AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 2003
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMERICAN INTERNATIONAL GROUP, INC. DELAWARE 13-2592361
AIG CAPITAL TRUST I DELAWARE 16-6543022
AIG CAPITAL TRUST II DELAWARE 16-6543023
(Exact name of registrant as (State or Other Jurisdiction (IRS Employer
specified in its charter) of Identification Number)
Incorporation or Organization)
70 PINE STREET
NEW YORK, NEW YORK 10270
(212) 770-7000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
KATHLEEN E. SHANNON, ESQ.
SENIOR VICE PRESIDENT, SECRETARY AND DEPUTY GENERAL COUNSEL
AMERICAN INTERNATIONAL GROUP, INC.
70 PINE STREET
NEW YORK, NEW YORK 10270
(212) 770-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
ROBERT W. REEDER, ESQ.
ROBERT S. RISOLEO, ESQ.
SULLIVAN & CROMWELL LLP
125 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 558-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1)(2)(3) PER UNIT(5)(6) OFFERING PRICE(5) REGISTRATION FEE(7)
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Debt Securities(4)........................... 100%
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Warrants..................................... 100%
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Purchase Contracts........................... 100%
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Units(8)..................................... $5,139,770,000 100% $5,139,770,000 $415,808
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Preferred Stock, par value $5.00 per share... 100%
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Depositary Shares(9)......................... 100%
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Common Stock, par value $2.50 per share...... 100%
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AIG Capital Trust I Capital Securities....... 100%
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AIG Capital Trust II Capital Securities...... 100%
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Guarantees with respect to Capital
Securities(10)............................. 100%
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(See footnotes on next page)
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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(1) An indeterminate aggregate initial offering price or number of the
securities is being registered as may from time to time be issued at
indeterminate prices, with an aggregate initial offering price not to
exceed $5,139,770,000 or the equivalent thereof in one or more other
currencies, currency units or composite currencies.
(2) This registration statement also covers an undeterminable amount of the
registered securities that may be reoffered and resold on an ongoing basis
after their initial sale in market-making transactions by subsidiaries of
the registrant.
(3) This registration statement also includes such indeterminate amounts of
debt securities, warrants, purchase contracts, units, preferred stock,
depositary shares and common stock, as may be issued upon exercise,
conversion or exchange of any securities that provide for that issuance,
such indeterminate amounts of debt securities, warrants, purchase
contracts, preferred stock and common stock, as may be issued in units,
such indeterminate amount of preferred stock as may be represented by
depositary shares and such indeterminate amount of debt securities as may
be issued and sold by AIG to either of the AIG Capital Trust I or AIG
Capital Trust II (together, the "Trusts") in connection with the issuance
of capital securities, which may later be distributed for no additional
consideration to the holders of the capital securities of such Trusts.
(4) If any debt securities are issued at original issue discount, such greater
amount as shall result in aggregate net proceeds not in excess of
$5,139,770,000.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act.
(6) Separate consideration may not be received for registered securities that
are issuable on exercise, conversion or exchange of other securities or
that are issued in units or represented by depositary shares.
(7) Pursuant to Rule 457(p) under the Securities Act, the registration fee
currently due in connection with this registration statement is fully
offset by (a) $36,899 of the registration fee previously paid by the
registrant under registration statement on Form S-3, File No. 333-31024,
filed on February 24, 2000, and (b) $378,909 of the registration fee
previously paid by the registrant in connection with a registration
statement on Form S-3, File No. 333-69546, filed on September 18, 2001.
(8) Each unit will be issued under a unit agreement or an indenture and will
represent an interest in two or more debt securities, warrants, purchase
contracts, preferred or common stock, which may or may not be separable
from one another.
(9) Each depositary share will be issued under a deposit agreement, will
represent an interest in a fractional share or multiple shares of preferred
stock and will be evidenced by a depositary receipt.
(10) No additional consideration will be received for the AIG Guarantees with
respect to the Capital Securities.
Pursuant to Rule 429 of the Securities Act, the prospectuses included in
this registration statement also relate to the prospectus included in
Registration Statement No. 333-31024.
EXPLANATORY NOTE
This registration statement contains:
- a prospectus to be used in connection with offerings of debt securities,
warrants, purchase contracts, units, preferred stock, depositary shares
and common stock of AIG on a continuous or delayed basis; and
- a prospectus to be used in connection with offerings of:
-- the capital securities of AIG Capital Trust I and AIG Capital Trust II;
-- the junior subordinated debentures of AIG; and
-- the guarantees of AIG of the capital securities,
each on a continuous basis.
