expressly
declared inapplicable herein, (ii) a covenant or agreement in respect of the
Debentures a default in whose observance, satisfaction or performance is
elsewhere specifically dealt with in this Third Supplemental Indenture or the
Indenture (including without limitation Article X of the Indenture), or (iii) an
event which is, or with the passage of time and/or giving of notice would result
in, an Event of Default) on the part of the Company in respect of the Debentures
that continues following a period of 60 days after the date on which written
notice of such failure, requiring the Company to remedy the same and stating
that it is a notice with respect to an Enforcement Event hereunder, shall have
been given to the Company by the Trustee by registered mail, or to the Company
and the Trustee by the Holders of at least a majority in the aggregate principal
amount of the Debentures at the time Outstanding; or

      (2) unless otherwise provided for in Section 2.1(d), the Company's failure
to use Commercially Reasonable Efforts to raise sufficient Eligible Repayment
Proceeds as required by Section 2.1(d); or

      (3) the Company's failure (a) to use commercially reasonable efforts to
raise Eligible APM Proceeds, or (b) to pay deferred interest on the Debentures,
in either case as required by Section 2.1(h) or (i).

      "Event of Default" has the meaning set forth in Section 2.1(j).

      "Federal Republic of Germany Obligation" means any security which is (i) a
direct obligation of the Federal Republic of Germany for the payment of which
the full faith and credit of the Federal Republic of Germany is pledged or (ii)
an obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the Federal Republic of Germany the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the Federal
Republic of Germany, which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof.

      "Final Maturity Date" has the meaning set forth in Section 2.1(d)(iii).

      "Indebtedness" means all indebtedness and obligations (other than the
Debentures) of, or Guaranteed or assumed by, the Company that (i) are for
borrowed money or (ii) are evidenced by bonds, debentures, notes or other
similar instruments.

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      "Interest Payment Date" means an Annual Interest Payment Date or a
Quarterly Interest Payment Date, as the case may be.

      "Interest Period" means the period from and including any Interest Payment
Date (or, in the case of the first Interest Payment Date, March 15, 2007) to but
excluding the next Interest Payment Date.

      "Make-Whole Redemption Price" means the sum, as determined by the
Calculation Agent, of the present values of the remaining scheduled payments of
principal (assuming for this purpose that the 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 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) 0.25% in all
other cases.

      "Market Disruption Event" means, for purposes of sales of APM Qualifying
Securities pursuant to Section 2.1(h) or sales of Qualifying Capital Securities
pursuant to Section 2.1(d), as applicable (collectively, the "Permitted
Securities"), the occurrence or existence of any of the following events or sets
of circumstances:

      (a) trading in securities generally (or in the Common Stock specifically)
on the New York Stock Exchange or any other national securities exchange, or in
the over-the-counter market, on which the Company's 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; or

      (b) the Company would be required to obtain the consent or approval of its
stockholders or the consent or approval of, license from, or registration with,
a regulatory body (including, without limitation, any securities exchange) or
governmental authority to issue and sell Permitted Securities, and the Company
fails to obtain that consent or approval or to receive such license or effect
such registration notwithstanding its commercially reasonable efforts to obtain
that consent, approval, license or registration; or

      (c) an event occurs and is continuing as a result of which the offering
document for the offer and sale of Permitted Securities would, in the Company's
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

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described under this clause (c) shall not constitute a Market Disruption Event
with respect to a period of more than 90 days in any 180-day period; or

      (d) the Company reasonably believes 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 Commission (for reasons other than those referred to
in clause (c) of this definition) and the Company is unable to comply with such
rule or regulation or such compliance is unduly burdensome, provided that one or
more events described under this clause (d) shall not constitute a Market
Disruption Event with respect to a period of more than 90 days in any 180-day
period; or

      (e) 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 the Company's securities, including any obligations of any
other Person Guaranteed by the Company, are trading; or

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

      (g) 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 the Company's Capital Stock has been
materially disrupted; or

      (h) 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 the Company's
judgment, impracticable or inadvisable to proceed with the offer and sale of
Permitted Securities.

      "Maximum Share Number" has the meaning set forth in Section 2.1(h).

      "Maximum Warrant Number" has the meaning set forth in Section 2.1(h).

      "Net Payment" means a payment by the Company or any Paying Agent on the
Debentures, including payment of principal and interest, after deduction for any
present or future withholding tax, assessment, or other governmental charge on
the Additional Amounts.

      "Non-U.S. Person" means any Person who, for U.S. federal income tax
purposes is (a) an individual that is a nonresident alien, (b) a corporation
organized or created under non-U.S. law, (c) a foreign partnership, one or more
members of which, for U.S. federal income tax purposes, is a corporation
organized or created under non-U.S. law, a nonresident alien individual or a
nonresident alien fiduciary of a non-U.S. estate or trust

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or (d) 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
Debenture.

      "Outstanding" has the meaning set forth in Section 2.1(d).

      "pari passu", as applied to the ranking of any obligation of a Person in
relation to any other obligation of such Person, means in any bankruptcy,
insolvency or receivership proceeding that each such obligation either (i) is
not subordinated or junior in right of payment to any other obligation or (ii)
is subordinate or junior in right of payment to the same obligations as is the
other, and is so subordinate or junior to the same extent, and is not
subordinate or junior in right of payment to each other or to any obligation as
to which the other is not so subordinate or junior.

      "Preferred Stock Issuance Cap" has the meaning set forth in Section
2.1(i)(1).

      "Prospectus Supplement" means the prospectus supplement dated March 8,
2007 relating to the Debentures.

      "Qualifying Non-Cumulative Preferred Stock" means the Company's
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, and has a provision that prohibits the
Company 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.

      "Qualifying Warrants" means net share settled warrants to purchase Common
Stock that (i) have an exercise price per share greater than the Current Stock
Market Price as of the date of pricing thereof, (ii) the Company is not entitled
to redeem for cash and the holders of which are not entitled to require the
Company to repurchase for cash in any circumstances and (iii) do not entitle the
holders thereof to purchase a number of shares of Common Stock in excess of the
applicable Maximum Warrant Number.

      "Quarterly Interest Payment Date" has the meaning set forth in Section
2.1(e).

      "Quarterly Interest Period" means the Interest Period relating to any
Quarterly Interest Payment Date.

      "Rating Agency Event" means a change by any nationally recognized
statistical rating organization within the meaning of Rule 15c3-1 under the
Exchange Act (or any successor provision or, upon adoption, any rule for the
registration of nationally recognized statistical rating organizations adopted
by the Commission), that, as of March 8, 2007, publishes a rating for the
Company (a "Rating Agency") to its equity credit criteria for securities similar
to the Debentures, as such criteria is in effect on March 8, 2007 (the "Current
Criteria"), which change results in a lower equity credit being given to the
Debentures as of the date of such change than the equity credit that

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would have been assigned to the Debentures as of the date of such change by such
Rating Agency pursuant to its Current Criteria.

      "Redemption Price" has the meaning set forth in Section 2.1(q).

      "Reference Date" means the date which is three Business Days prior to the
date fixed for redemption.

      "Regular Record Date" for the payment of any current interest payable on
any Interest Payment Date, the date specified in Section 2.1(f) and for the
payment of deferred interest, the date specified in Section 2.1(g)(ii).

      "Repayment Date" means the Scheduled Maturity Date and each Interest
Payment Date thereafter until the Company shall have repaid, redeemed, defeased
or otherwise acquired all of the Debentures.

      "Replacement Capital Covenant" means the replacement capital covenant,
dated as of March 15, 2007, of the Company relating to the Debentures, as the
same may be amended or supplemented from time to time in accordance with the
provisions thereof.

      "Reuters Screen EURIBOR01" means the display designated on Reuters Screen
EURIBOR01 (or such other page or service as may replace the Reuters Screen
EURIBOR01 as selected by the Calculation Agent or such other page and service as
may be selected by the Calculation Agent from time to time).

      "Scheduled Maturity Date" has the meaning set forth in Section 2.1(d).

      "Stock and Warrant Issuance Cap" has the meaning set forth in Section
2.1(i)(1).

      "Tax Event" means that the Company has requested and received an Opinion
of Counsel (which counsel need not be satisfactory to the Trustee) experienced
in such matters to the effect that, as a result of any:

      (a) 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 March 8, 2007;

      (b) proposed change in those laws or regulations that is announced
after March 8, 2007;

      (c) official administrative decision or judicial decision or
administrative action or other official pronouncement interpreting or applying
those laws or regulations that is announced after March 8, 2007; or

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      (d) threatened challenge asserted in connection with an audit of the
Company, 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 Debentures;

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

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

      "Three-month EURIBOR" means, with respect to any Quarterly Interest
Period, 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 immediately preceding the
first day of such Quarterly Interest Period. If the Reuters Screen EURIBOR01
does not include such a rate or is unavailable on such date, the Calculation
Agent 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 the Company), 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 Eurozone 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 Quarterly 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 Quarterly Interest Period will be the arithmetic mean of such rates. If
fewer than two such rates are so provided then the rate for the Quarterly
Interest Period will be the rate in effect with respect to the immediately
preceding Quarterly Interest Period, or, in the case of the Quarterly Interest
Period beginning on March 15, 2017, Three-month EURIBOR will be 3.879%.

      "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.

      "Voting Stock" means equity securities which ordinarily have voting power
for the election of directors, whether at all times or only so long as no senior
class of equity securities has such voting power by reason of any contingency.

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      (b) "Applicable Percentage", "Intent-Based Replacement Disclosure",
"Permitted Remedies" and "Qualifying Capital Securities" shall have the
respective meanings set forth in the Replacement Capital Covenant as in effect
on the date hereof and as it may be amended pursuant to its terms consistent
with Section 2.1(s).

                                   ARTICLE TWO

                 GENERAL TERMS AND CONDITIONS OF THE DEBENTURES

Section 2.1 Terms of Debentures

      Pursuant to Sections 201 and 301 of the Indenture, there is hereby
established a series of Securities, the terms of which shall be as follows:

      (a) Designation. The Securities of this series shall be known and
designated as the "4.875% Series A-3 Junior Subordinated Debentures" of the
Company (the "Debentures"). The CUSIP number of the Debentures is 026874BG1. The
Bank of New York will act as the paying agent for the Debentures.

       (b) Aggregate Principal Amount. The maximum aggregate principal amount of
the Debentures that may be authenticated and delivered under the Indenture and
this Third Supplemental Indenture is (euro)1,000,000,000 (except for Debentures
authenticated and delivered upon registration of transfer of, or exchange for,
or in lieu of, other Debentures pursuant to Section 304, 305, 306, 906 or 1107
of the Indenture or Section 3.5 of this Third Supplemental Indenture); provided,
however, that the Company may from time to time authenticate and deliver under
the Indenture and this Third Supplemental Indenture up to (euro)1,000,000,000
additional amount of Debentures, which Debentures may accrue interest from a
different date than the Debentures, as may be specified pursuant to Section 301
of the Indenture, so long as the Company reasonably determines that the
additional Debentures so authenticated and delivered will be fungible for United
States federal income tax purposes. From time to time the Company may execute
and deliver, and upon Company Order the Trustee shall authenticate and deliver,
additional Debentures.

