AIG 2008 Annual Report Download - page 49

The Series C Preferred Stock is not redeemable by AIG and, upon the effectiveness of the required
amendments to AIG’s Restated Certificate of Incorporation, will be convertible into common stock. From issuance,
the Series C Preferred Stock will, to the extent permitted by law, vote with the common stock as a single class and
represent approximately 77.9 percent of the voting power of the common stock, treating the Series C Preferred
Stock as converted. The Series C Preferred Stock will also participate in any dividends paid on the common stock,
with approximately 77.9 percent of all dividends paid allocated to the Series C Preferred Stock, treating the Series C
Preferred Stock as converted. Upon the liquidation, dissolution or winding up of AIG, the Series C Preferred Stock
is entitled to a liquidation preference per share equal to the greater of (i) $5.00 and (ii) the amount that would be
payable with respect to the shares of common stock issuable upon conversion of such share of Series C Preferred
Stock. For additional information about the Series C Preferred Stock, see Note 15 to the Consolidated Financial
Statements.
March 2009 Agreements in Principle
On March 2, 2009, AIG, the NY Fed and the United States Department of the Treasury announced agreements
in principle to modify the terms of the Fed Credit Agreement and the Series D Preferred Stock and to provide a
$30 billion equity capital commitment facility. The United States Government has issued the following statement
referring to the agreements in principle and other transactions they expect to undertake with AIG intended to
strengthen AIG’s capital position, enhance its liquidity, reduce its borrowing costs and facilitate AIG’s asset
disposition program.
“The steps announced today provide tangible evidence of the U.S. government’s commitment to the
orderly restructuring of AIG over time in the face of continuing market dislocations and economic
deterioration. Orderly restructuring is essential to AIG’s repayment of the support it has received from
U.S. taxpayers and to preserving financial stability. The U.S. government is committed to continuing to
work with AIG to maintain its ability to meet its obligations as they come due.”
See Note 23 to the Consolidated Financial Statements.
Modification to Series D Preferred Stock
On March 2, 2009, AIG and the United States Department of the Treasury announced their agreement in
principle to enter into a transaction pursuant to which the United States Department of the Treasury would modify
the terms of the Series D Preferred Stock. The modification will be effected by an exchange of 100 percent of the
outstanding shares of Series D Preferred Stock for newly issued perpetual serial preferred stock (Series E Preferred
Stock), with a liquidation preference equal to the issuance-date liquidation preference of the Series D Preferred
Stock surrendered plus accumulated but unpaid dividends thereon. The terms of the Series E Preferred Stock will be
the same as for the Series D Preferred Stock except that the dividends will not be cumulative. The Series D Preferred
Stock bore cumulative dividends.
The dividend rate on both the cumulative Series D Preferred Stock and the non-cumulative Series E Preferred
Stock is 10 percent per annum. Concurrent with the exchange of the shares of Series D Preferred Stock for the
Series E Preferred Stock, AIG will enter into a replacement capital covenant in favor of the holders of a series of
AIG debt, pursuant to which AIG will agree that prior to the third anniversary of the issuance of the Series E
Preferred Stock AIG will not repay, redeem or purchase, and no subsidiary of AIG will purchase, all or any part of
the Series E Preferred Stock except with the proceeds obtained from the issuance by AIG or any subsidiary of AIG
of certain capital securities. AIG will make a statement of intent substantially similar to the replacement capital
covenant with respect to subsequent years. The Series D Preferred Stock was not subject to a replacement capital
covenant.
Equity Capital Commitment Facility
On March 2, 2009, AIG and the United States Department of the Treasury announced its agreement in
principle to provide AIG with a 5-year equity capital commitment facility of $30 billion. AIG may use the facility to
sell to the United States Department of the Treasury fixed-rate, non-cumulative perpetual serial preferred stock
AIG 2008 Form 10-K 43
American International Group, Inc., and Subsidiaries