The first prospectus contained herein relates to market-making transactions
involving one or more of our subsidiaries that may occur on a continuous or
delayed basis in the securities described above, after they are initially
offered and sold. When the prospectus is delivered to an investor in the initial
offering described above, the investor will be informed of that fact in the
confirmation of sale. When the prospectus is delivered to an investor who is not
so informed, it is delivered in a market-making transaction involving one of or
more of our subsidiaries.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (Subject to completion, dated June 11, 2003)
$5,139,770,000
[AIG LOGO]
AMERICAN INTERNATIONAL GROUP, INC.
DEBT SECURITIES
WARRANTS
PURCHASE CONTRACTS
UNITS
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
We may offer to sell debt securities, warrants, purchase contracts,
preferred stock, either separately or represented by depositary shares, and
common stock, either individually or in units. The debt securities, warrants,
purchase contracts and preferred stock may be convertible into or exercisable or
exchangeable for common or preferred stock or other securities of AIG or debt or
equity securities of one or more other entities. These securities will have an
initial public offering price or purchase price of up to $5,139,770,000, or will
have the foreign currency or composite currency equivalent of this amount,
although we may increase this amount in the future. Our common stock is listed
on the NYSE and trades under the symbol "AIG."
This prospectus describes some of the general terms that may apply to these
securities and the general manner in which they may be offered. The specific
terms of any securities to be offered, and the specific manner in which they may
be offered, will be described in a supplement to this prospectus.
INVESTING IN SOME OF THE SECURITIES INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 46 TO READ ABOUT CERTAIN FACTORS YOU SHOULD CONSIDER
BEFORE BUYING THE SECURITIES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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We may offer and sell these securities to or through one or more
underwriters, dealers and agents, or directly to purchasers, on a continuous or
delayed basis.
We may use this prospectus in the initial sale of these securities. In
addition, one or more of our subsidiaries may use this prospectus in a
market-making transaction involving any of these securities after our initial
sale. UNLESS WE OR OUR AGENT INFORM THE PURCHASER OTHERWISE IN THE CONFIRMATION
OF SALE, THIS PROSPECTUS IS BEING USED IN A MARKET-MAKING TRANSACTION.
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AIG FINANCIAL SECURITIES CORP.
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The date of this prospectus is , 2003.
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY.......................................... 1
USE OF PROCEEDS............................................. 4
DESCRIPTION OF DEBT SECURITIES WE MAY OFFER................. 5
DESCRIPTION OF WARRANTS WE MAY OFFER........................ 16
DESCRIPTION OF PURCHASE CONTRACTS WE MAY OFFER.............. 28
DESCRIPTION OF UNITS WE MAY OFFER........................... 33
DESCRIPTION OF PREFERRED STOCK WE MAY OFFER................. 38
DESCRIPTION OF COMMON STOCK WE MAY OFFER.................... 44
MARKET PRICE AND DIVIDEND INFORMATION....................... 45
RISK FACTORS................................................ 46
LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE..................... 52
CONSIDERATIONS RELATING TO SECURITIES ISSUED IN BEARER
FORM...................................................... 57
PLAN OF DISTRIBUTION........................................ 61
VALIDITY OF THE SECURITIES.................................. 62
EXPERTS..................................................... 62
WHERE YOU CAN FIND MORE INFORMATION......................... 62
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995............................. 63
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT OR INFORMATION CONTAINED IN DOCUMENTS WHICH YOU ARE
REFERRED TO BY THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE ARE OFFERING TO SELL THE
SECURITIES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS
ACCURATE ONLY AS OF THE DATE ON THE FRONT OF THOSE DOCUMENTS, REGARDLESS OF THE
TIME OF DELIVERY OF THE DOCUMENTS OR ANY SALE OF THE SECURITIES.
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PROSPECTUS SUMMARY
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a shelf registration process. Under
this shelf process, we may sell the securities described in this prospectus in
one or more offerings up to a total amount of $5,139,770,000. This prospectus
provides you with a general description of the securities we may offer.
Each time we sell securities, we will provide a prospectus supplement that
will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read this prospectus and any prospectus supplement
together with additional information described in the section entitled "Where
You Can Find More Information."
