Document:

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American International Group, Inc.

  Annual Short-Term Incentive
Plan 

as Amended and Restated Effective March 1, 2016 

 

 

 

1.           
 Purpose

American
International Group, Inc. (“AIG” and together with its
consolidated subsidiaries, the “Company”) has created this American
International Group, Inc. Annual Short-Term Incentive Plan (this “Plan”)
to strengthen our pay-for-performance culture by rewarding employees for
business and individual performance during the applicable Performance Year. 
This Plan replaces the American International Group, Inc. 2013 Short-Term
Incentive Plan beginning with the Performance Year from January 1, 2014 through
December 31, 2014.  Awards under this Plan (each, an “Incentive Award”)
will be in the form of cash.  Capitalized terms not otherwise defined herein
will have the meanings set forth in the Glossary of Terms in Appendix A. 

2.           
 Performance Periods

This
Plan will operate for successive one-year periods beginning on January 1 of
each year (each, a “Performance Year”) until this Plan is terminated
by the Compensation and Management Resources Committee of the Board of
Directors of AIG (including any successor thereto, the “Committee”). 
The first Performance Year will be January 1, 2014 through December 31, 2014.

3.           
 Eligibility

All
full and part-time employees of the Company, excluding external contractors,
independent contractors, temporary workers, and independent agents during the
applicable Performance Year (the “Participants”) are eligible to
participate in this Plan for such Performance Year, unless the employee is a
participant in another variable pay or sales plan that the applicable business
has determined is in lieu of this Plan during such Performance Year.  For the
avoidance of doubt, employees who are eligible to participate in a bonus plan
that is required to be provided under local law or who have an employment
contract with AIG or its subsidiaries for ongoing employment of unlimited
duration that is not confined to a specific, finite project will not be
ineligible for the Plan (unless the applicable business expressly elects to
exclude such employee).  If an individual is hired after the Performance Year
commences, the individual may become a Participant in the Plan, and the amount
of his or her Incentive Award may be Pro-Rated to reflect the portion of the
Performance Year worked.

4.           
 Bonus Pool Funding

A.          
Determination.  As soon as practicable following
a Performance Year, the Committee will determine the aggregate bonus pool (the
“Earned Bonus Pool”) to ensure that the Plan rewards all
Participants appropriately and consistent with the purpose of this Plan. 
Promptly following this determination, the Compensation Center of Excellence (“Compensation
COE”) under the direction of the Operating Committee will allocate the
Earned Bonus Pool to each of the Business/Functional Segments.  Prior to March
31st of any Performance Year, the 

 

 

 

 

Committee will have the discretion
to establish a threshold goal (the “Threshold Goal”) and
determine that, if the Threshold Goal is not met, the Earned Bonus Pool will be
capped at a fixed amount (including $0) or the amount resulting from a
specified formula.

B.          
Exceptions to
Earned Bonus Pool.  As
soon as practicable following a Performance Year, the Committee will determine
whether the Incentive Awards for any Participants will be excluded from, and
not subject to, the Earned Bonus Pool.

5.           
 Incentive Awards

A.          
Amount and Form.  Prior to or as soon as
practicable following the commencement of a Performance Year, a Participant’s
target Incentive Award (the “Individual Target Award”) will be
established by the Committee or the applicable Business/Functional Segment in
which the Participant is Employed.  The Individual Target Award will generally
be established after considering the Participant’s job grade, business, local
market, job scope, responsibilities and experience.

B.          
Performance
Metrics.  Prior
to or as soon as practicable following the commencement of a Performance Year,
the Committee will determine the performance metric(s) (each, a “Performance
Metric”) and the manner in which each Participant’s actual Incentive
Award (the “Earned Individual Award”) will be calculated for such
Performance Year.  Unless otherwise determined by the Committee, there will be
three categories of Performance Metrics:  (1) Company-based Performance
Metrics, (2) Business/Functional Segment-based Performance Metrics and (3)
Individual-based Performance Metrics; provided that for any Performance
Year there will be at least one Company-based Performance Metric or
Business/Functional Segment-based Performance Metric (which could include the
Threshold Goal).  The Earned Individual Awards may be determined for any Performance
Year on the basis of one or any combination of the Performance Metrics, as
determined by the Committee in its sole discretion, and the Performance Metrics
will be documented in a written Administrative Guide prepared by management for
the Performance Year.  In determining the manner in which the Earned Individual
Award will be calculated, the Committee may establish minimum, target and
maximum achievement levels for any Performance Metric.

C.          
Earned Individual
Award.  The
Committee will assess performance against (1) any Company-based Performance
Metrics, (2) any Business/Functional Segment-based Performance Metrics and (3)
for Participants who are under the purview of the Committee, any
Individual-based Performance Metrics, in each case, as soon as practicable
following a Performance Year.  For any Participants who are not under the
purview of the Committee, such Participant’s manager (in accordance with the
then-current performance management process, if any) will assess performance
against his or her Individual-based Performance Metrics, if applicable.  Each
Participant’s Earned Individual Award will be determined by the extent to which
the Performance Metrics applicable to the Plan Year have been attained.  The
Committee may provide that an Earned Individual Award may not exceed a certain
percentage of the Individual Target Award.  In addition, in no event will the
aggregate Earned Individual Awards for a Performance Year exceed the Earned
Bonus Pool.

 

 

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D.          
Vesting; Payment.  Earned Individual Awards for a
Performance Year will be granted as the Committee determines in its sole
discretion and paid on such date or dates following the determination
process described in Section 5.C, but no later than April 30th
following the Performance Year (the “Award Date”).  A Participant
must be employed on the Award Date to be eligible to receive his or her Earned
Individual Award except to the extent provided in Section 6  and Appendix B. 
Prior to March 31st
of a Performance Year, the Committee
may determine that
all or a specified percentage of a Participant’s Earned Incentive Award will be
a “Deferred Award,” in which case such Earned Incentive Award
will be paid on the one-year anniversary of the Award Date (the “Deferred
Award Payment Date”). 

6.           
 Termination
in Service; Breaks in Service

A.          
Termination
Generally.  In
the event (i) a Participant’s Employment is Terminated for any reason during
the Performance Year or prior to the Award Date or (ii) a Participant is
Employed but not actively performing services for the Company for a portion of
the Performance Year or on the Award Date for certain reasons specified in Appendix B,
the amount and payment of the Earned Individual Award, if any, that the
Participant will receive will be determined (and, if applicable, modified) in accordance
with Appendix B. 

B.          
Termination
without Cause.  In
the event that a Participant is involuntarily Terminated without Cause, AIG
will require the Participant to execute a Release in order to impose
restrictive covenants requiring confidentiality of information,
non-disparagement and non-solicitation of Company employees for 12 months
following the termination as a condition to receiving payment of all or a
portion of an Earned Individual Award for which the Award Date has not occurred
as of such termination.  The Release must be executed by the Participant,
submitted to the Company and become irrevocable prior to the date on which any
such Earned Individual Award shall be paid, but in no event shall the Release
be executed later than March 10th of the year following the year in
which the Termination without Cause occurred; provided that if the
Release is executed after such time, any payments with respect to the Earned
Individual Award will be forfeited.

