{"id":42790,"date":"2015-09-17T11:25:58","date_gmt":"2015-09-17T16:25:58","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/contracts\/uncategorized\/settlement-term-sheet-aig.html"},"modified":"2015-09-17T11:25:58","modified_gmt":"2015-09-17T16:25:58","slug":"settlement-term-sheet-aig","status":"publish","type":"corporate_contracts","link":"https:\/\/corporate.findlaw.com\/contracts\/operations\/settlement-term-sheet-aig.html","title":{"rendered":"Settlement Term Sheet – AIG"},"content":{"rendered":"

Settlement Term Sheet<\/u><\/strong><\/p>\n

\n

The Ohio Public Employees Retirement System, the State Teachers Retirement
\nSystem of Ohio, and the Ohio Police and Fire Pension Fund (collectively, “Lead
\nPlaintiffs”), on behalf of all others similarly situated, and American
\nInternational Group, Inc. (“AIG”), have agreed in principle on the settlement of
\nall claims that Lead Plaintiffs have asserted against AIG in In re AIG
\nSecurities Litigation<\/em>, Master File No. 04 Civ. 8141 (S.D.N.Y.). The
\nprinciple terms of the settlement are as follows:<\/p>\n<\/p>\n

Confidentiality<\/u>:<\/p>\n<\/p>\n

The parties will use their best efforts to maintain the confidentiality of
\nthe existence and terms of this agreement until the settlement papers have been
\nsubmitted to the Court. This provision will not prevent the parties from
\ncommunicating the terms of the settlement to their advisors and complying with
\ntheir disclosure obligations. The parties will exchange their proposed public
\nstatements relating to the initial announcement of the settlement for review and
\ncomment 24 hours before such announcement is made. The parties are not
\nobligated to accept proposed comments made by the other party.<\/p>\n<\/p>\n

Settlement Class Definition<\/u>:<\/p>\n<\/p>\n

The settlement class definition will be the class definition as pled in the
\nConsolidated Third Amended Class Action Complaint (the “Complaint”), and AIG
\nwill seek to join the motion filed by PricewaterhouseCoopers seeking that class
\ndefinition. In the event the Court does not accept this definition, then it
\nwill be the class definition as modified by the Court153s February 22, 2010
\nOpinion regarding class certification. AIG, however, will agree to use the
\nClass Definition in the Court153s February 22, 2010 Opinion if
\nPricewaterhouseCoopers agrees to use that definition and no other party urges
\nupon the Court to accept a broader class definition for a period ending five
\ndays after the hearing on preliminary approval.<\/p>\n<\/p>\n

Settlement Amount<\/u>:<\/p>\n<\/p>\n

$725 million.<\/p>\n<\/p>\n

Funding Terms<\/u>:<\/p>\n<\/p>\n

(1) AIG will transfer $175 million into an
\nescrow account (the “Escrow Account”) within 10 days of the District Court
\nentering an order granting preliminary approval of the settlement.<\/p>\n<\/p>\n

(2) AIG153s obligation to fund the remainder
\nof the Settlement Amount is conditioned on its having consummated an offering of
\nits common stock (a “Qualified Offering”), or a series of such offerings, in
\nwhich it raises net proceeds of at least $550 million at any time before the
\nDistrict Court enters its final order approving the settlement (the “Order”).
\nAIG will use its best efforts, consistent with the fiduciary duties of its
\nmanagement and board of Directors, to consummate a Qualified Offering, but the
\ndecision as to whether market conditions or pending or contemplated corporate
\ntransactions make it commercially reasonable to proceed with such an offering
\nwill be<\/p>\n<\/p>\n

\n

<\/p>\n

\n

within AIG153s unilateral discretion. In the event that AIG effects a
\nregistered secondary offering of common stock on behalf of the U.S. Treasury
\nresulting in the U.S. Treasury receiving proceeds of at least equal to $550
\nmillion, then market access will be deemed to have been demonstrated and AIG
\nshall be deemed to have consummated a Qualified Offering. In addition, AIG, at
\nany time prior to entry of the Order, in its sole discretion, may otherwise
\nraise sufficient funds to pay the Settlement Amount in cash and deposit such
\nfunds into the Escrow Account.<\/p>\n<\/p>\n

(3) If AIG does not fully fund the Escrow
\nAccount with $725 million by the time the District Court enters its Order, Lead
\nPlaintiffs may, within 10 days of entry of the Order<\/p>\n<\/p>\n

(a) terminate the settlement and return the
\nparties to the positions they had in the litigation as of July 1, 2010, or<\/p>\n<\/p>\n