To see more detail, you should read our registration statement and the
exhibits filed with our registration statement.
AMERICAN INTERNATIONAL GROUP, INC.
AIG, a Delaware corporation, is a holding company which through its
subsidiaries is engaged in a broad range of insurance and insurance-related
activities in the United States and abroad. AIG's primary activities include
both general and life insurance operations. Other significant activities include
financial services and retirement savings and asset management.
AIG's principal executive offices are located at 70 Pine Street, New York,
New York 10270, and its telephone number is 212-770-7000.
THE SECURITIES WE ARE OFFERING
We may offer any of the following securities from time to time:
- debt securities;
- warrants;
- purchase contracts;
- units, comprised of two or more securities, in any combination;
- preferred stock, either directly or represented by depositary shares; and
- common stock.
When we use the term "securities" in this prospectus, we mean any of the
securities we may offer with this prospectus, unless we say otherwise. This
prospectus, including the following summary, describes the general terms that
may apply to the securities; the specific terms of any particular securities
that we may offer will be described in a separate supplement to this prospectus.
DEBT SECURITIES
We may issue several different types of debt securities. Our debt
securities may be senior or subordinated in right or payment. For any particular
debt securities we offer, your prospectus supplement will describe the terms of
the debt securities, and will include for each series of debt securities the
initial public offering price; designation; aggregate principal amount
(including whether determined by reference to an index or other financial
measure); currency; denomination; maturity; interest rate (whether fixed or
floating); time of payment of any interest; any terms for mandatory or optional
redemption, any terms on which the debt securities may be convertible into or
exercisable or exchangeable for common or preferred stock or other securities of
another entity and any other specific terms. We will issue the senior and
subordinated debt securities under separate debt indentures, between us and The
Bank of New York, as Trustee.
WARRANTS
We may offer two types of warrants:
- warrants to purchase our debt securities; and
1
- warrants to purchase or sell, or whose cash value is determined by
reference to the performance, level or value of, one or more of the
following:
-- securities of one or more issuers, including our common or preferred
stock or other securities described in this prospectus or debt or
equity securities of third parties;
-- one or more currencies;
-- one or more commodities;
-- any other financial, economic or other measure or instrument, including
the occurrence or non-occurrence of any event or circumstance; and
-- one or more indices or baskets of the items described above.
For any particular warrants we offer, your prospectus supplement will
describe the underlying property; the expiration date; the exercise price or the
manner of determining the exercise price; the amount and kind, or the manner of
determining the amount and kind, of property to be delivered by you or us upon
exercise; and any other specific terms. We may issue the warrants under the
warrant indenture between us and The Bank of New York, as Trustee, or under
warrant agreements between us and one or more warrant agents.
PURCHASE CONTRACTS
We may offer purchase contracts for the purchase or sale of, or whose cash
value is determined by reference to the performance, level or value of, one or
more of the following:
- securities of one or more issuers, including our common or preferred
stock or other securities described in this prospectus or debt or equity
securities of third parties;
- one or more currencies;
- one or more commodities;
- any other financial, economic or other measure or instrument, including,
the occurrence or non-occurrence of any event or circumstance; and
- one or more indices or baskets of the items described above.
For any particular purchase contracts we offer, your prospectus supplement
will describe the underlying property; the settlement date; the purchase price
or manner of determining the purchase price and whether it must be paid when the
purchase contract is issued or at a later date; the amount and kind, or the
manner of determining the amount and kind, of property to be delivered at
settlement; whether the holder will pledge property to secure the performance of
any obligations the holder may have under the purchase contract; and any other
specific terms. We may issue purchase contracts under a senior debt indenture or
a subordinated debt indenture described above or a unit agreement described
below.
UNITS
We may offer units, comprised of any combination of our debt securities,
warrants, purchase contracts, preferred stock and common stock. For any
particular units we offer, your prospectus supplement will describe the
particular securities comprising each unit; the terms on which those securities
will be separable, if any; whether the holder will pledge property to secure the
performance of any obligations the holder may have under the unit; and any other
specific terms of the units. We may issue the units under unit agreements
between us and one or more unit agents.