7.           
 Clawback/Repayment.

Notwithstanding
anything to the contrary herein, in consideration of the grant of an Incentive
Award, the award and any payments under this Plan will be subject to forfeiture
and/or repayment to the extent provided for in the AIG Clawback Policy, as in
effect from time to time.

In
particular, for purposes of this Plan effective March 10, 2015, any Participant
who is in grade level 27 or above will be a “Covered Employee” under the AIG
Clawback Policy and any award and payments to such Participant under this Plan
will be subject to forfeiture and/or repayment to the extent provided for in
the AIG Clawback Policy, as in effect from time to time, if it is determined in
accordance with the AIG Clawback Policy that any of the following events have
occurred (each such event, a “Covered Event” for purposes of the AIG Clawback
Policy):

 

 

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A.          
a material
restatement of all or a portion of AIG’s financial statements occurs and the
Board or Committee determines that recovery of payments under the award is
appropriate after reviewing all relevant facts and circumstances that
contributed to the restatement, including whether the Participant engaged in
misconduct, and considering issues of accountability;

B.          
payments under the
award were based on materially inaccurate financial statements or on performance metrics
that are materially inaccurately determined, regardless of whether the
Participant was responsible for the inaccuracy;

C.          
the Participant’s
failure to properly identify, assess or sufficiently raise concerns about risk,
including in a supervisory role, resulted in a material adverse impact on AIG,
any of AIG’s business units or the broader financial system;

D.          
any action or
omission by the Participant constituted a material violation of AIG’s risk
policies as in effect from time to time; or  

E.          
any action or omission
by the Participant resulted in material financial or reputational harm to AIG.

 

8.           
 Administration

A.          
General.  The Plan will be administered by
the Committee, and any person or persons designated by the Committee to
administer the Plan from time to time including, but not limited to, the Senior
C&B Executive and the Compensation COE.  The Compensation COE will conduct
validation analyses to determine that this Plan is generally operated in
accordance with the terms of this Plan and the applicable Administrative
Guide.  Actions of the Committee may be taken by the vote of a majority of its
members.  The Committee may allocate among its members and delegate to any
person who is not a member of the Committee any of its powers, responsibilities
or duties under the Plan.  The Committee will have the power to construe,
interpret and implement this Plan, to make regulations for carrying out its
purposes and to make all other determinations in connection with its
administration, all of which will, unless otherwise determined by the
Committee, be final, binding and conclusive.  The Committee may, in its sole
discretion, reinstate any Earned Individual Awards made under this Plan that
have been terminated and forfeited because of a Participant’s Termination, if
the Participant complies with any covenants, agreements or conditions that the
Committee may impose; provided,  however, that payment under such
reinstated awards will not be made until the scheduled times set forth in this
Plan.

B.          
Determination of
Employment.  The
Committee, with respect to any Participant under the purview of the Committee,
and the Senior C&B Executive, with respect to any other Participant, will
have the right to determine the commencement or Termination date of a
Participant’s Employment with the Company solely for purposes of this Plan,
separate and apart from any determination as may be made by the Company with
respect to the individual’s employment.

 

 

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C.          
No Liability.  No member of the Board of
Directors of AIG (the “Board”) or any employee of AIG performing
services with respect to the Plan (each, a “Covered Person”) will
have any liability to any person (including any Participant) for any action
taken or omitted to be taken or any determination made, in each case, in good
faith with respect to this Plan or any Participant’s participation in it.  Each
Covered Person will be indemnified and held harmless by AIG against and from
any loss, cost, liability, or expense (including attorneys’ fees) that may be
imposed upon or incurred by such Covered Person in connection with or resulting
from any action, suit or proceeding to which such Covered Person may be a party
or in which such Covered Person may be involved by reason of any action taken
or omitted to be taken under this Plan and against and from any and all amounts
paid by such Covered Person, with AIG’s approval, in settlement thereof, or
paid by such Covered Person in satisfaction of any judgment in any such action,
suit or proceeding against such Covered Person, provided  that  AIG
will have the right, at its own expense, to assume and defend any such action,
suit or proceeding and, once AIG gives notice of its intent to assume the
defense, AIG will have sole control over such defense with counsel of AIG’s
choice.  To the extent any taxable expense reimbursement under this paragraph
is subject to Section 409A, (1) the amount thereof eligible in one taxable year
shall not affect the amount eligible in any other taxable year; (2) in no event
shall any expenses be reimbursed after the last day of the taxable year
following the taxable year in which the Covered Person incurred such expenses;
and (3) in no event shall any right to reimbursement be subject to liquidation
or exchange for another benefit.  The foregoing right of indemnification will
not be available to a Covered Person to the extent that a court of competent
jurisdiction in a final judgment or other final adjudication, in either case,
not subject to further appeal, determines that the acts or omissions of such
Covered Person giving rise to the indemnification claim resulted from such
Covered Person’s bad faith, fraud or willful misconduct.  The foregoing right
of indemnification will not be exclusive of any other rights of indemnification
to which Covered Persons may be entitled under AIG’s Amended and Restated
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or
any other power that AIG may have to indemnify such persons or hold them
harmless.

D.          
Consent.  If the Committee at any time
determines, in its sole discretion, that any consent (as hereinafter defined)
is necessary or desirable as a condition of, or in connection with, the
granting of any award or the payment of any amount under this Plan or the
taking of any other action thereunder (each such action, a “plan action”),
then such plan action will not be taken, in whole or in part, unless and until
such consent will have been effected or obtained to the full satisfaction of
the Committee; provided  that  if such consent has not been so
effected or obtained as of the latest date provided by this Plan for payment of
such amount and further delay is not permitted in accordance with the
requirements of Section 409A, such amount will be forfeited and terminate
notwithstanding any prior earning or vesting.  

The
term “consent” as used in this paragraph with respect to any plan
action includes (1) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state, or
local law, or law, rule or regulation of a jurisdiction outside the United
States, (2) any other matter, which the Committee may deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption 

 

 

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from the requirement that any
such listing, qualification or registration be made, (3) any and all other
consents, clearances and approvals in respect of a plan action by any
governmental or other regulatory body or any stock exchange or self-regulatory
agency and (4) any and all consents required by the Committee.

9.           
 Other Provisions

A.          
No Funding.  The Company will be under no
obligation to fund or set aside amounts to pay obligations under this Plan. A
Participant will have no rights to awards or other amounts under this Plan
other than as a general, unsecured creditor of the Company.