      (c) Form and Denominations. The Debentures will be issued only in fully
registered form, and the authorized denominations of the Debentures shall be
(euro)50,000 principal amount and even multiples thereof. The Debentures will
initially be issued in the form of one or more Global Securities substantially
in the form of Annex A attached hereto, with such modifications thereto as may
be approved by the authorized officer executing the same. The Debentures will be
denominated in euro and payments of principal, premium if any and interest will
be made in euro. If the euro is unavailable to the Company due to the imposition
of exchange controls or other circumstances beyond its control or the euro is no
longer used by the member states of the European Monetary Union that have
adopted the euro as their currency or for the settlement of transactions by

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public institutions of or within the international banking community, then all
payments in respect of such Debentures will be made in U.S. dollars until the
euro is again available to the Company or so used. The amount payable on any
date in euro will be converted into U.S. dollars on the basis of the most
recently available market exchange rate for the euro as determined by the
Calculation Agent. Any payment in U.S. dollars pursuant to this Section 2.1(c)
will not be deemed a default or Enforcement Event under the Indenture.

      (d)   Scheduled Maturity Date.

            (i) The principal amount of, and all accrued and unpaid interest on,
      the Outstanding Debentures shall be payable in full on March 15, 2037, or
      if such day is not a Business Day, the next Business Day (the "Scheduled
      Maturity Date"); provided that in the event the Company has delivered an
      Officers' Certificate to the Trustee pursuant to clause (vi) of this
      Section 2.1(d) in connection with the Scheduled Maturity Date, (A) the
      principal amount of Debentures payable on the Scheduled Maturity Date, if
      any, shall be the principal amount set forth in the notice of repayment
      accompanying such Officers' Certificate, (B) such specified principal
      amount of Debentures shall be repaid on the Scheduled Maturity Date
      pursuant to Article III, and (C) subject to clause (ii) of this Section
      2.1(d), the remaining Debentures shall remain Outstanding and shall be
      payable on the immediately succeeding Quarterly Interest Payment Date or
      such earlier date on which they are redeemed pursuant to Section 2.1(o) or
      shall become due and payable pursuant to Section 502 of the Indenture or
      clause (iii) of this Section 2.1(d). The Outstanding Debentures shall be
      due and payable on the Scheduled Maturity Date except to the extent so
      specified in an Officers' Certificate delivered to the Trustee not more
      than 30 and not less than 10 Business Days immediately preceding the
      Scheduled Maturity Date.

            (ii) In the event the Company has delivered an Officers' Certificate
      to the Trustee pursuant to clause (vi) of this Section 2.1(d) in
      connection with any Quarterly Interest Payment Date, the principal amount
      of Debentures payable on such Quarterly Interest Payment Date shall be the
      principal amount set forth in the notice of repayment, if any,
      accompanying such Officers' Certificate, such principal amount of
      Debentures shall be repaid on such Quarterly Interest Payment Date
      pursuant to Article III, and the remaining Debentures shall remain
      Outstanding and shall be payable on the immediately succeeding Quarterly
      Interest Payment Date or such earlier date on which they are redeemed
      pursuant to Section 2.1(o) or shall become due and payable pursuant to
      Section 502 of the Indenture or clause (iii) of this Section 2.1(d). The
      Outstanding Debentures shall be due and payable on any Quarterly Interest
      Payment Date except to the extent so specified in an Officers' Certificate
      delivered to the Trustee not more than 30 and no less than 10 Business
      Days immediately preceding such Quarterly Interest Payment Date.

                                      -12-
<PAGE>

            (iii) Notwithstanding anything to the contrary set forth in this
      Third Supplemental Indenture, the principal of, and all accrued and unpaid
      interest on, all Outstanding Debentures shall be due and payable on March
      15, 2067, or if such day is not a Business Day, the following Business Day
      (the "Final Maturity Date").

            (iv) Any repayment of principal and current interest on the
      Debentures pursuant to this Section 2.1(d) on any date prior to the Final
      Maturity Date shall not affect the Company's obligations under Section
      2.1(h) with respect to the payment of deferred interest on the Debentures.
      For the purpose of clarity, it is possible that the Company may repay the
      principal and current interest on a Debenture pursuant to this Section
      2.1(d) but still be obligated to pay deferred interest on the Debenture.
      For the purposes of the definition of "Outstanding" in the Indenture, a
      Debenture, as to which principal and current interest has been repaid,
      redeemed or otherwise satisfied by the Company, shall for all purposes of
      the Indenture and this Third Supplemental Indenture, other than for
      purposes of Article XI of the Indenture and Section 2.1(d) and Article III
      of this Third Supplemental Indenture, be deemed Outstanding so long as any
      deferred interest on such Debenture remains unpaid.

            (v) Until principal and current interest on all Outstanding
      Debentures are paid in full, the principal of all Outstanding Debentures
      is automatically accelerated as provided in Section 2.1(k) or a
      declaration of acceleration pursuant to Section 502 of the Indenture
      occurs, the Company shall use Commercially Reasonable Efforts, subject to
      a Market Disruption Event:

                  (A) to raise sufficient Eligible Repayment Proceeds during a
            180-day period ending on a date not more than 30 and not less than
            10 Business Days prior to the Scheduled Maturity Date to permit
            repayment of the principal and current interest on all Outstanding
            Debentures in full on the Scheduled Maturity Date; and

                  (B) if the Company is unable for any reason to raise
            sufficient Eligible Repayment Proceeds to permit repayment in full
            of the principal amount of and current interest on all the
            Outstanding Debentures on the Scheduled Maturity Date or any
            subsequent Quarterly Interest Payment Date, to raise sufficient
            Eligible Repayment Proceeds to permit repayment of the principal and
            current interest on all Outstanding Debentures in full on the next
            Quarterly Interest Payment Date pursuant to clause (ii) of this
            Section 2.1(d).

            (vi) The Company shall, if it has not raised sufficient Eligible
      Repayment Proceeds in connection with any Repayment Date, deliver an
      Officers' Certificate to the Trustee no more than 30 and no less than 10
      Business Days in advance of such Repayment Date stating the amount of
      Eligible

                                      -13-
<PAGE>

      Repayment Proceeds, if any, raised pursuant to clause (v) above in
      connection with such Repayment Date. Each Officers' Certificate delivered
      pursuant to this clause (vi), unless no principal amount of Debentures is
      to be repaid on the applicable Repayment Date, shall be accompanied by a
      notice of repayment pursuant to Section 3.1 setting forth the principal
      amount of the Debentures to be repaid on such Repayment Date, which amount
      shall be determined after giving effect to clause (viii) of this Section
      2.1(d).

            (vii) The Company shall be excused from its obligation to use
      Commercially Reasonable Efforts to sell Qualifying Capital Securities
      pursuant to clause (v) above if such Officers' Certificate further
      certifies that: (A) a Market Disruption Event was existing at any time
      during the period commencing 180 days prior to the date of such Officers'
      Certificate or, in the case of any Repayment Date after the Scheduled
      Maturity Date, the period commencing on the immediately preceding
      Quarterly Interest Payment Date and ending on the Business Day immediately
      preceding the date of such Officers' Certificate; and (B) either (1) the
      Market Disruption Event continued for the entire 180-day period or, in the
      case of any Repayment Date after the Scheduled Maturity Date, the period
      since the most recent Quarterly Interest Payment Date, as the case may be,
      or (2) the Market Disruption Event continued for only part of the relevant
      period, but the Company was unable after Commercially Reasonable Efforts
      to raise sufficient Eligible Repayment Proceeds during the rest of that
      period to permit repayment of the Debentures in full.

            (viii) Payments on the Debentures on any Repayment Date shall be
      applied, first, to the extent permitted by Section 2.1(i), to deferred
      interest to the extent of Eligible APM Proceeds raised pursuant to Section
      2.1(i), second, to current interest and, third, to the repayment of the
      principal of Debentures; provided that if the Company is obligated to sell
      Qualifying Capital Securities and repay any outstanding pari passu
      securities in addition to the Debentures, then on any date and for any
      period such payments shall be applied to the Debentures and those other
      pari passu securities having the same scheduled maturity date as the
      Debentures pro rata in accordance with their respective outstanding
      principal amounts and none of such payments shall be applied to any other
      pari passu securities having a later scheduled maturity date until the
      principal of and all accrued and unpaid interest on the Debentures has
      been paid in full, except to the extent permitted by clause (vii) of
      Section 2.1(g) and the first sentence of Section 2.1(h). If the Company
      has raised less than $5,000,000 of Eligible Repayment Proceeds during the
      relevant 180-day or three-month period, the Company will not be required
      to repay any Debentures on the relevant Repayment Date, but it will repay
      the applicable principal amount of the Debentures on the next Quarterly
      Interest Payment Date as of which the Company has raised at least
      $5,000,000 of Eligible Repayment Proceeds.

                                      -14-
<PAGE>

      (e) Rate of Interest. The Debentures shall bear interest (i) from and
including March 15, 2007 to but excluding March 15, 2017 at the rate of 4.875%
per annum, computed on the basis of the number of days from and including the
date on which interest begins to accrue during the relevant Interest Period to
but excluding the scheduled date on which such 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), and (ii) beginning on and
including March 15, 2017, at an annual rate equal to Three-month EURIBOR plus
1.73%, computed on the basis of a 360-day year and the actual number of days
elapsed. All percentages resulting from any calculation of Three-month EURIBOR
will be rounded upward or downward, as appropriate, to the next higher or lower
one hundred-thousandth of a percentage point. Subject to Sections 2.1(g) and
(h): (x) prior to and including March 15, 2017, interest on the Debentures shall
be payable annually in arrears on March 15 of each year, beginning on March 15,
2008 (each such date, an "Annual Interest Payment Date"), and (y) after March
15, 2017, interest on the Debentures shall be payable quarterly in arrears on
March 15, June 15, September 15 and December 15 of each year, beginning on June
15, 2017, or if any such day is not a Business Day, the following Business Day,
unless such postponement would cause the day to fall in the next calendar month,
in which case it shall be brought forward to the preceding Business Day (each
such date, a "Quarterly Interest Payment Date"). In the event any Annual
Interest Payment Date falls 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 shall accrue as a result of such postponement. Any
installment of interest (or portion thereof) deferred in accordance with Section
2.1(g) or otherwise unpaid shall bear additional interest, to the extent
permitted by law, at the rate of interest then in effect from time to time on
the Debentures, from the relevant Interest Payment Date, compounded on each
subsequent Interest Payment Date, until paid in accordance with Section 2.1(h).

      (f) To Whom Interest is Payable. Interest (other than deferred interest
which shall be payable to the Persons specified pursuant to Section 2.1(g)(ii))
shall be payable to the Person in whose name the Debentures are registered on
the day (whether or not a Business Day) next preceding the Interest Payment
Date, or in the event the Debentures cease to be held in the form of one or more
Global Securities, at the close of business on the date 15 days prior to that
Interest Payment Date, whether or not a Business Day.

      (g)   Option to Defer Interest Payments.

            (i) The Company shall have the right, at any time and from time to
      time prior to the Final Maturity Date, to defer the payment of interest on
      the Debentures for one or more consecutive Interest Periods that do not
      exceed 10 years; provided that no Deferral Period shall extend beyond the
      Final Maturity Date or the earlier redemption of the Debentures. If an
      Event of Default has occurred and is continuing or the Company has given
      notice of its election to defer interest payments but the Deferral Period
      has not yet commenced or a Deferral Period is continuing, the Company
      shall not, and shall not permit any

                                      -15-
<PAGE>

      Subsidiary, subject to the exceptions specified in clause (vii) of this
      Section 2.1(g), to: (a) declare or pay any dividends or distributions on,
      or redeem, purchase, acquire or make a liquidation payment with respect
      to, any Capital Stock of the Company, (b) make any payment of principal
      of, or interest or premium, if any, on, or repay, purchase or redeem any
      debt securities of the Company that rank pari passu with or junior to the
      Debentures or (c) make any payments with respect to any Guarantee by the
      Company of the junior subordinated debt securities of any Subsidiary if
      such Guarantee ranks pari passu with, or junior in interest to, the
      Debentures.