(b) elect to take unrestricted, transferable
\nAIG common stock valued at $550 million, and AIG will be obligated, within 10
\ndays of plaintiffs153 election, to fund the Escrow Account with stock, which will
\nbe valued at the volume weighted average closing price for the 10 trading days
\npreceding entry of the Order (the “Settlement Stock”), provided AIG is able to
\nobtain all necessary approvals, or<\/p>\n<\/p>\n

(c) elect to extend the period for AIG to
\nmake a Qualified Offering or otherwise fund the escrow agreement for up to one
\nyear after entry of the Order, provided that, at any time during the year, Lead
\nPlaintiffs may<\/p>\n<\/p>\n

(i) elect, on 2 business days153 notice, to
\ntake the Settlement Stock (which will not be repriced, except as described
\nbelow) in full satisfaction of AIG153s settlement obligations, however, if Lead
\nPlaintiffs153 sale of Settlement Stock results in net proceeds that exceed $550
\nmillion, then any proceeds in excess of $550 million will be returned to AIG, or\n<\/p>\n<\/p>\n

(ii) elect, on 21 days153 notice, to terminate
\nthe settlement,<\/p>\n<\/p>\n

but if AIG has taken steps to consummate a Qualified Offering before the
\nexpiration of the 21 day period, Lead Plaintiffs may not demand stock or
\nterminate the settlement unless the offering is terminated.<\/p>\n<\/p>\n

(4) If the settlement is not consummated for
\nany reason, then the cash and stock in the escrow account, less reasonable
\nadministrative expenses (not to include the parties153 attorneys153 fees), will be
\nreturned to AIG.<\/p>\n<\/p>\n

The parties will use their best efforts to make sure that the Settlement
\nStock receive the exemption from registration available under
\nSection 3(a)(10) of the Securities Act. In the event the exemption under
\nSection 3(a)(10) is not available, AIG will use its best efforts to deliver
\nfully transferable, unrestricted stock for the Settlement Stock.<\/p>\n<\/p>\n

In the event the Company issues one or more Forms 8K during the pricing
\nperiod or during the two week period preceding the pricing period, Lead
\nPlaintiffs may elect, within 10 days of the issuance of such an 8K, to have the
\npricing period deferred until two weeks after any such 8K is filed.<\/p>\n

\n

2<\/p>\n

\n

<\/p>\n

\n

In the event the Company issues one or more Forms 8K within 12 weeks of Lead
\nPlaintiffs receiving Settlement Stock, Lead Plaintiffs may elect, within 10 days
\nof the issuance of such an 8K, to have any unsold stock repriced before sale,
\nwith the 10-day pricing period starting two weeks after any such 8K is filed.\n<\/p>\n<\/p>\n

In the event that, after the Order is entered, but before any stock or cash
\nis distributed to the Class, Lead Plaintiffs have received the Settlement Stock,
\nbut, for any reason, the settlement does not become effective, then Lead
\nPlaintiffs will return to AIG any unsold Settlement Stock and the net amount
\nLead Plaintiffs actually received in the sale of any Settlement Stock
\n(i.e.,<\/em> the sale price less any transaction costs), with no further
\nobligation to AIG.<\/p>\n<\/p>\n

Timing<\/u>:<\/p>\n<\/p>\n

Both parties will use their best efforts to expedite approval of the
\nsettlement. AIG and Lead Plaintiffs will use their best efforts to obtain all
\nnecessary approvals to enter into the settlement by July 16, 2010, and the
\nparties will use their best efforts to submit settlement papers to the Court by
\nAugust 13, 2010.<\/p>\n<\/p>\n

Subsequent to July 16, 2010, and after AIG and Lead Plaintiffs receive all
\nnecessary approvals to proceed with the settlement, the parties will seek a stay
\nof all deadlines in the litigation, both in the District Court and in the Second
\nCircuit.<\/p>\n<\/p>\n

Blow provision<\/u>:<\/p>\n<\/p>\n

The confidential portion of this Exhibit 10.3 has been omitted and
\nfiled separately with the Securities and Exchange Commission. Confidential
\nTreatment has been requested for the omitted portions.<\/strong><\/p>\n<\/p>\n

Payment by Opt-Out Plaintiffs for Use of Class Discovery<\/u>:<\/p>\n<\/p>\n

Plaintiffs may seek an order from the Court requiring opt-out plaintiffs to
\npay into the settlement fund a fee for class discovery materials (i.e., for the
\nbenefit of the Class) in the same percentage of Lead Plaintiffs153 lodestar and
\nexpenses related to discovery as the percentage of the shares held by that
\nopt-out plaintiff during the Class Period. Defendants will not be required to
\njoin in any such application.<\/p>\n<\/p>\n