PREFERRED STOCK AND DEPOSITARY SHARES
We may offer our preferred stock in one or more series. For any particular
series we offer, your prospectus supplement will describe the specific
designation; the aggregate number of shares offered; the rate and periods, or
manner of calculating the rate and periods, for dividends, if any; the stated
value and liquidation preference amount, if any; the voting rights, if any; the
terms on which the series will be convertible into or exercisable or
exchangeable for our common stock, preferred stock of another series or other
securities described in this prospectus or the debt or equity securities of
third parties or property, if any; the redemption terms, if any; and any other
specific terms. We may also offer depositary shares, each of which would
represent an interest in a fractional share or multiple shares of preferred
stock. We may issue the depositary shares under deposit agreements between us
and one or more depositaries.
2
COMMON STOCK
We may also issue our common stock.
LISTING
If any securities are to be listed or quoted on a securities exchange or
quotation system, your prospectus supplement will say so. Our common stock is
listed on the New York Stock Exchange under the symbol "AIG."
MANNER OF OFFERING
The securities will be offered when they are first issued and sold and
after that in market-making transactions involving one or more of our
subsidiaries.
When we issue new securities, we may offer them for sale to or through
underwriters, dealers and agents, including one of our subsidiaries, such as AIG
Financial Securities Corp., or directly to purchasers. Your prospectus
supplement will include any required information about the firms we use and the
discounts or commissions we may pay them for their services.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of AIG and its consolidated subsidiaries for the periods indicated. For
more information on our consolidated ratios of earnings to fixed charges, see
our Annual Report on Form 10-K for the year ended December 31, 2002 and our
Quarterly Report for the quarter ended March 31, 2003, both of which are
incorporated by reference into this prospectus as described under "Where You Can
Find More Information."
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
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2003 2002 2002 2001 2000 1999 1998
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3.82 3.91 3.10 2.92 3.59 3.96 3.57
Earnings represent:
- Income from operations before income taxes, adjustments for minority
interest and income/loss from equity investees
plus
- Fixed charges other than capitalized interest
- Amortization of capitalized interest
- The distributed income of equity investees
less
- The minority interest in pre-tax income of subsidiaries that do not have
fixed charges.
Fixed charges include:
- Interest, whether expensed or capitalized
- Amortization of debt issuance costs
- One-third of rental expense. Our management believes this is
representative of the interest factor.
As of the date of this prospectus, we have no preferred stock outstanding.
3
USE OF PROCEEDS
Unless otherwise indicated in any prospectus supplement, we intend to use
the net proceeds from the sale of securities for general corporate purposes.
4
DESCRIPTION OF DEBT SECURITIES WE MAY OFFER
References to "AIG," "us," "we" or "our" in this section means American
International Group, Inc., and does not include the consolidated subsidiaries of
American International Group, Inc. Also, in this section, references to
"holders" mean those who own debt securities registered in their own names, on
the books that we or the applicable trustee maintain for this purpose, and not
those who own beneficial interests in debt securities registered in street name
or in debt securities issued in book-entry form through one or more
depositaries. When we refer to "you" in this prospectus, we mean all purchasers
of the securities being offered by this prospectus, whether they are the holders
or only indirect owners of those securities. Owners of beneficial interests in
the debt securities should read the section below entitled "Legal Ownership and
Book-Entry Issuance."
DEBT SECURITIES MAY BE SENIOR OR SUBORDINATED
We may issue senior or subordinated debt securities. Neither the senior
debt securities nor the subordinated debt securities will be secured by any of
our property or assets or the property or assets of our subsidiaries. Thus, by
owning a debt security, you are one of our unsecured creditors.
The senior debt securities and, in the case of senior debt securities in
bearer form, any related interest coupons, will be issued under our senior debt
indenture described below and will rank equally with all of our other unsecured
and unsubordinated debt.
The subordinated debt securities and, in the case of subordinated debt
securities in bearer form, any related interest coupons, will be issued under
our subordinated debt indenture described below and will be subordinate in right
of payment to all of our "senior indebtedness," as defined in the subordinated
debt indenture. Neither indenture limits our ability to incur additional
unsecured indebtedness.
When we refer to "debt securities" in this prospectus, we mean both the
senior debt securities and the subordinated debt securities.
THE SENIOR AND SUBORDINATED DEBT INDENTURES
The senior debt securities and the subordinated debt securities are each
governed by a document called an indenture -- the senior debt indenture, in the
case of the senior debt securities, and the subordinated debt indenture, in the
case of the subordinated debt securities. Each indenture is a contract between
AIG and The Bank of New York, which acts as trustee. The indentures are
substantially identical, except for the provisions relating to subordination,
which are included only in the subordinated debt indenture.