            (ii) At the end of any Deferral Period, the Company shall pay all
      deferred interest on the Debentures (together with compounded interest
      thereon, if any, to the extent permitted by applicable law), to the Person
      in whose name the Debentures are registered at the close of business on
      the Business Day next preceding the Interest Payment Date at the end of
      such Deferral Period or, in the event the Debentures cease to be held in
      the form of one or more Global Securities, at the close of business on the
      date 15 days prior to the end of the Deferral Period, whether or not a
      Business Day.

            (iii) Upon termination of any Deferral Period and upon the payment
      of all deferred interest and any compounded interest then due on any
      Interest Payment Date, the Company may elect to begin a new Deferral
      Period pursuant to clause (i) of this Section 2.1(g).

            (iv) The Company may elect to pay deferred interest on any Interest
      Payment Date during any Deferral Period to the extent permitted by Section
      2.1(h).

            (v) The Company shall give written notice to the Trustee and the
      Holders of the Debentures of its election to begin any Deferral Period at
      least one Business Day prior to the Regular Record Date for that Interest
      Payment Date. Notwithstanding the previous sentence, the Company's failure
      to pay any interest due within five Business Days after any Interest
      Payment Date shall automatically and without any further action by any
      Person be deemed to commence a Deferral Period.

            (vi) If any Deferral Period lasts longer than one year, the Company
      shall not, and shall cause its Subsidiaries not to purchase, redeem or
      otherwise acquire any securities ranking junior to or pari passu with any
      APM Qualifying Securities the proceeds of which were used to pay deferred
      interest during such Deferral Period until the first anniversary of the
      date on which all deferred interest has been paid, subject to the
      exceptions set forth in clause (vii) below. If the Company is involved in
      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

                                      -16-
<PAGE>

      the Business Combination or Continuing Directors cease for any reason to
      constitute a majority of the directors of the surviving or resulting
      entity, then neither the restrictions set forth in this clause (vi) nor
      the provisions of Section 2.1(h) shall apply to any Deferral Period that
      is terminated on the next Interest Payment Date following the date of
      consummation of the Business Combination.

            (vii) The restrictions in clauses (i) and (vi) of this Section
      2.1(g) do not apply to (a) purchases, redemptions or other acquisitions of
      shares of the Company's Capital Stock in connection with (1) any Employee
      Benefit Plan or the Assurance Agreement or (2) a dividend reinvestment,
      stock purchase plan or other similar plan, (b) any exchange or conversion
      of any class or series of the Company's Capital Stock (or the Capital
      Stock of any Subsidiary) for any class or series of the Company's Capital
      Stock or of any class or series of Indebtedness of the Company for any
      class or series of the Company's Capital Stock, (c) the purchase of
      fractional interests in shares of the Capital Stock of the Company in
      accordance with the conversion or exchange provisions of the Company's
      Capital Stock or the security or instrument being converted or exchanged,
      (d) any declaration of a dividend in connection with any stockholders'
      right plan, or the issuance of rights, equity securities or other property
      under any stockholders' right plan, or the redemption or repurchase of
      rights in accordance with any stockholders' rights plan, (e) 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 pari passu with or junior to such equity securities,
      (f) any payment during a Deferral Period of current interest in respect of
      any debt securities of the Company that rank pari passu with the
      Debentures that is made pro rata to the amounts due on such pari passu
      securities and on the Debentures and any payments of deferred interest on
      such pari passu securities that, if not made, would cause the Company to
      breach the terms of the instrument governing such pari passu securities
      (provided that such payments are made in accordance with Section 2.1(h) to
      the extent it applies), (g) any payment of principal in respect of pari
      passu securities having an earlier scheduled maturity date than the
      Debentures, as required under a provision of such pari passu securities
      that is substantially the same as Section 2.1(d) or any such payment in
      respect of any such pari passu securities having the same scheduled
      maturity date as the Debentures that is made on a pro rata basis among one
      or more series of such securities and the Debentures or (h) any repayment
      or redemption of a security necessary to avoid a breach of the instrument
      governing that security.

      (h) Payment of Deferred Interest. The Company shall not pay deferred
interest (including compounded interest thereon) on the Debentures on any
Interest Payment Date during any Deferral Period from any source other than
Eligible APM Proceeds unless (x) required by an applicable regulatory authority,
(y) permitted under clause (vi) of Section 2.1(g) or (z) an Event of Default has
occurred and is continuing. Notwithstanding the foregoing, the Company may pay
current interest during a Deferral

                                      -17-
<PAGE>

Period from any available funds. To the extent that the Company is able to raise
some, but not all, Eligible APM Proceeds to pay accrued and unpaid interest on
the applicable Interest Payment Date, such Eligible APM Proceeds shall be
allocated first to deferred payments of accrued and unpaid interest in
chronological order based on the date each payment was first deferred. If any
Indebtedness of the Company that ranks pari passu with the Debentures is
outstanding in addition to the Debentures under which the Company is obligated
to sell APM Qualifying Securities and apply the net proceeds to the payment of
deferred interest or distributions, then on any date and for any period the
amount of Eligible APM Proceeds received by the Company from such sales and
available for payment of the deferred interest and distributions shall be
applied to the Debentures and such 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 such pari passu securities) in
proportion to the total amounts that are due on the Debentures and such pari
passu securities. The Company may make such pro rata payments on such pari passu
securities so long as it shall have paid or deposited with the paying agent for
the Debentures or shall have segregated and holds in trust for payment the pro
rata proceeds applicable to the Debentures that have not been paid. The "Maximum
Share Number" will initially equal 100,000,000 and the "Maximum Warrant Number"
will initially equal 100,000,000; provided that, if the number of issued and
outstanding shares of 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 shall be correspondingly adjusted in a manner reasonably
determined by the Company. The Company may, at its discretion and without the
consent of the holders of the Debentures, increase the Maximum Share Number or
the Maximum Warrant Number or both (including through the increase of the
Company's authorized share capital, if necessary) if the Company determines that
such increase is necessary to allow the Company to issue sufficient Common Stock
and/or Qualifying Warrants to pay deferred interest on the Debentures.

      (i) Alternative Payment Mechanism. Immediately following any APM
Commencement Date and until the termination of the related Deferral Period, the
Company will be required to use commercially reasonable efforts to sell APM
Qualifying Securities until the Company has raised an amount of Eligible APM
Proceeds at least equal to the aggregate amount of accrued and unpaid deferred
interest on the Debentures (including compounded interest thereon) and applied
such Eligible APM Proceeds on the next Interest Payment Date to the payment of
deferred interest (including compounded interest thereon) in accordance with
Section 2.1(h); provided that:

            (1) the foregoing obligations shall not apply (i) during the first
      five years of any Deferral Period to the extent the number of shares of
      Common Stock

                                      -18-
<PAGE>

      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 Debentures pursuant to this Section 2.1(i), would, in the aggregate,
      exceed 2% of the total number of issued and outstanding shares of Common
      Stock as of the date of the Company's most recent publicly available
      consolidated financial statements on the date of determination (the "Stock
      and Warrant Issuance Cap") or (ii) to the issuance of Qualifying
      Non-Cumulative Preferred Stock at any time to the extent the Eligible APM
      Proceeds raised from such issuance, together with the Eligible APM
      Proceeds of all prior issuances of Qualifying Non-Cumulative Preferred
      Stock pursuant to this Section 2.1(i) applied to pay deferred interest on
      the Debentures, would exceed (euro)250,000,000 plus 25% of the aggregate
      principal amount of any additional Debentures at the time of their initial
      issuance pursuant to Section 2.1(b) (the "Preferred Stock Issuance Cap");

            (2) the foregoing obligations shall not apply in respect of any
      Interest Payment Date if the Company shall have provided to the Trustee
      (which the Trustee will promptly forward upon receipt to each Holder of
      the Debentures whose name appears in the Security Register) no more than
      30 and no less than 10 Business Days prior to such Interest Payment Date
      an Officers' Certificate stating that (i) a Market Disruption Event
      occurred after the immediately preceding Interest Payment Date and (ii)
      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 such
      Officers' Certificate is provided or (B) the Market Disruption Event
      continued for only part of such period but the Company was unable after
      commercially reasonable efforts to raise sufficient Eligible APM Proceeds
      during the rest of that period to pay all accrued and unpaid interest due
      on the Interest Payment Date with respect to which such Officers'
      Certificate is being delivered; and

            (3) to the extent that the Company has raised some but not all
      Eligible APM Proceeds necessary to pay all deferred interest on any
      Interest Payment Date, such Eligible APM Proceeds shall be applied in
      accordance with Section 2.1(h).

      Once the Company reaches the Stock and Warrant Issuance Cap for a Deferral
Period, the Company will not be required to issue more shares of Common Stock or
Qualifying Warrants under this Section 2.1(i) 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 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
the Company must pay any deferred interest, regardless of the time at which it
was deferred pursuant to

                                      -19-
<PAGE>

Section 2.1(h), subject to the limitations in Section 2.1(g), the Preferred
Stock Issuance Cap, the Maximum Share Number, the Maximum Warrant Number and any
Market Disruption Event. In addition, if the Stock and Warrant Issuance Cap is
reached during a Deferral Period and the Company subsequently pays 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 the start of a new Deferral Period. The Preferred Stock
Issuance Cap shall not reset to zero even if the Company pays all deferred
interest for a Deferral Period, and the Eligible APM Proceeds from sales of
Qualifying Non-Cumulative Preferred Stock applied pursuant to Section 2.1(h)
during such Deferral Period and all prior Deferral Periods cumulate as
Qualifying Non-Cumulative Preferred Stock is issued to pay deferred interest.
The Company will not be excused from its obligations under this Section 2.1(i)
if it determines not to pursue or complete the sale of APM Qualifying Securities
due to pricing, dividend rate or dilution considerations.

      (j) Events of Default. The Debentures shall not be entitled to the
benefits of the Events of Default in clauses (1) through (4) of Section 501 of
the Indenture. The Debentures shall be entitled to the benefits of the Events of
Default in clauses (5) and (6) of Section 501 of the Indenture. The following
events shall be Events of Default with respect to the Debentures (whatever the
reason for such Event of Default and whether it shall be occasioned by the
provisions of Article Fourteen of the Indenture or be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):

            (1) default in the payment of interest, including compounded
      interest, in full on any Debenture for a period of 30 days after the
      conclusion of a 10-year period following the commencement of any Deferral
      Period;

            (2)   default in the payment of the principal of the
      Debentures at the Final Maturity Date or upon a call for
      redemption;

Except as provided in this paragraph (j), no breach or default by the Company of
any other covenant or obligation under the Indenture or the terms of the
Debentures shall constitute an Event of Default.