B.          
Tax Withholding.  The Company will comply with
all applicable tax reporting, withholding and other requirements globally with
respect to amounts paid under this Plan, in amounts and in a manner determined
in the sole discretion of the Company.  As a condition to the payment of any
amount under this Plan, or in connection with any other event related to this
Plan, that gives rise to a federal or other governmental tax withholding
obligation (1) the Company may deduct or withhold (or cause to be deducted or
withheld) from any payment to a Participant whether or not pursuant to this
Plan or (2) the Committee will be entitled to require that the Participant
remit cash to the Company (through payroll deduction or otherwise), in each
case, in an amount sufficient in the opinion of the Company to satisfy such
withholding obligation.

C.          
No Rights to
Other Payments. 
The provisions of this Plan provide no right or eligibility to a Participant to
any other payouts from AIG or its subsidiaries under any other alternative
plans, schemes, arrangements or contracts AIG may have with any employee or
group of employees of AIG or its subsidiaries.  Nothing contained in the Plan
will be deemed in any way to limit or restrict the Company from adopting or
continuing in effect any compensation arrangements or making any award or
payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.

D.          
Effect on Benefit
Plans.  The
Incentive Award payment is deemed compensation under certain of the Company’s
compensation and benefit plans, but it is not deemed compensation for other
programs; provided, however, that for purposes of the Company’s benefit
programs, this Plan will be deemed a short-term incentive, annual, year-end
bonus program. The Summary Plan Description and plan summaries of each of the
Company’s compensation and benefit plans will govern whether and the extent to
which the Incentive Award payment will affect the Participant’s benefits under such
plans, and the Company reserves the right to amend those compensation and
benefit plans at any time.

E.          
Section 409A.  Payments under this Plan are
intended to be exempt from Section 409A to the extent they satisfy the
“short-term deferral exception” in Treasury Regulation Section 1.409A-1(b)(4) and otherwise to be compliant
with Section 409A, and this Plan shall be interpreted, operated and
administered accordingly.  For the avoidance of doubt, all Incentive Awards under the Plan
other than Deferred Awards are intended to satisfy the short-term deferral
exception and all Deferred Awards constitute “deferred compensation” subject to
Section 409A.  With
respect to any Incentive Award that constitutes “deferred compensation” 

 

 

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subject to Section 409A, (1) references
to termination of the Participant’s employment will mean the Participant’s
separation from service with the Company within the meaning of Section 409A and
(2) any payment to be made with respect to such Incentive Award in connection
with the Participant’s separation from service with the Company within the
meaning of Section 409A that would be subject to the limitations in Section
409A(a)(2)(b) of the Code will be delayed until six months after the
Participant’s separation from service (or earlier death) in accordance with the
requirements of Section 409.  Each payment made under the Plan will be deemed to be a separate
payment for purposes of Section 409A. 
The Committee will have full authority to give effect to the intent of this Section 9.E. 

F.           
Section 4999.  In the event that any Incentive
Award payment received or to be received by any Participant under this Plan
would be subject to the excise tax imposed by Section 4999 of the Code or any
similar or successor provision to Section 4999 (the “Excise Tax”)
then, at the discretion of the Chief Human Resource Officer, such Incentive
Award payment shall be reduced up to the largest amount which would result in
no portion of the Incentive Award payment being subject to the Excise Tax.  The
determination of any such reduction pursuant to this Section 9.F will be
made by the Senior C&B Executive, and such determination will be conclusive
and binding upon the Company, the Participant, the Senior C&B Executive and
the Committee for all purposes.

G.          
Section Headings.  The section headings contained
herein are for convenience only, and in the event of any conflict, the text of
the Plan, rather than the headings will control.

H.          
Severability.  If any term or provision
contained herein is finally held to be, to any extent, invalid, illegal or
unenforceable (whether in whole or in part), such provision will be deemed
modified only to the extent of such invalidity, illegality or unenforceability
and the remaining provisions will not be affected thereby.

I.            
No Third Party
Beneficiaries. 
Except as expressly provided herein, this Plan will not confer on any person
other than AIG and the Participant any rights or remedies hereunder. The
exculpation and indemnification provisions of Section 8.C will inure to
the benefit of a Covered Person’s estate and beneficiaries and legatees.

J.           
Nonassignability.  No award (or any rights and
obligations thereunder) granted to any person under the Plan may be sold,
exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed
of or hedged, in any manner (including through the use of any cash-settled
instrument), whether voluntarily or involuntarily and whether by operation of
law or otherwise, other than by will or by the laws of descent and
distribution, except as may be otherwise provided in the award agreement.  Any
sale, exchange, transfer, assignment, pledge, hypothecation, or other
disposition in violation of the provisions of this Section 9.J  will
be null and void and any award which is hedged in any manner will immediately
be forfeited.  All of the terms and conditions of this Plan and the award
agreements will be binding upon any permitted successors and assigns.

 

 

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K.          
Entire
Understanding.  The
Plan and, with respect to a Performance Year, the applicable Administrative
Guide, contains the entire understanding of the Company and the Participants
with respect to the subject matter thereof and supersedes all prior promises,
covenants, arrangements, agreements, communications, representations and
understanding between the Company and the Participant.

L.           
No Right of
Employment. 
Nothing in this Plan will be construed as creating any contract of employment
or conferring upon the Participant any right to continue in the employ or other
service of the Company, or any of its subdivisions or subsidiaries, or limit in
any way the right of the Company to change such Participant’s compensation or
benefits or to terminate the employment or other service of such Participant
with or without Cause.

M.         
Successor and
Assigns.  The
terms of this Plan will inure to the benefit of AIG and any successor entity.

N.          
Subject to Any
AIG Section 162(m) Plan.  
AIG may, in any year, propose a Section
162(m) compliant performance incentive award plan (the “AIG Section
162(m) Plan”).  If an AIG Section 162(m) Plan is proposed and approved
by the AIG stockholders in accordance with Section 162(m)(4)(C) of the Code and
Treasury Regulation Section 1.162‐27(e)(4), this Plan will function as a
sub-plan under the AIG Section 162(m) Plan, whereby performance compensation
amounts payable under the AIG Section 162(m) Plan can be paid in part by
accruing awards with respect to a Performance Year.

O.          
No Liability With
Respect to Tax Qualification or Adverse Tax Treatment.  Notwithstanding anything to
the contrary contained herein, in no event shall the Company be liable to a
Participant on account of the failure of any Incentive Award or amount payable
under this Plan to (a) qualify for favorable United States or foreign tax
treatment or (b) avoid adverse tax treatment under United States or foreign
law, including, without limitation, Section 409A.

10.        
 Governing Law.

The
Plan will be governed and enforced in accordance with the appropriate country
and local regulations.  With respect to Participants working in the United
States, this Plan will be governed by and construed in accordance with the laws
of the State of New York, without regard to principles of conflict of laws.

The
Plan shall also be subject to all applicable non-U.S. laws as to Participants
located outside of the United States. In the event that any provision of this
Plan is not permitted by the local laws of a country or jurisdiction in which a
Participant works, such local law shall supersede that provision of this Plan
with respect to that Participant.  The  Senior HR Attorney and the Senior
C&B Executive or their designee(s) shall have the discretion to operate the
Plan with respect to such Participant in a manner that incorporates as much of
the Plan’s current terms as possible while also complying with such local laws.