Reference to the indenture or the trustee with respect to any debt
securities, means the indenture under which those debt securities are issued and
the trustee under that indenture.
The trustee has two main roles:
1. The trustee can enforce the rights of holders against us if we
default on our obligations under the terms of the indenture or the debt
securities. There are some limitations on the extent to which the trustee
acts on behalf of holders, described below under "-- Events of
Default -- Remedies If an Event of Default Occurs."
2. The trustee performs administrative duties for us, such as sending
interest payments and notices to holders, and transferring a holder's debt
securities to a new buyer if a holder sells.
The indenture and its associated documents contain the full legal text of
the matters described in this section. The indenture and the debt securities are
governed by New York law. A copy of each indenture is an exhibit to our
registration statement. See "Where You Can Find More Information" below for
information on how to obtain a copy.
5
GENERAL
We may issue as many distinct series of debt securities under either
indenture as we wish. The provisions of the senior debt indenture and the
subordinated debt indenture allow us not only to issue debt securities with
terms different from those previously issued under the applicable indenture, but
also to "reopen" a previous issue of a series of debt securities and issue
additional debt securities of that series. We may issue debt securities in
amounts that exceed the total amount specified on the cover of your prospectus
supplement at any time without your consent and without notifying you. In
addition we may offer debt securities, together with other debt securities,
warrants, purchase contracts and preferred stock or common stock in the form of
units, as described below under "Description of Units We May Offer."
This section summarizes the material terms of the debt securities that are
common to all series, although the prospectus supplement which describes the
terms of each series of debt securities may also describe differences from the
material terms summarized here.
Because this section is a summary, it does not describe every aspect of the
debt securities. This summary is subject to and qualified in its entirety by
reference to all the provisions of the indenture, including definitions of
certain terms used in the indenture. In this summary, we describe the meaning of
only some of the more important terms. For your convenience, we also include
references in parentheses to certain sections of the indenture. Whenever we
refer to particular sections or defined terms of the indenture in this
prospectus or in the prospectus supplement, such sections or defined terms are
incorporated by reference here or in the prospectus supplement. You must look to
the indenture for the most complete description of what we describe in summary
form in this prospectus.
This summary also is subject to and qualified by reference to the
description of the particular terms of your series described in the prospectus
supplement. Those terms may vary from the terms described in this prospectus.
The prospectus supplement relating to each series of debt securities will be
attached to the front of this prospectus. There may also be a further prospectus
supplement, known as a pricing supplement, which contains the precise terms of
debt securities you are offered.
We may issue the debt securities as original issue discount securities,
which will be offered and sold at a substantial discount below their stated
principal amount. (Section 101) The prospectus supplement relating to the
original issue discount securities will describe federal income tax consequences
and other special considerations applicable to them. The debt securities may
also be issued as indexed securities or securities denominated in foreign
currencies or currency units, as described in more detail in the prospectus
supplement relating to any of the particular debt securities. Some of the risks
associated with such debt securities issued are described below under "Risk
Factors -- Indexed Securities" and "Risk Factors -- Non-U.S. Dollar Securities."
The prospectus supplement relating to specific debt securities will also
describe certain additional tax considerations applicable to such debt
securities.