      (k) Acceleration of Maturity; Rescission of Amendment. The remedies
provided to the Trustee and Holders by Section 502 of the Indenture will apply
only to an Event of Default under clause (1) of Section 2.1(j). If an Event of
Default specified in Section 501(5) or 501(6) of the Indenture occurs, then in
every such case the principal amount of all the Debentures shall automatically
become due and payable immediately, without any declaration or other action on
the part of the Trustee or any Holder. An Event of Default in clause (2) of
Section 2.1(j) shall not entitle the Holders to the benefits of Section 502 of
the Indenture.

                                      -20-
<PAGE>

      (l) Collection of Indebtedness and Suits From Enforcement by Trustee. The
Debentures shall not have the benefits of the first paragraph of Section 503 of
the Indenture.

      (m) Limitation on Suits. For purposes of the Debentures, Section 507 of
the Indenture is hereby amended (i) by adding "or Enforcement Event" after
"Event of Default" in clause (1) thereof, and (ii) by adding at the end of
clause (2) thereof: "or the Holders of no less than a majority in principal
amount of the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such Enforcement
Event in its own name as Trustee hereunder."

      (n) Unconditional Right of Holders to Receive Principal, Premium and
Interest. For purposes of the Debentures, Section 508 of the Indenture is hereby
amended and restated in its entirety:

      "Notwithstanding any other provision in this Indenture or the Third
      Supplemental Indenture, the Holder of any Debenture shall have the right,
      which is absolute and unconditional, to receive payment of the principal
      of and any premium and (subject to Section 2.1(g)(ii) of the Third
      Supplemental Indenture and Section 307 of the Indenture) interest on such
      Debenture when due, it being understood (i) that, in the case of a
      Deferral Period, interest shall only become due and payable at the time
      and in the manner provided for in Sections 2.1(g) and (h) of the Third
      Supplemental Indenture, and interest shall, in the case of Section 2.1(i)
      of the Third Supplemental Indenture, only become due and payable in the
      amount determined in accordance with such Section, and (ii) that the
      extent to which Holders have a right to receive payment of principal on
      any Repayment Date is determined in accordance with Section 2.1(d) of the
      Third Supplemental Indenture. Any Holder's right to institute suit for the
      enforcement of any such payment, and such rights referred to in this
      Section 508 shall not be impaired without the consent of such Holder."

For the purposes of Section 316(b) of the Trust Indenture Act, it is understood
and agreed that no payment of principal or interest shall be deemed due and
payable under the provisions of Sections 2.1(d), 2.1(g)(ii) and 2.1(h) until the
Company has received Eligible Repayment Proceeds or Eligible APM Proceeds,
respectively, to pay such principal or interest.

      (o) Waiver of Past Defaults. Notwithstanding anything to the contrary in
Section 513 of the Indenture, for the purposes of the Debentures, a past default
that is an Event of Default under Section 501(5) or 501(6) of the Indenture
cannot be waived, with respect to the Debentures and its consequences, without
the consent of each Holder of the Debentures.

      (p) Notice of Defaults and Enforcement Events. For purposes of the
Debentures, Section 602 of the Indenture is hereby amended (i) by adding "and

                                      -21-
<PAGE>

Enforcement Events" after "Defaults" in the header thereof, and (ii) by adding
"or Enforcement Event" after "default" in the first and second line of such
Section.

      (q) Redemption. The Debentures shall be redeemable in accordance with
Article Eleven of the Indenture, provided that the Debentures are redeemable at
any time (i) in whole but not in part at the option of the Company prior to
March 15, 2017, (ii) in whole but not in part upon the occurrence of a Rating
Agency Event or a Tax Event, (iii) in whole or in part at the option of the
Company on any Interest Payment Date on or after March 15, 2017, or (iv) in
whole but not in part, at any time at the option of the Company, if the Company
becomes obligated to pay Additional Amounts pursuant to Section 2.1(r), other
than as a result of an event that would, upon receipt of the required opinion of
counsel, constitute a Tax Event, at a "Redemption Price" equal to (1) 100% of
their principal amount plus accrued and unpaid interest to the Redemption Date
or (2) in the case of any such redemption prior to March 15, 2017 pursuant to
clause (i) or (ii) above, if greater, the applicable Make-Whole Redemption Price
plus accrued and unpaid interest to the Redemption Date. For purposes of the
Debentures, the first sentence of Section 1104 of the Indenture is replaced in
its entirety with the following: "Notice of redemption shall be given by
first-class mail, postage prepaid, mailed not less than 10 nor more than 60 days
prior to the Redemption Date, to each Holder of Securities to be redeemed, at
his address appearing in the Security Register." For purposes of the Debentures,
the following is inserted in Section 1103 after "as" and before "the Trustee":
"may be required by any national securities exchange on which the Debentures may
be listed, or, if not listed,".

      (r) Additional Amounts. The Company will, subject to the exceptions and
limitations set forth below, pay additional amounts ("Additional Amounts") on
the Debentures, including payment of principal of and interest, with respect to
any Beneficial Owner of the Debentures that is a Non-U.S. Person to ensure that
each Net Payment by the Company or any Paying Agent to that Non-U.S. Person on
the Debentures will not be less, due to the payment of U.S. withholding tax,
than the amount otherwise then due and payable.

      Notwithstanding the foregoing, the Company's foregoing obligations to pay
Additional Amounts shall not apply:

      (i) if a payment on the Debentures is reduced as a result of any tax,
assessment or governmental charge that is imposed or withheld solely by reason
of the Beneficial Owner:

      A) having, having had or being considered as having had a relationship
      with the U.S. as a citizen or resident or otherwise;

      B) being treated as present in, or engaged in, or being treated as having
      been present in or engaged in a trade or business in the U.S. or having or
      having had a permanent establishment in the U.S.;

                                      -22-
<PAGE>

      C) being or having been a personal holding company, a foreign private
      foundation or other foreign tax-exempt organization, a passive foreign
      investment company, a controlled foreign corporation with respect to the
      U.S., or a corporation that has accumulated earnings to avoid U.S. federal
      income tax;

      D) owning or having owned, actually or constructively, 10% or more of the
      total combined voting power of all classes of the Company's Capital Stock
      that is entitled to vote; or

      E) being a bank (i) purchasing Debentures in the ordinary course of its
      lending business or (ii) that is neither (A) buying the Debentures for
      investment purposes only nor (B) buying the Debentures for resale to a
      third-party that either is not a bank or holding the Debentures for
      investment purposes only.

      (ii) to any holder that is a fiduciary, a partnership, a limited liability
company, another fiscally transparent entity or that is not the sole Beneficial
Owner of the Debentures or any portion of the Debentures, but only to the extent
that a beneficiary or settlor in relation to the fiduciary, or a Beneficial
Owner, partner or a 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 such beneficiary, settlor, Beneficial Owner,
partner, or member received directly its beneficial or distributive share of the
payment;

      (iii) if a payment on the Debentures is reduced as a result of any tax,
assessment or 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, if compliance is required by statute or by regulation of the U.S.
or by an applicable income tax treaty to which the U.S. is a party as a
precondition to exemption from such tax, assessment or other governmental
charge;

      (iv) if a payment on the Debentures is reduced as a result of any tax,
assessment or governmental charge that is collected or imposed by any method
other than by withholding by the Company or a Paying Agent from a payment on
such Debentures;

      (v) if a payment on the Debentures is reduced as a result of any tax,
assessment or governmental charge that would not have been so imposed or
withheld but for the presentation by the Beneficial Owner of a Debenture for
payment on a date more than 30 days after the date on which such payment became
due and payable or the date on which payment thereof is duly provided for,
whichever occurs later;

      (vi) if a payment on the Debentures is reduced as a result of any estate,
inheritance, gift, sales, excise, transfer, wealth or personal property tax or
any similar tax, assessment, withholding, deduction or other governmental
charge;

                                      -23-
<PAGE>

      (vii) if a payment on the Debentures is reduced as a result of any tax,
assessment or other governmental charge any withholding agent (within the
meaning of the applicable rules) must withhold from any payment of principal of
or interest on any Debentures, if such payment can be made without such
withholding by any other withholding agent;

      (viii) if a payment on the Debentures is reduced as a result of any tax,
assessment or other governmental charge that is required to be made pursuant to
European Council Directive 2003/48/EC or any law implementing or complying with,
or introduced to conform to, any such Directive;

      (ix) if a payment on the Debentures is reduced as a result of any
combination of the above clauses (i) through (viii) of this Section 2.1(r).

      Except as provided in this Section 2.1(r), the Company shall have no
obligation to make any payment with respect to any tax, assessment or
governmental charge imposed by any government or a political subdivision or
taxing authority.

      (s) Replacement Capital Covenant. The Company shall not modify the
Replacement Capital Covenant to (A) amend the definitions incorporated into this
Third Supplemental Indenture pursuant to Section 1.2.3(b) in a manner adverse to
the Holders or (B) impose additional restrictions on the type or amount of
Qualifying Capital Securities that the Company may include for purposes of
determining the extent to which repayment, redemption, defeasance or repurchase
of the Debentures is permitted, except with the consent of the holders of a
majority of the principal amount of Outstanding Debentures. Except as expressly
provided in the preceding sentence, the Company may modify the Replacement
Capital Covenant at any time and in any manner without the consent of the
Holders of the Debentures.

      (t) Limitation on Claims in the Event of Bankruptcy, Insolvency or
Receivership. To the extent permitted by law, each Holder, by such Holder's
acceptance of the Debentures, agrees that if a Bankruptcy Event shall occur
prior to the redemption, repayment or defeasance of such Debentures, such Holder
shall 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.

      (u) Sinking Fund; Holder Repurchase Right. The Debentures shall not be
subject to any sinking fund or analogous provision or be redeemable at the
option of the Holders.

        (v) Forms. The Debentures shall be substantially in the form of Annex A
attached hereto, with such modifications thereto as may be approved by the
authorized officer executing the same.

                                      -24-
<PAGE>

      (w) Subordination. The Debentures shall be subject to Article XIV of the
Indenture, subject to the following modifications:

            (i) For purposes of the Debentures, the "or" before clause (iii) of
the definition of Senior Debt in the Indenture is deleted, the following clauses
are added to the definition of Senior Debt in the Indenture after the word
"contracts," in clause (iii) for purposes of the Debentures:

      ", (iv) any subordinated or junior subordinated debt that by its terms is
      not expressly pari passu or subordinated to the Debentures, (v) any
      Guarantee of any indebtedness, obligation or security issued by any Person
      that is an Affiliate of the Company and such Person is viewed by the
      Company as a vehicle to finance its operations, and (vi) Indebtedness of
      the Company to its Subsidiaries"; and

            (ii) For purposes of the Debentures, the following provision is
added to the end of the definition of Senior Debt in the Indenture after the
word "Securities": "provided that (a) trade account payables and accrued
liabilities arising in the ordinary course of the Company's business, (b) the
Company's 6.25% Series A-1 Junior Subordinated Debentures and 5.75% Series A-2
Junior Subordinated Debentures and (c) any other indebtedness, Guarantee or
other obligation that is specifically designated as being subordinate, or not
superior, in right of payment to the Debentures, shall not be considered Senior
Debt".

            (iii) For purposes of the Debentures, the provisions of Section 1404
of the Indenture shall only apply in the case where (A) there has been an event
of default with respect to Senior Debt within the meaning of clause (i) of the
definition of Senior Debt, (B) the principal amount of such Senior Debt has been
accelerated, (C) the outstanding principal amount of Senior Debt at the time of
acceleration is at least $100,000,000 and (D) the event of default or
acceleration has not been cured, waived, or otherwise ceased to exist. In no
other case and to no other Senior Debt shall Section 1404 apply.