11.        
 Plan Termination; Amendment

 

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The Plan may be amended or
modified, with or without prior notification of the Participants, at any time
in the sole discretion of the Committee.  The Plan will continue until
suspended or terminated by the Committee in its sole discretion; provided
that all Incentive Awards made under the Plan before its suspension or
termination will remain in effect until such awards have been satisfied or
terminated in accordance with the terms and provisions of the Plan and the
applicable award.  Any termination of this Plan will be done in a manner that
the Committee determines complies with Section 409A. 

Notwithstanding
the foregoing, the Committee’s rights and powers to amend the Plan shall be
delegated to the Senior C&B Executive, who shall have the right to amend
the Plan with respect to (i) amendments required by relevant law, regulation or
ruling, (ii) amendments that are not expected to have a material financial
impact on the Company, (iii) amendments that can reasonably be characterized as
technical or ministerial in nature or (iv) amendments that have previously been
approved in concept by the Committee.  Notwithstanding the foregoing
delegation, the Senior C&B Executive shall not have the power to make an
amendment to the Plan that could reasonably be expected to result in a
termination of the Plan or a change in the structure or the powers, duties or
responsibilities of the Committee, unless such amendment is approved or
ratified by the Committee.

12.        
 Effective Date

The
Plan is effective as of the 2014 Performance Year, and will continue thereafter
until terminated by the Committee; provided, however, that the existence
of the Plan at any time or from time to time does not guarantee or imply the
payment of any Incentive Awards hereunder, or the establishment of any future
plans or the continuation of this Plan. 

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Appendix A

Glossary of Terms

“AIG”
means American
International Group, Inc.

“AIG Section
162(m) Plan” means a Section 162(m) compliant performance incentive award
plan.

“Award Date”
means the date, in accordance with Section 5.D, that the Incentive Award
is granted to and becomes non-forfeitable (other than with respect to the
clawback provisions of Section 7 of the Plan) to the Participant.  For
point of clarity, for Participants with an Incentive Award of which a portion
is designated as a Deferred Award (with such portion payable in a year later
than the year following the Performance Year), the Award Date is the date the
entire Incentive Award becomes non-forfeitable and that the portion of the
Incentive Award not  designated as a Deferred Award is paid.  For all
others, the Award Date is the date that the entire Incentive Award is paid.

“Board”
means the Board of
Directors of AIG.

“Breaks in
Service” means the cessation of actively performing services for the
Company, either on a temporary or permanent basis (including Resignation,
Termination, Leaves of Absence, Retirement and Death).  See Appendix B
for more information.

“Business/Functional
Segments”
means the business
unit segments and functional unit segments established by the Committee for a
Performance Year.  

“Cause”
has the meaning provided in the applicable
severance plan, program or other arrangement in which the Participant is eligible to participate;
provided  that, to
the extent that the Committee, with respect to any Participant under the
purview of the Committee, or the Senior C&B Executive, with respect to any
other Participant, or their delegate(s), in each case, in its or his or her
sole discretion determines that the Participant is not eligible to participate
in a severance plan, program or arrangement,
“Termination without Cause” shall mean a Termination due to a reduction in
force, position elimination or office closing.

“Code” means the Internal Revenue Code of
1986, as amended from time to time.

“Committee”
means the
Compensation and Management Resources Committee of the Board of Directors of
AIG (including any successor thereto).

“Company”
means AIG together with its consolidated
subsidiaries.

“Compensation
COE” means the Compensation Center of Excellence.

“Covered Person”
means any employee
of AIG performing services with respect to the Plan.

“Deferred Award”
means all or a
specified percentage of a Participant’s Earned Incentive Award that the
Committee determines, prior to March 31st of a Performance Year,
will be paid on the Deferred Award Payment Date.

“Deferred Award
Payment Date” means the
one-year anniversary of the Award Date.

 

 

 

 

 

“Earned
Bonus Pool”
means the actual bonus pool approved by the Committee under this Plan for a
Performance Year.

“Earned
Individual Award” means a Participant’s
actual Incentive Award.

“Employed”
and “Employment” means (a) actively performing services for the
Company, (b) being on a Company-approved Paid Leave of Absence, or
Company-approved unpaid leave of absence, or (c) receiving long term disability
benefits for up to
three years from the date short term disability leave commenced, in each case while in good
standing with the Company. For purposes of this Plan, the term Employed shall
not include any period designated by the Company, in its sole discretion, as
“non-working notice,” and shall likewise not include any period during which
(i) an employee receives notice under The Worker Adjustment and Retraining
Notification Act or any state or local equivalent (“WARN”) and is directed not
to work during any period of the WARN notice requirement, or (ii) an employee
receives non-working notice pay and benefits pursuant to WARN.

“Excise Tax”
means the excise tax
imposed by Section 4999 of the Code or any similar or successor provision to
Section 4999.

 “Incentive
Award” means an award
under this Plan.

“Individual
Target Award” means a
Participant’s target Incentive Award.

“Normal
Schedule” means the date specified in Section 5.D that an
Incentive Award would otherwise have been paid if the Participant had continued
to remain Employed by the Company. 

“Operating
Committee” means the group
of senior executives selected by the President and CEO to be a member of this
deliberative group.

“Paid Leave of
Absence” means an approved leave of absence during which the
Participant is receiving salary continuation from a Company payroll; provided,
however, that it shall not include any period during which an Employee receives
notice under WARN and is directed not to report to work during all or a portion
of such WARN notice period;  or (2) following an employee’s Termination of
Employment date, a period during which an employee receives pay and benefits
pursuant to WARN.

 “Participant”
has the meaning provided in Section 3. 

“Performance
Metric” means a performance metric determined by the Committee prior to or as soon as practicable
following the commencement of a Performance Year in accordance with Section 5.B. 

“Performance
Year” means each successive
one-year periods beginning on January 1 of each year.

“Plan”
means this American
International Group, Inc. Annual Short-Term Incentive Plan (also referred to as
“Compensation Plan 483”).

“Pro-Rated”
means, for any amount under this Plan, multiplying such amount by a fraction,
the numerator of which is the number of months (rounding up for partial months)
during the Performance Year that the Participant actively performed services
for the 

 

-11- 

 

 

Company
(including any period designated by the Company as “working notice”, but not
including any period designated by the Company, in its sole discretion, as
“non-working notice”) or was on a Paid Leave of Absence (but not including any
period during which a Participant is receiving long term disability benefits),
and the denominator of which 12.  