In addition, the specific financial, legal and other terms particular to a
series of debt securities will be described in the prospectus supplement and, if
applicable, a pricing supplement relating to the series. The prospectus
supplement relating to a series of debt securities will describe the following
terms of the series:
- the title of the series of debt securities;
- whether it is a series of senior debt securities or a series of
subordinated debt securities;
- any limit on the aggregate principal amount of the series of debt
securities;
- the person to whom interest on a debt security is payable, if other than
the holder on the regular record date;
- the date or dates on which the series of debt securities will mature;
- the rate or rates, which may be fixed or variable per annum, at which the
series of debt securities will bear interest, if any, and the date or
dates from which that interest, if any, will accrue;
- the place or places where the principal of, premium, if any, and interest
on the debt securities is payable;
6
- the dates on which interest, if any, on the series of debt securities
will be payable and the regular record dates for the interest payment
dates;
- any mandatory or optional sinking funds or similar provisions or
provisions for redemption at the option of the issuer;
- the date, if any, after which and the price or prices at which the series
of debt securities may, in accordance with any optional or mandatory
redemption provisions, be redeemed and the other detailed terms and
provisions of those optional or mandatory redemption provisions, if any;
- if the debt securities may be converted into or exercised or exchanged
for our common stock or preferred stock or other of our securities or the
debt or equity securities of third parties, the terms on which
conversion, exercise or exchange may occur, including whether conversion,
exercise or exchange is mandatory, at the option of the holder or at our
option, the period during which conversion, exercise or exchange may
occur, the initial conversion, exercise or exchange price or rate and the
circumstances or manner in which the amount of common stock or preferred
stock or other securities or the debt or equity securities of third
parties issuable upon conversion, exercise or exchange may be adjusted;
- if other than denominations of $1,000 and any of its integral multiples,
the denominations in which the series of debt securities will be
issuable;
- the currency of payment of principal, premium, if any, and interest on
the series of debt securities;
- if the currency of payment for principal, premium, if any, and interest
on the series of debt securities is subject to our election or that of a
holder, the currency or currencies in which payment can be made and the
period within which, and the terms and conditions upon which, the
election can be made;
- any index used to determine the amount of payment of principal or
premium, if any, and interest on the series of debt securities;
- the applicability of the provisions described under "-- Defeasance"
below;
- any event of default under the series of debt securities if different
from those described under "-- Events of Default" below;
- if the debt securities will be issued in bearer form, any special
provisions relating to bearer securities that are not addressed in this
prospectus;
- if the series of debt securities will be issuable only in the form of a
global security, the depositary or its nominee with respect to the series
of debt securities and the circumstances under which the global security
may be registered for transfer or exchange in the name of a person other
than the depositary or the nominee; and
- any other special feature of the series of debt securities.
An investment in debt securities may involve special risks, including risks
associated with indexed securities and currency-related risks if the debt
security is linked to an index or is payable in or otherwise linked to a
non-U.S. dollar currency. We describe some of these risks below under "Risk
Factors -- Indexed Securities" and "Risk Factors -- Non-U.S. Dollar Securities."
MARKET-MAKING TRANSACTIONS
One or more of our subsidiaries may purchase and resell debt securities in
market-making transactions after their initial issuance. We discuss these
transactions below under "Plan of Distribution -- Market-Making Resales by
Subsidiaries." We may also purchase debt securities in the open market or in
private transactions to be held by us or cancelled.
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OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- ADDITIONAL MECHANICS relevant to the debt securities under normal
circumstances, such as how holders transfer ownership and where we make
payments;
- Holders' rights in several SPECIAL SITUATIONS, such as if we merge with
another company or if we want to change a term of the debt securities;
- SUBORDINATION PROVISIONS in the subordinated debt indenture that may
prohibit us from making payment on those securities;
- Our right to release ourselves from all or some of our obligations under
the debt securities and the indenture by a process called DEFEASANCE; and
- Holders' rights if we DEFAULT or experience other financial difficulties.
ADDITIONAL MECHANICS
FORM, EXCHANGE AND TRANSFER
Unless we specify otherwise in the prospectus supplement, the debt
securities will be issued:
- only in fully registered form;
- without interest coupons; and
- in denominations that are even multiples of $1,000. (Section 302)
If we issue a debt security in bearer form, the provisions described below
under "Considerations Relating to Securities Issued in Bearer Form" would apply
to that security. Some of the features of the debt securities that we describe
in this prospectus may not apply to bearer debt securities.
If a debt security is issued as a registered global debt security, only the
depositary -- e.g., DTC, Euroclear and Clearstream, each as defined below under
"Legal Ownership and Book-Entry Issuance" -- will be entitled to transfer and
exchange the debt security as described in this subsection, since the depositary
will be the sole holder of the debt security. Those who own beneficial interests
in a global security do so through participants in the depositary's securities
clearance system, and the rights of these indirect owners will be governed
solely by the applicable procedures of the depositary and its participants. We
describe book-entry procedures below under "Legal Ownership and Book-Entry
Issuance."
Holders may have their debt securities broken into more debt securities of
smaller denominations of not less than $1,000 or combined into fewer debt
securities of larger denominations, as long as the total principal amount is not
changed. (Section 305) This is called an exchange.