            (iv) The Debentures shall rank pari passu with the Company's 6.25%
Series A-1 Junior Subordinated Debentures and 5.75% Series A-2 Junior
Subordinated Debentures.

      (x) Registrar, Paying Agent, Authenticating Agent and Place of Payment.
The Company hereby appoints The Bank of New York as Security Registrar,
Authenticating Agent and Paying Agent with respect to the Debentures. The
Debentures may be surrendered for registration of transfer and for exchange at
the office or agency of the Company maintained for such purpose in the City of
New York, New York and at any other office or agency maintained by the Company
for such purpose. The Place of Payment for the Debentures shall be the Paying
Agent's office in New York, New York.

      (y) Defeasance. Until March 15, 2017, the Debentures will be subject to
Sections 1302 and 1303 of the Indenture except that all references to "U.S.
Government Obligations" shall be replaced by "Federal Republic of Germany
Obligations".

                                      -25-
<PAGE>

                                 ARTICLE THREE

                          REPAYMENT OF THE DEBENTURES

      3.1. REPAYMENT. The Company shall, not more than 30 nor less than 10
Business Days prior to each Repayment Date (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of the principal amount of
Debentures to be repaid on such date pursuant to Section 2.1(d).

      3.2. SELECTION OF SECURITIES TO BE REPAID. If less than all the Debentures
are to be repaid on any Repayment Date, the particular Debentures to be repaid
shall be selected not more than 30 days prior to such Repayment Date by the
Trustee, from the Outstanding Debentures not previously repaid or redeemed or as
to which notice of repayment or redemption has been given, by such other method
as the Trustee may deem fair and appropriate and which may provide for the
selection for repayment of a portion of the principal amount of any Debenture,
provided that the portion of the principal amount of any Debenture not repaid
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination).

      The Trustee shall promptly notify the Company in writing of the Debentures
selected for partial repayment and the principal amount thereof to be repaid.
For all purposes hereof, unless the context otherwise requires, all provisions
relating to the repayment of Debentures shall relate, in the case of any
Debenture repaid or to be repaid only in part, to the portion of the principal
amount of such Debenture which has been or is to be repaid.

      3.3. NOTICE OF REPAYMENT. Notice of repayment shall be given by
first-class mail, postage prepaid, mailed not later than the 15th calendar day,
and not earlier than the 10th calendar day, prior to the Repayment Date, to each
Holder of Debentures to be repaid, at the address of such Holder as it appears
in the Security Register.

      Each notice of repayment shall identify the Debentures to be repaid
(including CUSIP number, if a CUSIP number has been assigned to the Debentures)
and shall state:

      (a) the Repayment Date;

      (b) if less than all Outstanding Debentures are to be repaid, the
identification (and, in the case of partial repayment, the respective principal
amounts) of the particular Debentures to be repaid;

      (c) that on the Repayment Date, the principal amount of the Debentures or
portions thereof to be repaid will become due and payable, and that interest
thereon, if any, shall cease to accrue on and after said date;

                                      -26-
<PAGE>

      (d) whether any deferred interest shall remain outstanding on any
Debentures to be repaid, and if so, the amount of such deferred interest and
that compound interest thereon shall continue to accrue on and after said date
until paid; and

      (e) the place or places where such Debentures are to be surrendered for
payment of the principal amount thereof.

      Notice of repayment shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company and shall
be irrevocable.

      3.4. DEPOSIT OF REPAYMENT AMOUNT. Prior to 10:00 a.m., New York City time,
on the Repayment Date specified in the notice of repayment given as provided in
Section 3.3, the Company will deposit with the Trustee or with one or more
Paying Agents (or if the Company is acting as its own Paying Agent, the Company
will segregate and hold in trust as provided in Section 1003 of the Indenture)
an amount of money sufficient to pay the principal amount of, and (except to the
extent the payment of such accrued interest shall be prohibited pursuant to
Section 2.1(h)) any accrued interest (including compounded interest) on, all the
Debentures which are to be repaid on that date.

      3.5. PAYMENT OF DEBENTURES SUBJECT TO REPAYMENT. If any notice of
repayment has been given as provided in Section 3.3, the Debentures or portion
of the Debentures with respect to which such notice has been given shall become
due and payable on the Repayment Date. On presentation and surrender of such
Debentures as provided in the notice of repayment, such Debentures or the
specified portions thereof shall be paid by the Company at their principal
amount, together with accrued interest (including any compounded interest) to
the Repayment Date (except to the extent the payment of such accrued interest
shall be prohibited pursuant to Section 2.1(h)); provided that, except in the
case of a repayment in full of all Outstanding Debentures, installments of
interest whose Stated Maturity is on or prior to the Repayment Date will be
payable to the Holders of such Debentures, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Regular
Record Dates according to their terms and the provisions of Section 307 of the
Indenture and Section 2.1(g)(ii) of this Third Supplemental Indenture.

      Section 1107 of the Indenture shall apply to any Debenture repaid in part
pursuant to this Article III.

      If any Debenture subject to repayment shall not be so repaid upon
surrender thereof, the principal of such Debenture shall, until paid, bear
interest from the applicable Repayment Date at the rate prescribed therefore in
the Debenture.

                                      -27-
<PAGE>

                                  ARTICLE FOUR

                                  MISCELLANEOUS

SECTION 4.1 RELATIONSHIP TO EXISTING INDENTURE

      The Third Supplemental Indenture is a supplemental indenture within the
meaning of the Indenture. The Indenture, as supplemented and amended by this
Third Supplemental Indenture, is in all respects ratified, confirmed and
approved and, with respect to the Debentures, the Indenture, as supplemented and
amended by this Third Supplemental Indenture, shall be read, taken and construed
as one and the same instrument.

SECTION 4.2 MODIFICATION OF THE EXISTING INDENTURE

      Except as expressly modified by this Third Supplemental Indenture, the
provisions of the Indenture shall govern the terms and conditions of the
Debentures.

SECTION 4.3 GOVERNING LAW

      This instrument shall be governed by and construed in accordance with the
laws of the State of New York.

SECTION 4.4 COUNTERPARTS

      This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

SECTION 4.5 TRUSTEE MAKES NO REPRESENTATION

      The recitals contained herein are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
Third Supplemental Indenture (except for its execution thereof and its
certificates of authentication of the Debentures).

                                      -28-
<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed and attested all as of the day and
year first above written.

                                AMERICAN INTERNATIONAL GROUP, INC.

                                By /s/ Robert A. Gender
                                  ----------------------------------------------
                                     Name:     Robert A. Gender
                                     Title:    Vice President and Treasurer

Attest:

    /s/ Kathleen E. Shannon
------------------------------

                                THE BANK OF NEW YORK,
                                as Trustee

                                By /s/ Julie Salovitch-Miller
                                  ----------------------------------------------
                                     Name:     Julie Salovitch-Miller
                                     Title:    Vice President

<PAGE>

                                                                         ANNEX A

      THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

                       AMERICAN INTERNATIONAL GROUP, INC.

Registered No.                                                   ISIN:
E                                                           CUSIP No.:

      American International Group, Inc., a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to The Bank of New York Depository
(Nominees) Limited, or registered assigns, the principal sum of    euros (     )
on March 15, 2067, or if such day is not a Business Day, the following Business
Day (the "Final Maturity Date"); provided that the principal amount of, and all
accrued and unpaid interest on, this Security shall be payable in full on March
15, 2037, or if such day is not a Business Day, the next Business Day (the
"Scheduled Maturity Date"), or any subsequent Interest Payment Date (as
hereinafter defined) to the extent set forth in the Indenture hereinafter
referred to. As provided in the Indenture, the principal of this Security is
payable on the Scheduled Maturity Date only to the extent the Company has raised
sufficient Eligible Repayment Proceeds. The Company's obligation to raise
Eligible Repayment Proceeds is subject to certain limitations and restrictions
described in the Third Supplemental Indenture hereinafter referred to. In
connection with the issuance of this Security, the Company has entered into a
Replacement Capital Covenant that contains restrictions on the Company's ability
to repay the principal of this Security.

      This Security shall bear interest (i) from and including March 15, 2007 to
but excluding March 15, 2017 at the rate of 4.875% per annum annually in arrears
on March 15 in each year, commencing March 15, 2008 (computed on the basis of
the number of days from and including the date on which interest begins to
accrue during the relevant Interest Period to but excluding the scheduled date
on which such 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)), and (ii) from and including March 15, 2017, at an annual rate
equal to Three-month EURIBOR (as defined in the Indenture) plus 1.73% (computed
on the basis of a 360-day year and the actual number of days elapsed), payable
(subject to deferral as set forth herein and in the Indenture) quarterly in
arrears on March 15, June 15, September 15 and December 15 in each year,
commencing June 15, 2017, until the principal hereof is paid or made available
for payment (each such date referred to in clause (i) or (ii), an "Interest
Payment Date"). In

<PAGE>

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 shall be postponed to the next day that is a Business Day and no
interest shall 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 shall 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. Any installment of
interest (or portion thereof) deferred in accordance with the Indenture or
otherwise unpaid on the relevant Interest Payment Date shall bear interest, to
the extent permitted by law, at the rate of interest then in effect on this
Security, from the relevant Interest Payment Date, compounded on each subsequent
Interest Payment Date, until paid in accordance with the Indenture.

      A "Business Day" shall mean any day other than (i) a Saturday, Sunday or
other day on which banking institutions in The City of New York are authorized
or required by law or executive order to remain closed or (ii) a day that is not
a TARGET settlement day.

      The interest (other than deferred interest) so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered (i) on the day (whether or not a Business
Day) next preceding the Interest Payment Date if this Security is issued in the
form of a Global Security, or (ii) the close of business on the fifteenth day
(whether or not a Business Day) next preceding such Interest Payment Date if
this Security is not issued in the form of a Global Security. Any such interest
not so punctually paid or duly provided for (other than deferred interest) will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in the Indenture. Any deferred interest shall be payable to the holder of record
of this Security as provided below.

      The Company shall have the right, at any time and from time to time, prior
to the Final Maturity Date to defer the payment of interest on this Security for
one or more consecutive Interest Periods that do not exceed 10 years; provided
that no Deferral Period shall extend beyond the Final Maturity Date or the
earlier redemption of the Securities of this series. As provided in the
Indenture, the payment of deferred interest is subject to the Company's ability
to raise Eligible APM Proceeds. The Company's obligation to raise Eligible APM
Proceeds is subject to certain limitations, restrictions and exceptions
described in the Third Supplemental Indenture.

                                      A-2
<PAGE>

      At the end of any Deferral Period, the Company shall pay all deferred
interest on this Security (together with compounded interest thereon, if any, to
the extent permitted by applicable law), to the Person in whose name this
Security is registered at the close of business on the Business Day next
preceding the Interest Payment Date at the end of such Deferral Period or, in
the event this Security ceases to be held in the form of a Global Security, at
the close of business on the date 15 days prior to the end of the Deferral
Period, whether or not a Business Day. Upon termination of any Deferral Period
and upon the payment of all deferred interest and any compounded interest then
due on any Interest Payment Date, the Company may elect to begin a new Deferral
Period, subject to the above requirements and those in the Indenture. The
Company may elect to pay deferred interest on any Interest Payment Date during
any Deferral Period to the extent permitted, and shall pay deferred interest
(including compounded interest thereon) to the extent required, by the
Indenture.