“Release”
means the release
required by the severance plan or program applicable to the Participant’s
Termination without Cause; provided that, to the extent that no such
established severance plan or program is deemed applicable by the Committee,
with respect to any Participant under the purview of the Committee, or the
Senior C&B Executive, with respect to any other Participant, or their delegate(s),
in each case, in its or his or her sole discretion, then the release will be a
release generally in the form set forth in Appendix C, subject to any
provisions that the Senior
HR Attorney and the Senior C&B Executive or their delegate(s) may amend or add to the
release; provided, further,
that if the local laws of a country or non-U.S. jurisdiction in which the
Participant performs services would not permit all or a portion of the release
in Appendix C to be structured or executed in the applicable form
attached hereto, the Senior
HR Attorney and the Senior C&B Executive or their designee(s) shall have the discretion to
create a release that incorporates as much of the release in the form attached
as Appendix C as possible while also complying with such local laws.

“Retirement” or “Retire”
means, solely for
purposes of this Plan, (i) in the United States, voluntary Termination
initiated by the Participant (while such Participant is in good standing with
the Company) (x) on or after age 60 with five years of service or (y) on or
after age 55 with 10 years of service, and (ii) outside of the
United States, effective
as of April 1, 2014,
a  voluntary Termination initiated
by the Participant (while such Participant is in good standing with the
Company) (x) on or after age 60 with five years of service or (y) on or after
age 55 with 10 years of service.

  

 “Section 409A”
means Section 409A of the Code, including any amendments or successor
provisions to that section, and any regulations and other administrative
guidance relating thereto, in each case as they may be from time to time
amended or interpreted through further administrative guidance.

“Senior
C&B Executive” 
means the Company’s most senior executive whose
responsibility it is to oversee both the Corporate Compensation Department and
the Corporate Benefits Department.  In the event that no individual holds such
position, “Senior C&B Executive” will instead refer to the Company’s most
senior executive whose responsibility it is to oversee the global Human
Resources Department.

“Senior
HR Attorney” 
means the Company’s most senior attorney whose responsibility it is to oversee
Human Resource/employment matters.

“Termination”
or “Terminate,” with respect to a Participant, means the
termination of the Participant’s Employment.

“Threshold Goal”
has the meaning provided in Section 4. 

“Unpaid Leave of Absence” means an approved leave of
absence during which the Participant is not receiving salary continuation from
a Company payroll, including a period of long term disability leave during
which a Participant may be receiving long term disability insurance payments
from a long term disability insurer.

 

 

 

 

-12- 

 

 

  

-13- 

 

Appendix B

Treatment of Incentive Awards Upon Various Types of
Breaks in Service or

Terminations of Employment

	
   Type of Break in Service or
   Termination of Employment

   	
   Amount the Participant
   Receives

   
	
  Short-Term & Long-Term
  Medical Leaves of Absence 

  (STD &
  LTD)

  Family Medical & Domestic
  Partner Leave

  Non-Medical Leave of Absence

  (Personal
  Leave)

  Military Leave of Absence

  	
  If
  a Participant is on an approved leave of absence during which the Participant
  is receiving salary continuation from a Company payroll (a “Paid Leave
  of Absence”), such Paid Leave of Absence will not be deemed a break a
  service or a Termination for purposes of this Plan. Time on a Paid Leave of
  Absence will be treated the same as time during which the Participant
  performs services for the Company.

   

  If
  a Participant is on an approved leave of absence during which the Participant
  is NOT receiving salary continuation from a Company payroll, including a
  period of long term disability leave during which a Participant may be
  receiving long term disability insurance payments from a long term disability
  insurer (an “Unpaid Leave of Absence”), his or her Incentive
  Award will be Pro-Rated based on the number of months during the Performance
  Year that the Participant was actively employed (prior to the Participant’s
  last day worked) or on a Paid Leave of Absence with the Company, but will not
  include the number of months that the Participant was on an Unpaid Leave of
  Absence.

   

  Incentive
  Awards are paid on the Normal Schedule.

   

  
	
  Retirement

  	
  If
  a Participant Retires During the Performance Year, after March 31st
  and before the End of the Performance Year:  

  ·        
  The
  Incentive Award is Pro-Rated based on the number of months during the
  Performance Year that the Participant was actively employed (prior to the
  Participant’s last day worked) or on a Paid Leave of Absence with the Company
  and,

  ·        
  The amount
  of the Incentive Award is based on 100% of the Participant’s Individual
  Target Award for such Performance Year and, 

  ·        
  To the
  extent applicable for such Performance Year, actual performance against the Company-based Performance
  Metrics and the Business/Functional Segment-based Performance Metrics as determined by the Committee.
  

  ·        
  Paid on the
  Normal Schedule. 

   

  If
  a Participant Retires on or before March 31st of the Performance
  Year:

  ·        
  Participant
  will not receive any Pro-Rated Incentive Award payment for the current
  Performance Year.

   

   

  If
  a Participant Retires After the End of the Performance Year but 

  

 

 

 

 

 

 

	
   Type of Break in Service or
   Termination of Employment

   	
   Amount the Participant
   Receives

   
	
   

  	
  prior
  to the Award Date: 
   

  ·        
  The
  Incentive Award is not Pro-Rated, but is paid in full based on, to the extent
  applicable for such Performance Year, actual performance against the
  Individual-based Performance Metrics, the Company-based Performance
  Metrics and the Business/Functional Segment-based Performance Metrics for such Performance Year. 

  ·        
  Paid on the
  Normal Schedule.

   

  
	
  Death

  	
  If
  a Participant Dies During the Performance Year, after March 31st
  and before the End of the Performance Year:  

  ·        
  The
  Incentive Award is Pro-Rated based on the number of months during the
  Performance Year that the Participant was actively employed (prior to the
  Participant’s last day worked) or on a Paid Leave of Absence with the Company
  and the amount of the Incentive Award is based on 100% of the Participant’s
  Individual Target Award for such Performance Year. 

  ·        
  Paid as
  soon as administratively possible after the date of death, but in no event
  later than March 15th following such Performance Year. 

   

  If
  a Participant Dies on or before March 31st of the Performance
  Year:

  ·        
  The
  Participant will not receive any Pro-Rated Incentive Award payment for the
  current Performance Year.

   

  If
  a Participant Dies After the End of the Performance Year but prior to the
  Award Date:

  ·        
  The
  Incentive Award is not Pro-Rated, but is paid 100% of the Individual Target
  Award in effect on the date of death. 

  ·        
  Paid as
  soon as administratively possible after the date of death, but in no event
  later than March 15th following the year in which the death occurred.

  
	
  Resignation, Voluntary Quit,
  Constructive Discharge

  	
  If the
  last day the Participant was actively performing services for the Company
  (the Participant’s last day worked) or on a Paid Leave of Absence is prior to
  the Award Date, the Incentive Award is forfeited.  

  
	
  Termination without Cause

   

  	
  If
  a Participant Experiences a Termination without Cause: 

  For
  Participants in the 2012 Executive Severance Plan or its successor plan, paid
  in accordance with such plan.  