Holders may exchange or transfer debt securities at the office of the
trustee. They may also replace lost, stolen or mutilated debt securities at that
office. The trustee acts as our agent for registering debt securities in the
names of holders and transferring debt securities. We may change this
appointment to another entity or perform it ourselves. The entity performing the
role of maintaining the list of registered holders is called the security
registrar. It will also perform transfers. (Section 305) The trustee's agent may
require an indemnity before replacing any debt securities.
Holders will not be required to pay a service charge to transfer or
exchange debt securities, but holders may be required to pay for any tax or
other governmental charge associated with the exchange or transfer. The transfer
or exchange will only be made if the security registrar is satisfied with your
proof of ownership.
If we designate additional transfer agents, they will be named in the
prospectus supplement. We may cancel the designation of any particular transfer
agent. We may also approve a change in the office through which any transfer
agent acts. (Section 1002)
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If the debt securities are redeemable and we redeem less than all of the
debt securities of a particular series, we may block the transfer or exchange of
debt securities during the period beginning 15 days before the day we mail the
notice of redemption and ending on the day of that mailing, in order to freeze
the list of holders to prepare the mailing. We may also refuse to register
transfers or exchanges of debt securities selected for redemption, except that
we will continue to permit transfers and exchanges of the unredeemed portion of
any debt security being partially redeemed. (Section 305)
The rules for exchange described above apply to exchange of debt securities
for other debt securities of the same series and kind. If a debt security is
convertible, exercisable or exchangeable into or for a different kind of
security, such as one that we have not issued, or for other property, the rules
governing that type of conversion, exercise or exchange will be described in the
prospectus supplement.
PAYMENT AND PAYING AGENTS
We will pay interest to the person listed in the trustee's records at the
close of business on a particular day in advance of each due date for interest,
even if that person no longer owns the debt security on the interest due date.
That particular day, usually about two weeks in advance of the interest due
date, is called the regular record date and will be stated in the prospectus
supplement. (Section 307) Holders buying and selling debt securities must work
out between them how to compensate for the fact that we will pay all the
interest for an interest period to the one who is the registered holder on the
regular record date. The most common manner is to adjust the sale price of the
securities to pro-rate interest fairly between buyer and seller. This prorated
interest amount is called accrued interest.
We will pay interest, principal and any other money due on the debt
securities at the corporate trust office of the trustee in New York City. That
office is currently located at 101 Barclay Street, New York, New York 10286.
Holders must make arrangements to have their payments picked up at or wired from
that office. We may also choose to pay interest by mailing checks.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS,
BROKERS OR OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW THEY WILL RECEIVE
PAYMENTS.
We may also arrange for additional payment offices and may cancel or change
these offices, including our use of the trustee's corporate trust office. These
offices are called paying agents. We may also choose to act as our own paying
agent or choose one of our subsidiaries to do so. We must notify holders of
changes in the paying agents for any particular series of debt securities.
(Section 1002)
NOTICES
We and the trustee will send notices regarding the debt securities only to
holders, using their addresses as listed in the trustee's records. (Sections 101
and 106) With respect to who is a legal "holder" for this purpose, see "Legal
Ownership and Book-Entry Issuance."
Regardless of who acts as paying agent, all money paid by us to a paying
agent that remains unclaimed at the end of two years after the amount is due to
holders will be repaid to us. After that two-year period, holders may look to us
for payment and not to the trustee or any other paying agent. (Section 1003)
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SPECIAL SITUATIONS
MERGERS AND SIMILAR EVENTS
We are generally permitted to consolidate or merge with another company or
firm. We are also permitted to sell or lease substantially all of our assets to
another firm, or to buy or lease substantially all of the assets of another
firm. However, we may not take any of these actions unless all the following
conditions are met:
- When we merge out of existence or sell or lease substantially all of our
assets, the other firm may not be organized under a foreign country's
laws, that is, it must be a corporation, partnership or trust organized
under the laws of a state of the United States or the District of
Columbia or under federal law, and it must agree to be legally
responsible for the debt securities.
- The merger, sale of assets or other transaction must not cause a default
on the debt securities, and we must not already be in default (unless the
merger or other transaction would cure the default). For purposes of this
no-default test, a default would include an event of default that has
occurred and not been cured. A default for this purpose would also
include any event that would be an event of default if the requirements
for giving us default notice or our default having to exist for a
specific period of time were disregarded.
If the conditions described above are satisfied with respect to any series
of debt securities, we will not need to obtain the approval of the holders of
those debt securities in order to merge or consolidate or to sell our assets.