      To the extent permitted by law, each Holder of this Security, by such
Holder's acceptance of this Security agrees that if a Bankruptcy Event shall
occur prior to the redemption or repayment of this Security, such Holder shall
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.

      The Company shall give written notice to the Trustee and the Holders of
this Security of its election to begin any Deferral Period at least one Business
Day prior to the Regular Record Date for that Interest Payment Date, provided,
however, that the Company's failure to pay any interest due within five Business
Days after any Interest Payment Date shall automatically and without any further
action by any Person be deemed to commence a Deferral Period.

      Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the Borough of Manhattan, The City of New York, and will be made in
euros; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register. If the euro is unavailable
to the Company due to the imposition of exchange controls or other circumstances
beyond its control or the euro is no longer used by the member states of the
European Monetary Union that have adopted the euro as their currency or for the
settlement of transactions by public institutions of or within the international
banking community, then all payments in respect of this Security will be made in
U.S. dollars until the euro is again available to the Company or so used. The
amount payable on any date in euros will be converted into U.S. dollars on the
basis of the most recently available market exchange rate for euros as
determined by the Calculation Agent. Any payment in U.S. dollars as described
above will not be deemed a default or Enforcement Event under the Indenture.

      Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

                                      A-3
<PAGE>

      Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                      A-4
<PAGE>

      IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.

Dated:

                                        AMERICAN INTERNATIONAL GROUP, INC.

                                        By:
                                        ----------------------------------------
                                                 Name:
                                                 Title:

                                        Attest:
                                        ----------------------------------------
                                                  Name:
                                                  Title:

This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.

Dated:
                                        THE BANK OF NEW YORK,
                                            as Trustee

                                        By:
                                        ----------------------------------------
                                                 Name:
                                                 Title:

<PAGE>

                               REVERSE OF SECURITY

      This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under a Junior Subordinated Debt Indenture, dated as of March 13, 2007
(herein called the "Base Indenture"), which term shall have the meaning assigned
to it in such instrument, as supplemented by a Third Supplemental Indenture,
dated as of March 15, 2007 (herein called the "Third Supplemental Indenture"
and, together with the Base Indenture, the "Indenture"), in each case, between
the Company and The Bank of New York, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), and reference is
hereby made to the Indenture for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Debt and the Holders of the Securities and of the
terms upon which the Securities are, and are to be, authenticated and delivered.
This Security is one of the series designated on the face hereof limited in
aggregate principal amount to (euro)1,000,000,000 (except for Securities
authenticated and delivered upon registration or transfer of, or exchange for,
or in lieu of, other Securities pursuant to Section 304, 305, 306, 906, or 1107
of the Base Indenture or Section 3.5 of the Third Supplemental Indenture);
provided, however, that the Company may from time to time authenticate and
deliver under the Indenture up to (euro)1,000,000,000 additional principal
amount of Securities which may accrue interest from a different date than this
Security, as may be specified pursuant to Section 301 of the Base Indenture, so
long as the company reasonably determines that the additional Securities so
authenticated and delivered will be fungible for United States federal income
tax purposes.

        All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

      The Securities of this series are subject to redemption upon not less than
10 days nor more than 60 days' prior notice by first class mail, postage
pre-paid, to each Holder of Securities to be redeemed, at any time (i) in whole
but not in part at the option of the Company prior to March 15, 2017, (ii) in
whole but not in part upon the occurrence of a Rating Agency Event or a Tax
Event, (iii) in whole or in part at the option of the Company on any Interest
Payment Date on or after March 15, 2017 or (iv) in whole but not in part at the
option of the Company if the Company becomes obligated to pay Additional
Amounts, other than as a result of an event that would, upon receipt of the
required opinion of counsel pursuant to the definition of Tax Event, constitute
a Tax Event, at a "Redemption Price" equal to (1) 100% of their principal amount
plus accrued and unpaid interest to the Redemption Date or (2) in the case of
any such redemption prior to March 15, 2017 pursuant to clause (i) or (ii)
above, if greater, the applicable Make-Whole Redemption Price plus accrued and
unpaid interest to the Redemption Date.

      In the event of a redemption of this Security in part only a new Security
or Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation thereof.

                                      A-6
<PAGE>

The Company will, subject to the exceptions and limitations set forth in the
Third Supplemental Indenture, pay Additional Amounts on this Security with
respect to any Beneficial Owner of all or any portion of this Security that is a
Non-U.S. Person to ensure that each Net Payment by the Company or Paying Agent
on such portion of this Security        , including payment of principal and
interest, that it beneficially owns will not be less, due to any present or
future tax, assessment or governmental charge of the U.S. or a political
subdivision or taxing authority thereof or therein, imposed by withholding with
respect to the payment, than the amount that would have been payable in respect
of such portion of this Security had no withholding been required. For all
purposes of this Security, any Additional Amounts that are payable shall be
treated as interest on this Security.

      The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Debt, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his or her behalf to take such actions as
may be necessary or appropriate to effectuate the subordination so provided and
(c) appoints the Trustee as his or her attorney-in-fact for any and all such
purposes. Each Holder hereof, by his or her acceptance hereof, waives all notice
of the acceptance of the subordination provisions contained herein and in the
Indenture by each holder of Senior Debt, whether now outstanding or hereafter
created, incurred, assumed or Guaranteed, and waives reliance by each such
holder of Senior Debt upon said provisions.

      The Indenture contains provisions for defeasance of the entire
indebtedness of this Security at any time prior to March 15, 2017 upon
compliance with certain conditions set forth in the Indenture.

      The Securities of this series are entitled to the benefits of the Events
of Default described in Section 2.1(j) of the Third Supplemental Indenture and
the Enforcement Events as defined in the Third Supplemental Indenture. The
Holder of this Security and the Trustee shall be entitled to the remedies
provided by Section 502 of the Base Indenture only if an Event of Default
specified in clause (1) of Section 2.1(j) of the Third Supplemental Indenture
shall occur with respect to the Securities of this series. If an Event of
Default specified in Section 501(5) or Section 501(6) of the Base Indenture
shall occur with respect to the Securities of this series, then in every such
case the principal amount of all the Securities of this series shall become
automatically due and payable immediately, without any declaration or other
action on the part of the Trustee or any Holder. An Event of Default specified
in clause (2) of Section 2.1(j) of the Third Supplemental Indenture shall not
entitle the Holders to the benefits of Section 502 of the Base Indenture.

      The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of

                                      A-7
<PAGE>

a majority in principal amount of the Securities at the time Outstanding of each
series to be affected. The Indenture also contains provisions permitting the
Holders of specified percentages in principal amount of the Securities of each
series at the time Outstanding, on behalf of the Holders of all Securities of
such series, to waive compliance by the Company with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Security.

      As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default or Enforcement Event
with respect to the Securities of this series, the Holders of not less than 25%
(or, in the case of an Enforcement Event, a majority) in principal amount of the
Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default or Enforcement Event, as the case may be, as Trustee and offered the
Trustee reasonable indemnity, and the Trustee shall not have received from the
Holders of a majority in principal amount of Securities of this series at the
time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any premium or interest hereon on or after the
respective due dates to the extent provided by Section 2.1(n) of the Third
Supplemental Indenture.

      As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

      The Securities of this series are issuable only in fully registered form
without coupons in denominations of (euro)50,000 and even multiples thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.

                                      A-8
<PAGE>

      No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

      Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

      The Company and, by its acceptance of this Security or a beneficial
interest therein, the Holder of, and any Person that acquires beneficial
interest in, this Security agree that, for United States federal, state and
local tax purposes, it is intended that this Security constitute indebtedness.

      THE BASE INDENTURE, THE THIRD SUPPLEMENTAL INDENTURE AND THIS SECURITY
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.

                                      A-9EX-4.1

 

EXHIBIT 4.1

VOTING AND CONVERSION AGREEMENT

     VOTING AND CONVERSION AGREEMENT, dated as of March 14, 2007 (this “Agreement”), by and
among PXRE Group Ltd., a Bermuda company (“Parent”), Argonaut Group, Inc., a Delaware
corporation (the “Company”), Capital Z Financial Services Fund II, L.P. (“Capital Z
Fund”), Capital Z Financial Services Private Fund II, L.P. (“Capital Z Private Fund”),
CapZ PXRE Holdings, LLC (“CapZ Holdings”), CapZ PXRE Holdings Private, LLC (“CapZ
Holdings Private”), Capital Z Management, LLC (“Capital Management” and collectively
with Capital Z Fund, Capital Z Private Fund, CapZ Holdings and CapZ Holdings Private, “Cap
Z”), Reservoir Capital Master Fund, L.P. (“Reservoir Capital Master Fund”), Reservoir
Capital Master Fund II, L.P. (“Reservoir Capital Master Fund II”), Reservoir Capital
Partners, L.P. (“Reservoir Partners”), Reservoir Capital Investment Partners, L.P.
(“Reservoir Investment”), Reservoir Capital Group, L.L.C. (“Reservoir Group” and,
collectively with Reservoir Capital Master Fund, Reservoir Capital Master Fund II, Reservoir
Partners and Reservoir Investment, “Reservoir”), RER Reinsurance Holdings, L.P.
(“RER”) and Robert Stavis (“Robert Stavis” and, collectively with Cap Z, Reservoir,
and RER “Stockholders”). Capitalized terms not defined herein shall have the meaning
ascribed to such terms in the Merger Agreement (defined below).

W I T N E S S E T H:

     WHEREAS, Parent, Merger Sub, a Delaware corporation and wholly owned subsidiary of Parent
(“Merger Sub”), and the Company have entered into an Agreement and Plan of Merger, dated as
of the date hereof (as the same may be amended or supplemented, the “Merger Agreement”),
providing for, among other things, the merger of Merger Sub with and into the Company (the
“Merger”), upon the terms and subject to the conditions set forth in the Merger Agreement;

     WHEREAS, pursuant to Section 8.14 of the Merger Agreement, Parent shall cause the number of
authorized common shares of Parent, par value $1.00 per share (the “Common Shares”) to be
increased (the “Share Increase”);

     WHEREAS, pursuant to Section 4.1(c) of the Merger Agreement, the number of Common Shares
outstanding shall be reduced pursuant to a one-for-ten reverse stock split (the “Reverse Stock
Split”);

     WHEREAS, pursuant to Section 8.10 of the Merger Agreement, Parent shall cause the name of
Parent to be changed to “Argo Group International Holdings, Ltd.” (the “Name Change”);

     WHEREAS, pursuant to Section 8.9 of the Merger Agreement, Parent shall increase the number of
members of the board of directors of Parent to twelve (12) and shall use commercially reasonable
efforts to increase the number of members of the board of directors of Parent to thirteen (13)
(collectively, the “Board Increase”);

     WHEREAS, as of the date hereof, each Stockholder beneficially owns (as such term is defined in
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder) the number of shares of (i)

 

 