   

  For
  all other Participants, payable pursuant to the AIG, Inc. Severance Plan, or
  other severance arrangement applicable to such Termination without Cause as
  follows:  

   

   

   

   

  

 

 

-15- 

 

 

 

	
   Type of Break in Service or
   Termination of Employment

   	
   Amount the Participant
   Receives

   
	
   

  	
  Termination
  without Cause During the Performance Year

  ·        
  If the last
  day that the Participant was actively performing services for the Company
  (the Participant’s last day worked) or on a Paid Leave of Absence occurs
  after March 31st and before the end of the Performance Year, the
  Participant will receive 100% of the Participant’s Individual Target Award
  with respect to such Performance Year Pro-Rated based on the number of months
  during the Performance Year that the Participant was actively performing
  services for the Company (prior to the Participant’s last day worked) or on a
  Paid Leave of Absence. 

  ·        
  For the
  avoidance of doubt, if the last day that the Participant was actively
  performing services for the Company or on a Paid Leave of Absence occurs on
  or before March 31st of a Performance Year, the Participant will
  not receive any Incentive Award payment for such Performance Year.

  Termination
  without Cause After the End of the Performance Year but prior to the Award
  Date

  ·        
  If the last
  day that the Participant was actively performing services for the Company
  (the Participant’s last day worked) or on a Paid Leave of Absence occurs
  after the end of the Performance Year, but prior to the Award Date for such
  Performance Year, the Participant will receive 100% of the Participant’s
  Individual Target Award with respect to such Performance Year.

   

  Timing
  of Payments
   

  ·        
  Paid as
  soon as administratively possible after the date of Termination without
  Cause, but no later than March 15th following the year in which
  the Termination without Cause occurs, and in no event later than when other actively employed Participants are paid
  similar Incentive Awards under the Plan; provided that any Deferred
  Award will be paid on the Normal Schedule.   

  To the
  extent there is an inconsistency between this Plan and the applicable
  severance program, the severance program will prevail. To the extent the
  Committee, with
  respect to any Participant under the purview of the Committee, or the Senior
  C&B Executive, with respect to any other Participant, or their
  delegate(s), in each case, in its or his or her sole discretion determines that no established
  severance program or arrangement is applicable to a Participant’s Termination
  without Cause, then, in accordance with Section 6.B, the Participant
  will need to execute a release generally in the form set forth in Appendix
  C, subject to any provisions that the Senior HR Attorney and the Senior
  C&B Executive  or their delegate(s) may amend or add to the release.

  

 

 

 

 

 

 

 

 

 

-16- 

 

 

 

-17- 

 

Appendix C

Form
of Release Referred to in Section 6.B of the Plan

NOT personalized to each
Participant.

(1)          
[Employee Name] (“Employee”),
for good and sufficient consideration, the receipt of which is hereby
acknowledged, hereby waives and forever releases and discharges any and all
claims of any kind Employee may have against American International Group,
Inc., its affiliate or subsidiary companies, or any officer, director or
employee of, or any benefit plan sponsored by, any such company (collectively,
the “Released Parties”) which arise from Employee’s employment
with any of the Released Parties or the termination of Employee’s employment
with any of the Released Parties.  [Specifically, but without limiting that
release, Employee hereby waives any rights or claims Employee might have
pursuant to the Age Discrimination in Employment Act of 1967, as amended (the “Act”)
and under the laws of any and all jurisdictions, including, without limitation,
the United States.  Employee recognizes that Employee is not waiving any rights
or claims under the Act that may arise after the date that Employee executes
this Release.] Nothing herein modifies or affects any vested rights that
Employee may have under the [American International Group, Inc. Retirement
Plan, or the American International Group, Inc. Incentive Savings Plan] [and
other plans applicable to Employee]; nor does this Release confer any such
rights, which are governed by the terms of the respective plans (and any
agreements under such plans).

(2)          
Employee
acknowledges that Employee has not filed any complaint, charge, claim or
proceeding, if any, against any of the Released Parties before any local, state
or federal agency, court or other body (each individually a “Proceeding”). 
Employee represents that Employee is not aware of any basis on which such a
Proceeding could reasonably be instituted.

(3)          
Confidentiality/Non-Disclosure.  During the term of Employee’s
employment, the Company permitted Employee to have access to and become
acquainted with trade secret information of a confidential, proprietary or
secret nature.  Subject to and in addition to any confidentiality or
non-disclosure requirements to which Employee was subject prior to the date the
Employee executes this Release, effective as of the date Employee executes this
Release, Employee acknowledges and agrees that (i) all confidential,
proprietary, trade secret information received, obtained or possessed at any
time by Employee concerning or relating to the business, financial,
operational, marketing, economic, accounting, tax or other affairs at the
Company or any client, customer, agent or supplier or prospective client,
customer, agent or supplier of the Company will be treated by Employee in the
strictest confidence and will not be disclosed or used by Employee in any
manner without the prior written consent of the Company or unless required by
law, and ii) Employee  has not during the term of Employee’s employment and
will not remove or destroy any such confidential information.

(4)          
Non-Solicitation.  Employee
acknowledges and agrees that Employee’s employment with the Company required
exposure to and use of confidential trade secret information (as set forth in
Paragraph 3).  Subject
to and in addition to any non-solicitation requirements to which Employee was
subject prior to the date Employee executes this Release, effective as of the
date Employee executes this Release, Employee acknowledges and agrees that (i)
Employee will not, directly or 

 

 

 

 

 

indirectly, on Employee’s own behalf or on behalf of any other
person or entity solicit, contact, call upon, communicate with or attempt to
communicate with any customer or client or prospective customer or client of
the Company where to do so would require the use or disclosure of trade secret
information, and (ii) for a period of one (1) year after employment terminates
for any reason, Employee will not solicit or in any manner encourage or provide
assistance to any employee, consultant or agent of the Company to terminate his
or her employment or other relationship with the Company or to leave its employ
or other relationship with the Company for any engagement in any capacity or
any other person or entity.

(5)          
Non-Disparagement.  Employee acknowledges and
agrees that Employee will not disparage AIG or any of its subsidiaries or
affiliates or any of their officers, directors or employees to any person or
entity not affiliated with AIG; provided, however, that nothing herein
prohibits the Employee from giving truthful testimony as required by law.

(6)          
Employee agrees that
AIG’s remedies at law for a breach or threatened breach of Section 3, 4 and 5
of this Release would be inadequate.  In recognition of this fact, Employee
agrees that, in the event of such a breach or threatened breach, in addition to
any remedies at law, AIG, without posting any bond, shall be entitled to obtain
equitable relief from a court of competent jurisdiction the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy which may then be available in the event of a breach
or threatened breach of such provision.

(7)          
[Employee
acknowledges and understands that Employee is hereby being advised to consult
with an attorney prior to executing this Release.  Employee also acknowledges
and understands that Employee has twenty-one (21) days to consider the terms of
this Release before signing it.  However, in no event may Employee sign this
Release before Employee’s termination date.]