Releases<\/u>:<\/p>\n<\/p>\n

Lead Plaintiffs and the Class will dismiss, with prejudice, all claims
\nagainst AIG, and will agree not to sue and to give general releases to AIG and
\neveryone AIG may have an obligation to indemnify.<\/p>\n<\/p>\n

Lead Plaintiffs and the Class will also dismiss, with prejudice, and release
\nall claims against Eli Broad, John A. Graf, Frank J. Hoenemeyer, Martin J.
\nSullivan, Thomas R. Tizzio, Wachovia Securities, Inc. and Merrill Lynch &
\nCo.<\/p>\n

\n

3<\/p>\n

\n

<\/p>\n

\n

Bar Order<\/u>:<\/p>\n<\/p>\n

The bar order shall bar all future claims for contribution or indemnity (and
\nrelated claims where the injury to non-settling defendants is their liability or
\nrisk of liability to the plaintiffs) arising out of the action, and shall apply
\nto the full extent of the PSLRA.<\/p>\n<\/p>\n

Disputes<\/u>:<\/p>\n<\/p>\n

All disputes regarding the interpretation of and compliance with this
\nagreement will be resolved by Hon. Layn Phillips, as sole arbitrator. Issues
\nregarding approval of the settlement will be resolved by the District Court.\n<\/p>\n<\/p>\n

Approvals<\/u>:<\/p>\n<\/p>\n

This term sheet is conditioned upon AIG and Lead Plaintiffs receiving all
\nnecessary approvals. AIG and Lead Plaintiffs will use its their best efforts to
\nobtain all such approvals.<\/p>\n<\/p>\n

The issuance of any Settlement Stock will be subject to all necessary
\napprovals.<\/p>\n<\/p>\n

Attorneys153 Fees for Lead Plaintiffs153 Counsel<\/u>:<\/p>\n<\/p>\n

After entry of an Order approving the settlement and Lead Counsel153s fee
\nrequest, and before the resolution of appeals, if any, counsel for Lead
\nPlaintiffs may withdraw an amount equal to the award of attorneys153 fees and
\nreimbursed expenses from the Escrow Account, provided that any such withdrawal
\nshall be repaid by Counsel for Lead Plaintiffs, along with interest at the
\nEscrow Account rate of interest, if the settlement is not consummated for any
\nreason or if the award of attorneys153 fees and reimbursed expenses is otherwise
\nreversed or modified.<\/p>\n<\/p>\n

Execution<\/u>:<\/p>\n<\/p>\n

This Term Sheet may be executed in counterparts, including by signature
\ntransmitted by facsimile or email. Each counterpart when so executed shall be
\ndeemed to be an original, and all such counterparts together shall constitute
\nthe same instrument.<\/p>\n<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

DATED: July 1, 2010<\/p>\n<\/td>\n

\n<\/td>\n\n<\/td>\n<\/tr>\n
\n<\/td>\n\n<\/td>\n\n<\/td>\n<\/tr>\n
\n

This Term Sheet is hereby agreed to by:<\/p>\n<\/td>\n

\n<\/td>\n\n<\/td>\n<\/tr>\n
\n<\/td>\n\n<\/td>\n\n<\/td>\n<\/tr>\n
\n

\/s\/Thomas A. Dubbs<\/p>\n<\/td>\n

\n<\/td>\n\n

\/s\/ Daniel J. Kramer<\/p>\n<\/td>\n<\/tr>\n

\n

Thomas A. Dubbs<\/p>\n<\/td>\n

\n<\/td>\n\n

Daniel J. Kramer<\/p>\n<\/td>\n<\/tr>\n

\n

Labaton Sucharow LLP<\/p>\n<\/td>\n

\n<\/td>\n\n

Paul, Weiss, Rifkind, Wharton & Garrison LLP<\/p>\n<\/td>\n<\/tr>\n

\n

140 Broadway<\/p>\n<\/td>\n

\n<\/td>\n\n

1285 Avenue of the Americas<\/p>\n<\/td>\n<\/tr>\n

\n

New York, NY 10005<\/p>\n<\/td>\n

\n<\/td>\n\n

New York, New York 10019<\/p>\n<\/td>\n<\/tr>\n

\n

On behalf of Lead Plaintiffs and the Class <\/em><\/p>\n<\/td>\n

\n<\/td>\n\n

On behalf of American International Group, Inc<\/em>.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\n

4<\/p>\n

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