Series A Convertible Voting Preferred Shares of Parent, par value $1.00 per share (“Series
A Preferred Shares”), (ii) Series B Convertible Voting Preferred Shares of Parent, par value
$1.00 per share (“Series B Preferred Shares”), (iii) Series C Convertible Voting Preferred
Shares of Parent, par value $1.00 per share (“Series C Preferred Shares” and collectively
with Series A Preferred Shares and Series B Preferred Shares, “Preferred Shares”), (iv)
Class A Convertible Voting Common Shares of Parent, par value $1.00 per share (“Class A Common
Shares”), (v) Class B Convertible Voting Common Shares of Parent, par value $1.00 per share
(“Class B Common Shares”), (vi) Class C Convertible Voting Common Shares of Parent, par
value $1.00 per share (“Class C Common Shares” and collectively with Class A Common Shares
and Class B Common Shares, “Convertible Common Shares”) and (vii) Common Shares, set forth
opposite such Stockholder’s name on Schedule I (and with respect to each Stockholder, such
Preferred Shares, Convertible Common Shares and Common Shares, together with any other Common
Shares, the beneficial ownership of which is acquired by such Stockholder from and including the
date hereof through and including the date on which this Agreement is terminated in accordance with
its terms (including through the exercise of any stock options, warrants or similar instruments),
its “Subject Shares”);

     WHEREAS, pursuant to that certain Description of Stock of Parent, dated as of February 12,
2002 (the “Description of Stock”), attached to the bye-laws of Parent, as amended (the
“Bye-Laws”), Stockholders as holders of Preferred Shares and Convertible Common Shares have
been granted certain approval rights with respect to actions proposed to be taken by Parent in
connection with the Merger, including the right to approve (i) the expansion by Parent into lines
of business other than continuing lines of business in which Parent is currently involved and (ii)
any alteration or change to the terms, designations, powers, preferences or relative participating,
optional or other special rights, or the qualifications, limitations or restrictions of the
Preferred Shares or Convertible Common Shares;

     WHEREAS, pursuant to the Description of Stock, Stockholders may opt at any time to convert (i)
Preferred Shares to Convertible Common Shares and (ii) Convertible Common Shares to Common Shares;

     WHEREAS, as a condition to their willingness to enter into this Agreement, Stockholders have
required that Parent reduce the conversion price applicable to the conversion of Preferred Shares
to Convertible Common Shares on the terms set forth herein only if the Merger is consummated; and

     WHEREAS, as a condition to its willingness to enter into the Merger Agreement, Parent and the
Company have requested that Stockholders enter into this Agreement pursuant to which each
Stockholder shall, among other things, (i) vote all of their Subject Shares in favor of the
proposal to approve and adopt the Merger Agreement and the Merger, the Share Increase, the Reverse
Stock Split, the amendment and restatements of the memorandum of association of Parent (the
“Memorandum of Association”) and the Bye-Laws (such amendment and restatements together,
the “Amendment and Restatements”), the Name Change and the Board Increase, (ii) deliver the
consent described in Section 5 hereof and (iii) convert all of their Preferred Shares and
Convertible Common Shares into Common Shares, immediately prior to consummation of the Merger.

 

 

     NOW, THEREFORE, to induce the Company and Parent to enter into, and in consideration of their
entering into, the Merger Agreement, and in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, and intending to be legally bound hereby, the
parties hereto agree as follows:

     Section 1. Limited Irrevocable Proxies.

     (a) Each Stockholder hereby irrevocably grants to, and appoints, Parent and any individual who
shall be designated by Parent, Stockholder’s proxy and attorney-in-fact (with full power of
substitution and resubstitution), for and in the name, place and stead of Stockholder, to vote its
Subject Shares, or grant a consent or approval in respect of such Subject Shares, at any meeting of
stockholders of Parent or at any adjournment or postponement thereof or in any other circumstances
upon which their vote, consent or other approval is sought, in the manner contemplated by
Sections 6(a)(i)-(vii) hereof; provided, however, that each Stockholder
shall be entitled to revoke such proxy in the event the Closing does not occur for any reason on or
before August 31, 2007 or the Merger Agreement is terminated in accordance with its terms.

     (b) Each Stockholder represents and warrants that any proxies heretofore given in respect of
its Subject Shares are not irrevocable and that any such proxies have been or are hereby revoked.

     (c) Each Stockholder understands and acknowledges that Parent is entering into the Merger
Agreement in reliance upon such Stockholder’s execution and delivery of this Agreement. Each
Stockholder hereby affirms that the proxy set forth in this Section 1 is coupled with an
interest and is irrevocable until such time as this Agreement terminates in accordance with its
terms and that no subsequent proxies with respect to its Subject Shares shall be given (and if
given shall not be effective). Each Stockholder hereby further affirms that the irrevocable proxy
is given in connection with the execution of the Merger Agreement and that such irrevocable proxy
is given to secure the performance of the duties of such Stockholder under this Agreement. Each
Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause
to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in
accordance with the provisions of the Bye-Laws and Bermuda law. The power of attorney granted by
each Stockholder is a durable power of attorney and shall survive the dissolution, bankruptcy,
death or incapacity of such Stockholder.

     Section 2. Representations and Warranties of Stockholders. Each Stockholder hereby
represents and warrants as follows:

     (a) Ownership of Subject Shares. Stockholder is the record and beneficial owner of,
and has good, valid and marketable title to, the Subject Shares set forth opposite its name on
Schedule I, free and clear of any liens, warrants, options or other rights to purchase or
acquire such Subject Shares other than those imposed by securities laws and by this Agreement.
Stockholder has the exclusive right to vote the Subject Shares set forth opposite its name on
Schedule I, and none of such Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting of such Subject Shares, except as
contemplated by this Agreement.

 

 

     (b) Authority; No Conflict. Stockholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Stockholder and constitutes a valid and binding obligation
of Stockholder enforceable against Stockholder in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, result in any violation of, or
constitute (with or without notice or lapse of time or both) default under, any provision of any
trust agreement, loan or credit agreement, bond, note, mortgage, indenture, lease, partnership
agreement or other contract, agreement, obligation, commitment, arrangement, understanding,
instrument, permit, concession, franchise or license or any statute, law, ordinance, rule,
regulation, judgment, order, notice or decree applicable to Stockholder or to any of Stockholder’s
property or assets.

     (c) No Filings; Consents. No consents or approvals of, or filings or registrations
with, any Governmental Entity or any other Person are necessary to be made by Stockholder in
connection with (i) the execution and delivery by Stockholder of this Agreement and (ii) the
performance by Stockholder of its obligations under this Agreement, including the grant of the
limited irrevocable proxy pursuant to Section 1(a) hereof.

     (d) Reliance. Each Stockholder understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon such Stockholder’s execution and delivery of this
Agreement.

     (e) Brokers. No broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission from Parent or the Company in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of Stockholders.

     Section 3. Representations and Warranties of the Company. The Company hereby
represents and warrants that the Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its terms. The
execution and delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict with, result in any
violation of, or constitute (with or without notice or lapse of time or both) default under, any
provisions of the certificate of incorporation or by-laws of the Company or any trust agreement,
loan or credit agreement, bond, note, mortgage, indenture, lease or other contract, agreement,
obligation, commitment, arrangement, understanding, instrument, permit, concession, franchise or
license or any statute, law, ordinance, rule, regulation, judgment, order, notice or decree
applicable to the Company or any of the Company’s property or assets. No broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee or commission from
Stockholder or Parent in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.

     Section 4. Representations and Warranties of Parent. Parent hereby represents and
warrants that Parent has all requisite corporate power and authority to enter into

 

 

this Agreement and to consummate the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by Parent and constitutes a valid and binding
obligation of Parent enforceable against Parent in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, result in any violation of, or
constitute (with or without notice or lapse of time or both) default under, any provisions of the
Memorandum of Association or Bye-Laws or any trust agreement, loan or credit agreement, bond, note,
mortgage, indenture, lease or other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit, concession, franchise or license or any statute, law, ordinance,
rule, regulation, judgment, order, notice or decree applicable to Parent or any of Parent’s
property or assets. No broker, finder or investment banker is entitled to any brokerage, finder’s
or other fee or commission from Stockholder or the Company in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of Parent.

     Section 5. Consents of Preferred Shares and Convertible Common Shares.

     (a) Each Stockholder hereby agrees that, concurrently with the execution and delivery of this
Agreement and the Merger Agreement, it shall execute and deliver to Parent a consent, substantially
in the form attached as Exhibit A (the “Consent”), to:

     (i) the substitution of $6.24 (the “Substituted Conversion Price”) for
the “Current Conversion Price” calculated in accordance with the terms of the
Description of Stock for the purpose of calculating the conversion ratio applicable
to the conversion of Preferred Shares to Convertible Common Shares pursuant to
Section 7(a) hereof;

     (ii) the waiver of any dividends that would have otherwise accrued on the
Preferred Shares in accordance with the terms of the Description of Stock from and
after December 31, 2006 (the “Waived Dividends”) and the acknowledgment that
such Waived Dividends shall not constitute “past due” dividends under Section 4(c)
of the Description of Stock;

     (iii) the exclusion of the Waived Dividends that otherwise would have been
included in each of the Series A Preferred Liquidation Preference, the Series B
Preferred Liquidation Preference and the Series C Preferred Liquidation Preference
for the purpose of calculating the Series A Conversion Ratio, the Series B
Conversion Ratio and the Series C Conversion Ratio, respectively;

     (iv) the waiver of any adjustments to the Current Conversion Price that would
have otherwise occurred as a result of the Merger and the related transactions in
accordance with Sections 7(a), 7(b) and 7(d) of the Description of Stock;

     (v) the expansion by Parent into lines of business other than continuing lines
of business in which Parent is currently involved resulting from the Merger;

 

 

     (vi) the entry by such Stockholder and Parent into this Agreement and the
conversions provided by Section 7 hereof; and

     (vii) the Board Increase;

provided, that such consents are conditioned upon the Closing occurring on or before
August 31, 2007, and in the event the Closing does not occur on or before August 31, 2007 or the
Merger Agreement is terminated in accordance with its terms, the foregoing consents shall hereby
be automatically rescinded, shall have no effect and shall be void ab initio; provided,
further, that any Waived Dividends that become payable as a result thereof shall not be
deemed “past due” dividends under Section 4(c) of the Description of Stock if paid on the next
applicable Dividend Due Date; provided, further, that if the Closing does occur
and any dividends or distributions are declared or paid in respect of the Common Shares at or
prior to the Closing, then Stockholders shall be entitled to share in such dividend or
distribution in respect of the Preferred Shares and Convertible Common Shares on an as-converted
basis (assuming the Substituted Conversion Price).

     (b) Subject to Section 5(a), the Consent shall remain in full force and effect until
the termination of this Agreement. Such Stockholder shall not enter into any agreement or
understanding with any Person prior to the termination of this Agreement that is inconsistent with
the terms hereof.