(8)          
[Upon the signing of
this Release by Employee, Employee understands that Employee shall have a
period of seven (7) days following Employee’s signing of this Release in which
Employee may revoke this Release.  Employee understands that this Release shall
not become effective or enforceable until this seven (7) day revocation period
has expired, and that neither the Released Parties nor any other person has any
obligation [pursuant to the American International Group, Inc. Annual
Short-Term Incentive Plan] until eight (8) days have passed since
Employee’s signing of this Release without Employee having revoked this
Release.  If Employee revokes this Release, Employee will be deemed not to have
accepted the terms of this Release.]

 

-19- 

 

 

 

(9)          
Any dispute arising
under this Release shall be governed by the [law of the State of New York],
without reference to the choice of law rules that would cause the application
of the law of any other jurisdiction.

	
   

  	
   

  	
   

  
	
  
   

  

  	
   

  	

   

  

  
	
   

  	
   

  	
   

  
	
  DATE

  	
   

  	
  [Employee]

  

 

-20-_

EXECUTION VERSION

 

FIRST
AMENDMENT TO THE

STOCK PURCHASE
AGREEMENT

 

            This FIRST AMENDMENT TO THE STOCK PURCHASE
AGREEMENT, dated December 29, 2016 (this “Amendment”), is made by and
between AMERICAN INTERNATIONAL GROUP, INC., a Delaware corporation (“Parent”),
and ARCH CAPITAL GROUP LTD., an exempted company with limited liability
registered under the laws of Bermuda (the “Acquiror”).  Capitalized
terms not defined herein shall have the meanings set forth in the Stock
Purchase Agreement, dated as of August 15, 2016 (as amended, modified or
supplemented from time to time in accordance with its terms, the “Purchase
Agreement”), by and between the Parent and the Acquiror.

            WHEREAS, the Acquiror and the Parent have
entered into the Purchase Agreement, pursuant to which the Parent has agreed to
sell, convey, assign, transfer and deliver to the Acquiror, and the Acquiror
has agreed to purchase, acquire and accept from the Parent, all of the
outstanding shares of common stock, par value $1.00 per share, in United
Guaranty Corporation, a North Carolina corporation, and all of the outstanding
shares in AIG United Guaranty Insurance (Asia) Limited, a Hong Kong limited
company;

WHEREAS, concurrently with the
execution of this Amendment, the Acquiror and Arch U.S. MI Holdings, Inc., a Delaware
corporation (“Arch MI”), are entering into that certain assignment
agreement (the “Assignment Agreement”), pursuant to which the Acquiror
has assigned to Arch MI, and Arch MI has assumed from the Acquiror, all of the
Acquiror’s rights to acquire the outstanding shares of common stock, par value
$1.00 per share, of United Guaranty Corporation, a North Carolina corporation,
pursuant to the Purchase Agreement;

            WHEREAS, concurrently with the execution of
this Amendment, the Parent, for itself and in its capacity as the Parent Escrow
Agent, on the one hand, and the Acquiror and Arch MI, for itself and in its
capacity as the Acquiror Escrow Agent, on the other hand, are entering into the
Escrow Agreement, dated as of the date hereof (the “Escrow Agreement”);
and

            WHEREAS, the parties desire to amend the
Purchase Agreement in accordance with Section 11.08 thereof, as
hereinafter provided.

NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

1.                 
Agreements and Amendments

.

a.                  
Section 2.02 of the Purchase Agreement is hereby amended
by adding the following after the last sentence in such Section:

“Notwithstanding anything to the contrary in this Section
2.02, if the last Business Day of the first month during which all the
conditions set forth in Article VIII have been satisfied or waived
(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 at the
Closing) is December 30, 2016, (i) the Closing Date shall be 

 

 

 

December
31, 2016, (ii) the Closing shall take place at 11:59 p.m., New York City time,
on the Closing Date and (iii) upon the occurrence of the Closing, the time and
date that the purchase and sale described in Section 2.01 of the Shares
becomes effective shall be 11:59 p.m., New York City time, on the Closing
Date.”

  

b.                 
Section 2.05(a)(i) of the Purchase Agreement is hereby
amended and restated in its entirety as follows:

“subject to Section 2.05(d),
evidence of the Shares, duly endorsed in blank or accompanied by stock powers
duly executed in proper form for transfer;”

c.                  
Section 2.05(a)(iii) of the Purchase Agreement is hereby
amended and restated in its entirety as follows:

“written
resignations of (A) each director and officer of the Company and (B) each
director of each of the Transferred Subsidiaries (other than Bob Gagliardi as a
director of United Guaranty Partners Insurance Company), in each of (A) and
(B), who is an employee of the Parent, but not an employee of the Company or a
Transferred Subsidiary;”

 

d.                 
Section 2.05(b)(i) of the Purchase Agreement is hereby
amended and restated in its entirety as follows:

“subject to Section 2.05(d), (A) subject to Section
2.06, the Cash Consideration, (B) evidence of the Convertible Preferred
Stock Consideration in book entry form on the records of the Acquiror’s
transfer agent, (C) evidence of the Perpetual Preferred Stock Consideration in
book entry form on the records of the Acquiror’s transfer agent and (D) the
cash payment provided for in Section 6.01(l);” 

 

e.                  
The Purchase Agreement is hereby amended by adding the following
as a new Section 2.05(d): 

“Notwithstanding Section 2.05(a)(i) and Section
2.05(b)(i), if the Closing Date shall be December 31, 2016: 

(i)                
on December 30, 2016, the Parent shall deliver, or cause to be
delivered, to the Acquiror Escrow Agent evidence of the Shares, duly endorsed
in blank or accompanied by stock powers duly executed in proper form for
transfer to be held by the Acquiror Escrow Agent in the Acquiror Escrow Account
in accordance with, and subject to the terms of, the Escrow Agreement and this
Agreement; 

(ii)              
on December 30, 2016, the Acquiror shall deliver, or cause to be
delivered, to the Parent Escrow Agent (X) subject to Section 2.06,
the Cash Consideration, (Y) confirmation of a book-entry transfer of the
Convertible Preferred Stock Consideration in form and substance reasonably
satisfactory to the Parent and the Acquiror and (Z) the cash payment
provided for in Section 6.01(l), in each of cases (X) through (Z),
to be held by the Parent Escrow 

                                                                              2                                                                              

 

 

Agent in the Parent
Escrow Account subject to the terms of this Agreement and the Escrow Agreement;
and

(iii)            
unless otherwise agreed in writing by the parties, at 11:59 p.m.,
New York City time, on the Closing Date, (a) the Acquiror Escrow Agent shall
release all assets in the Acquiror Escrow Account to Arch MI and (b) the Parent
Escrow Agent shall release all assets in the Parent Escrow Account to the
Parent, in each case, in accordance with, and subject to the terms of, the
Escrow Agreement and this Agreement.”

f.                  
The penultimate sentence of Section 2.06 of the Purchase
Agreement is hereby amended and restated in its entirety as follows:

“If the UG
Asia Shares are not transferred to the Acquiror on the Closing Date,
(A) the Parent and the Acquiror shall continue to take the efforts
consistent with Section 5.06 to obtain any required approvals to
transfer the UG Asia Shares to Acquiror and (B) the Parent will continue to own
and operate UG Asia with services provided by the Acquiror under the Transition
Services Agreement; provided, however, (i) the Parent shall
continue to comply with the covenants set forth in Section 5.01 herein
with respect to UG Asia, (ii) to the extent that any covenant set forth in
this Agreement with respect to UG Asia would otherwise be required to be
performed or complied with on or prior to the Closing Date, such covenant shall
instead be required to be performed or complied with on or prior to the UG Asia
Closing Date and (iii) any reference to the Closing Date in Section 6.01 
herein as applied to or affecting the treatment of employees of UG Asia shall
be deemed to refer to the UG Asia Closing Date.”