     Section 6. Voting Covenants of Stockholders. Each Stockholder agrees as follows:

     (a) Without in any way limiting Stockholder’s right to vote its Subject Shares in such
Stockholder’s sole discretion with respect to any other matters that may be submitted to a
stockholder vote, consent or other approval (including by written consent), at any meeting of the
stockholders of Parent called upon to approve and adopt the Merger Agreement and the Merger, the
Share Increase, the Reverse Stock Split, the Amendment and Restatements, the Name Change or the
Board Increase or at any adjournment thereof or in any other circumstances upon which a vote,
consent or other approval (including written consent) with respect to the Merger Agreement and the
Merger, the Share Increase, the Reverse Stock Split, the Amendment and Restatements, the Name
Change or the Board Increase is sought, Stockholder shall vote (or cause to be voted) its Subject
Shares:

     (i) in favor of the Merger, the approval and adoption of the Merger Agreement
and approval of any other transactions contemplated by the Merger Agreement;

     (ii) in favor of the Share Increase;

     (iii) in favor of the Reverse Stock Split;

     (iv) in favor of the Amendment and Restatements;

     (v) in favor of the Name Change;

 

 

     (vi) in favor of the Board Increase; and

     (vii) against (x) any Parent Alternative Transaction Proposal or any merger
agreement or merger (other than the Merger Agreement and the Merger), amalgamation,
consolidation, combination, sale of substantially all of Parent’s assets, sale or
issuance of securities of Parent or any of its Subsidiaries, reorganization, joint
venture, recapitalization, dissolution, liquidation or winding up of or by Parent or
any of its Subsidiaries and (y) any amendment of the Memorandum of Association or
Bye-Laws or equivalent organizational documents or other proposal or transaction
involving Parent or any of its Subsidiaries which amendment or other proposal or
transaction would or could reasonably be expected to impede, frustrate, prevent,
nullify or result in a breach of any representation, warranty or covenant or any
other obligation or agreement of Parent under or with respect to, the Merger, the
Merger Agreement or any of the transactions contemplated by the Merger Agreement or
by this Agreement, including, without limitation, the Share Increase, the Reverse
Stock Split, the Amendment and Restatements, the Name Change and the Board Increase.

     (b) Stockholder shall not enter into any agreement or understanding with any Person prior to
the termination of this Agreement to vote or give instructions in a manner inconsistent with this
Section 6.

     (c) Stockholder agrees not to transfer, sell, assign, exchange, pledge or otherwise dispose of
(including by gift) or encumber any of its Subject Shares, or to make any offer or agreement
relating thereto, at any time prior to the termination of this Agreement unless the acquirer of
such Subject Shares executes a counterpart signature page to this Agreement and agrees to be bound
by all of the restrictions, obligations and commitments of Stockholders hereunder. Furthermore,
Stockholder shall not, except as contemplated by this Agreement, directly or indirectly, grant any
proxies or powers of attorney with respect to its Subject Shares, deposit such Subject Shares into
a voting trust or enter into a voting agreement or any other arrangement with respect to such
Subject Shares and shall not commit or agree to take any of the foregoing actions.

     (d) Stockholder shall be deemed to be a Representative at all times for purposes of Section
8.3(a) of the Merger Agreement (regardless of whether Stockholder is in fact a Representative at
the relevant time) and shall comply with the terms of Section 8.3(a) of the Merger Agreement.

     Section 7. Conversion Covenants of Stockholders. Upon certification by Parent and the
Company to the Stockholders of the satisfaction or waiver of all the conditions set forth in
Article IX of the Merger Agreement (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), each
Stockholder agrees that at least one (1) Business Day prior to the Closing Date such Stockholder
shall:

     (a) surrender all Preferred Shares with written evidence to Parent at its office designated
pursuant to the Bye-Laws (substantially in the form attached as Exhibit B) of such

 

 

Stockholder’s election to convert all Series A Preferred Shares, Series B Preferred Shares or
Series C Preferred Shares of such Stockholder into fully paid and nonassessable Class A Common
Shares, Class B Common Shares or Class C Common Shares, respectively, using the Substituted
Conversion Price and excluding the Waived Dividends from the calculation of the applicable
conversion ratio, but otherwise in accordance with the terms of the Description of Stock; and

     (b) surrender all Convertible Common Shares with written evidence to Parent at its office
designated pursuant to the Bye-Laws (substantially in the form attached as Exhibit B) of
such Stockholder’s election to convert all Class A Common Shares, Class B Common Shares and Class C
Common Shares of such Stockholder (including all of the Convertible Common Shares resulting from
the conversion in subparagraph 7(a) above) into fully paid and nonassessable Common Shares on a
one-for-one ratio in accordance with the terms of the Description of Stock;

     provided, that such conversion shall be conditioned upon the Closing occurring on or prior
to August 31, 2007 and if the Closing does not occur on or before August 31, 2007 for any reason or
the Merger Agreement is terminated pursuant to its terms, the foregoing covenants to convert and
any elections made in accordance therewith shall hereby be rescinded, shall have no effect and
shall be void ab initio and Stockholders shall continue to hold such Preferred Shares and
Convertible Common Shares Stockholders held of record immediately prior to such elections to
convert and the current conversion terms as set forth in the Description of Stock shall apply to
any future conversions thereof.

     Section 8. Further Assurances. Each Stockholder will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further consents, documents and
other instruments as Parent may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.

     Section 9. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to its Subject Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of such Subject Shares shall pass, whether by
operation of law or otherwise, including the respective successors of such Stockholder. In the
event of any stock split, stock dividend, merger, amalgamation, reorganization, recapitalization or
other change in the capital structure of Parent affecting the Subject Shares or the acquisition of
additional shares of Subject Shares, the number of Subject Shares shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any additional or decreased shares
of Subject Shares issued to or acquired or disposed of by such Stockholder.

     Section 10. Stockholder Capacity. Each Stockholder enters into this Agreement solely
in such Stockholder’s capacity as the record and beneficial owner of its Subject Shares. If any
Stockholder is or becomes during the term hereof a director or officer of Parent, such Stockholder
makes no agreement or understanding in this Agreement in Stockholder’s capacity as such director or
officer. Nothing in this Agreement shall limit or affect any actions taken by Stockholder in
Stockholder’s capacity as an officer or director of Parent.

     Section 11. No Ownership Interest. Except as expressly set forth in this

 

 

Agreement, nothing contained in this Agreement shall be deemed to vest in Parent or the
Company any direct or indirect ownership or incidence of ownership of or with respect to any
Subject Shares. All rights, ownership and economic benefits of and relating to any Subject Shares
shall remain and belong to Stockholders, and the Company shall not have any authority to exercise
any power or authority to manage, direct, superintend, restrict, regulate, govern or administer any
of the policies or operations of Parent or exercise any power or authority to direct Stockholders
in the voting of any of the Subject Shares, except as otherwise expressly provided in this
Agreement.

     Section 12. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, in whole or in part (whether by operation of law or
otherwise), by any party hereto without the prior written consent of each of the other parties
hereto, and any attempt to make any such assignment without such consent shall be null and void;
provided that Parent may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent;
provided, further, that any Stockholder may assign its rights and obligations in
connection with any transfer of Subject Shares made in accordance with Section 6(c).
Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and assigns.

     Section 13. Termination. This Agreement shall terminate, and the provisions hereof
shall be of no further force or effect, upon the earliest of (i) the Effective Time, (ii) the
termination of the Merger Agreement, and (iii) August 31, 2007; provided, however,
that notwithstanding anything to the contrary contained in this Agreement, no party hereto shall be
relieved of or released from any liabilities or damages arising out of a willful breach of its
covenants or a willful breach of its representations or warranties contained in this Agreement
prior to the termination of this Agreement.

     Section 14. General Provisions.

     (a) Modification. No supplement, modification or amendment of this Agreement will be
binding unless made in a written instrument that is signed by all of the parties hereto and that
specifically refers to this Agreement.

     (b) Notice. All notices and other communications hereunder shall be in writing and
shall be deemed given upon receipt by the parties. All notices hereunder shall be delivered to the
Company and Parent in accordance with Section 11.2 of the Merger Agreement and to each Stockholder
at its address set forth on Parent’s stock ledger (or at such other address for a party as shall be
specified by like notice).

     (c) Costs and Expenses. Whether or not the Merger is consummated, each party shall
bear its own expenses in connection with this Agreement and the transactions contemplated hereby.

     (d) Interpretation. When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not affect in any way the

 

 

meaning or interpretation of this Agreement. This Agreement is the result of the collective
efforts of the Company, Parent and Stockholder, and each provision hereof has been subject to the
mutual consultation, negotiation and agreement of the parties and there shall be no construction
against any party based on any presumption of that party’s involvement in the drafting thereof.
The words “include”, “includes” or “including” shall be deemed to be followed by the words “without
limitation.” The term “ordinary course of business” (or similar terms) shall be deemed to be
followed by the words “consistent with past practice.”

     (e) Entire Agreement; No Third Party Beneficiaries. This Agreement (including the
documents and the instruments referred to herein) (i) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.

     (f) Governing Law and Venue; Waiver of Jury Trial.

     (i) This Agreement shall be governed by, and construed in accordance with, the
laws of Bermuda, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. The parties hereby irrevocably submit to
the jurisdiction of the courts of the State of New York and the Federal courts of
the United States of America located in the State of New York and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not subject
thereto or that such action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be appropriate or that
this Agreement or any such document may not be enforced in or by such courts, and
the parties irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a New York State court. The
parties hereby consent to and grant any such court jurisdiction over the person of
such parties solely for such purpose and over the subject matter of such dispute and
agree that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 14(b) or in such other manner as may be
permitted by law shall be valid and sufficient service thereof.

     (ii) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO

 

 

ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND
(iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 14(f)(ii).

     (g) Counterparts. This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.

     (h) Severability. If any provision of this Agreement, or the application thereof to
any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement, and
the application of such provision to other Persons or circumstances, shall not be affected thereby,
and to such end, the provisions of this Agreement are agreed to be severable. Upon such
determination that any term or other provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

     (i) Enforcement. The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the
terms and provisions of this Agreement, in addition to any other remedy to which they are entitled
at law or in equity. Without limiting the generality of the foregoing, the parties hereto
expressly agree that the obligations of Stockholders set forth in Sections 5, 6 and
7 hereof shall be subject to the foregoing provisions of this Section 14(i).

[SIGNATURE PAGE FOLLOWS]

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of
the date first written above.

PXRE GROUP LTD.

By:/s/
Jeffrey L. Radke

Name: Jeffrey L. Radke

Title:  President & Chief Executive Officer

ARGONAUT GROUP, INC.

By:/s/ Byron L. LeFlore, Jr.

Name: Byron L. LeFlore, Jr.

Title:   Senior Vice President

 

 

CAPITAL Z FINANCIAL SERVICES FUND II, L.P.

By:/s/ Bradley Cooper

Name: Bradley Cooper

Title:

CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.

By: /s/ Bradley Cooper

Name: Bradley Cooper

Title:

CAPZ PXRE HOLDINGS, LLC

By: /s/ Bradley Cooper

Name: Bradley Cooper

Title:

CAPZ PXRE HOLDINGS PRIVATE, LLC

By: /s/ Bradley Cooper

Name: Bradley Cooper

Title:

CAPITAL Z MANAGEMENT, LLC

By: /s/ Bradley Cooper

Name: Bradley Cooper

Title:

 

 

RESERVOIR CAPITAL MASTER FUND, L.P.

By: /s/ Craig Huff

Name: Craig Huff

Title:

RESERVOIR CAPITAL MASTER FUND II, L.P.

By: /s/ Craig Huff

Name: Craig Huff

Title:

RESERVOIR CAPITAL PARTNERS, L.P.

By: /s/ Craig Huff

Name: Craig Huff

Title:

RESERVOIR CAPITAL INVESTMENT PARTNERS, L.P.

By: /s/ Craig Huff

Name: Craig Huff

Title:

RESERVOIR CAPITAL GROUP, L.L.C.

By: /s/ Craig Huff

Name: Craig Huff

Title:

 

 

RER REINSURANCE HOLDINGS, L.P.

By: /s/ Richard E. Rainwater by Melissa T. Parrish, Attorney-in-fact

Name: Richard E. Rainwater

Title: General Partner

 

 

ROBERT STAVIS

/s/ Robert Stavis

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