 

g.                 
Section 5.08(b) of the Purchase Agreement is hereby
amended by adding the following after the last sentence in such Section:

“Furthermore,
for the avoidance of doubt, no Intercompany Agreements with or relating to UG
Asia shall be required to be terminated or commuted prior to the UG Asia
Closing Date.”

h.                 
Section 5.08(b) of the Parent Disclosure Schedule is
amended and restated in its entirety as provided in Schedule A hereto.

i.                   
The Purchase Agreement is hereby amended by adding the following
as a new Section 5.08(e): 

“From and after the UG Asia
Closing Date, the parties shall cooperate in good faith and use their
respective commercially reasonable efforts to cause, subject to the receipt of
any required approvals or non‐disapprovals by a Governmental Authority, the
novation, effective as of the UG Asia Closing Date (with the economics novated
as of January 1, 2017), to the Acquiror or its Subsidiary of the 100% Quota
Share Reinsurance Agreement, dated as of September 16, 2011 and effective
October 1, 2011, between AIG United Guaranty Insurance (Asia) Limited and
National Union Fire Company of Pittsburgh, Pa.”

                                                                              3                                                                              

 

 

 

j.                   
Section 5.09(c) of the Purchase
Agreement is hereby amended by adding the following after the last sentence in
such Section:

“Notwithstanding the foregoing,
the Acquiror shall cause, and the Acquiror hereby causes, as of Closing, the
Company to grant to the Parent (and as of Closing the Company shall be deemed
to have granted to Parent) a limited, non-exclusive, non-transferable license
to use that certain model for the Quota Share Agreement known as the CAT model
(the “Model”) for the sole and exclusive purposes of performing “stress
tests” and planning for capital stress scenarios.  For the avoidance of doubt,
the Parent acknowledges and agrees that it shall have no right to use the Model
to compete against the Acquiror or the Company through utilization of the Model
to price or evaluate post-Closing business or otherwise.  The Acquiror shall
deliver, or cause the Company to deliver, to the Parent a useable copy of the
Model reasonably promptly after Closing.  The Parent acknowledges and agrees
that this is a one-time transfer of the Model on an “as is” basis and that
neither the Acquiror nor the Company shall have any obligation to provide maintenance
or updates to the Model to the Parent or any of its Affiliates.”

 

k.                 
The first clause of Section 5.21 of the Purchase Agreement
is hereby amended and restated in its entirety as follows:

“Except as provided on Section
5.21 of the Parent Disclosure Schedule, on or prior to the Closing Date,”

 

l.                   
Section 5.21 is added to the Parent Disclosure Schedule as
provided in Schedule B hereto.

m.               
The definition assigned to “Ancillary Agreements” in Exhibit A
to the Purchase Agreement is hereby amended and restated in its entirety as
follows:

“Ancillary
Agreements” shall mean the Escrow Agreement, the Transition Services
Agreement and the Investor Rights Agreement.

n.                 
The definition assigned to “Run-Off UGC Entities” in Exhibit A
to the Purchase Agreement is hereby amended and restated in its entirety as
follows:

“Run-Off UGC Entities” shall mean AIG United Guaranty
Limited, AIG United Guaranty Agenzia di Assicurazione S.R.L., AIG United
Guaranty, Sociedad Limitada, AIG United Guaranty Mexico, S.A., and AIG Mortgage
Risk Solutions Pty Ltd.

o.                 
Exhibit A to the Purchase Agreement is hereby amended by
adding the following definitions in alphabetical order therein:

“Acquiror Escrow Account” has the meaning set forth
in the Escrow Agreement.

                                                                              4                                                                              

 

 

“Acqurior Escrow Agent” means
Arch MI.

“Arch MI” means Arch U.S.
MI Holdings, Inc., a Delaware corporation, as assignee of the rights of the
Acquiror to acquire the Shares pursuant to that certain assignment agreement
between Arch MI and the Acquiror.        

 

“Escrow Agreement” means the Escrow Agreement, dated
as of the date hereof, by and among the Parent, the Acquiror and Arch MI.

“Model” shall have the meaning set forth in Section
5.09(c). 

“Parent Escrow Account” has the meaning set forth in
the Escrow Agreement. 

“Parent Escrow Agent” means American International
Group, Inc., a Delaware corporation.

 

2.                 
Miscellaneous 

.
Any reference in the Purchase Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein” or words of like import shall hereafter be deemed to refer
to the Purchase Agreement as hereby amended.  Except as expressly amended
herein, the parties hereby agree and acknowledge that all of the terms and
provisions set forth in the Purchase Agreement remain in full force and effect
in all respects.  To the extent of any inconsistency between the provisions of
this Amendment and the provisions of the Purchase Agreement, the terms of this
Amendment shall govern.  This Amendment shall be governed and construed in
accordance with the Purchase Agreement.

3.                 
Dispute Resolution; Arbitration; Governing Law; Waiver of Jury
Trial

.

a.                  
This Amendment, and all claims and defenses arising out of or
relating to this Amendment or the formation, breach, termination or validity of
this Amendment, shall in all respects be governed by, and construed in
accordance with, the Laws of the State of New York without giving effect to any
conflicts of Law principles of such state that would apply the Laws of another
jurisdiction.

b.                 
The provisions of Section 11.10(b) through (f)  of
the Purchase Agreement shall apply to this Amendment mutatis mutandis. 

4.                 
Counterparts 

. 
This Amendment may be executed in one or
more counterparts, and by the different parties to such agreement in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
facsimile or other means of electronic transmission shall be as effective as
delivery of a manually executed counterpart of any such Agreement.

[Signature
Page Follows] 

                                                                              5                                                                              

 

 

IN WITNESS WHEREOF, the parties have executed this
Amendment as of the date first written above.

AMERICAN INTERNATIONAL GROUP, INC.

By:   _________________________

         Name:

         Title:

ARCH CAPITAL GROUP LTD.

By:   _________________________

         Name:

         Title: 

 

[Signature Page to Amendment]

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