Also, these conditions will apply only if we wish to merge or consolidate with
another entity or sell substantially all of our assets to another entity. We
will not need to satisfy these conditions if we enter into other types of
transactions, including any transaction in which we acquire the stock or assets
of another entity, any transaction that involves a change of control but in
which we do not merge or consolidate and any transaction in which we sell less
than substantially all of our assets. It is possible that this type of
transaction may result in a reduction in our credit rating, may reduce our
operating results or may impair our financial condition. Holders of our debt
securities, however, will have no approval right with respect to any transaction
of this type.
MODIFICATION AND WAIVER OF THE DEBT SECURITIES
There are four types of changes we can make to either indenture and the
debt securities issued under that indenture.
Changes Requiring Approval of All Holders. First, there are changes that
cannot be made to the indenture or the debt securities without specific approval
of each holder of a debt security affected in any material respect by the change
under a particular debt indenture. Following is a list of those types of
changes:
- change the stated maturity of the principal or interest on a debt
security;
- reduce any amounts due on a debt security;
- reduce the amount of principal payable upon acceleration of the maturity
of a debt security (including the amount payable on an original issue
discount security) following a default;
- change the currency of payment on a debt security;
- impair a holder's right to sue for payment;
- impair any right that a holder of a debt security may have to exchange or
convert the debt security for or into other property;
- reduce the percentage of holders of debt securities whose consent is
needed to modify or amend the indenture;
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- reduce the percentage of holders of debt securities whose consent is
needed to waive compliance with certain provisions of the indenture or to
waive certain defaults; or
- modify any other aspect of the provisions dealing with modification and
waiver of the indenture. (Section 902)
Changes Requiring a Majority Vote. The second type of change to the
indenture and the debt securities is the kind that requires a vote in favor by
holders of debt securities owning not less than a majority of the principal
amount of the particular series affected. Most changes fall into this category,
except for clarifying changes and certain other changes that would not adversely
affect in any material respect holders of the debt securities. (Section 901) We
may also obtain a waiver of a past default from the holders of debt securities
owning a majority of the principal amount of the particular series affected.
However, we cannot obtain a waiver of a payment default or any other aspect of
the indenture or the debt securities listed in the first category described
above under "-- Changes Requiring Approval of All Holders" unless we obtain the
individual consent of each holder to the waiver. (Section 513)
Changes Not Requiring Approval. The third type of change to the indenture
and the debt securities does not require any vote by holders of debt securities.
This type is limited to clarifications and certain other changes that would not
adversely affect in any material respect holders of the debt securities.
(Section 901)
We may also make changes or obtain waivers that do not adversely affect in
any material respect a particular debt security, even if they affect other debt
securities. In those cases, we do not need to obtain the approval of the holder
of that debt security; we need only obtain any required approvals from the
holders of the affected debt securities.
Modification of Subordination Provisions. We may not modify the
subordination provisions of the subordinated debt indenture in a manner that
would adversely affect in any material respect the outstanding subordinated debt
securities of any one or more series without the consent of the holders of a
majority of the principal amount of all affected series, voting together as one
class.
Further Details Concerning Voting. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a debt
security:
- For original issue discount securities, we will use the principal amount
that would be due and payable on the voting date if the maturity of the
debt securities were accelerated to that date because of a default.
- For debt securities whose principal amount is not known (for example,
because it is based on an index), we will use a special rule for that
debt security described in the prospectus supplement.
- For debt securities denominated in one or more foreign currencies or
currency units, we will use the U.S. dollar equivalent.
Debt securities will not be considered outstanding, and therefore not
eligible to vote, if we have given a notice of redemption and deposited or set
aside in trust for the holders money for the payment or redemption of the debt
securities. Debt securities will also not be eligible to vote if they have been
fully defeased as described below under "-- Defeasance -- Full Defeasance."
(Section 1302)
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding debt securities that are
entitled to vote or take other action under the indenture. In certain limited
circumstances, the trustee will be entitled to set a record date for action by
holders. If we or the trustee set a record date for a vote or other action to be
taken by holders of a particular series, that vote or action may be taken only
by persons who are holders of outstanding securities of that series on the
record date. We or the trustee, as applicable, may shorten or lengthen this
period from time to time. This period, however, may not extend beyond the 180th
day after the record date for the action. (Sections 512, 902 and 1008)
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BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS,
BROKERS OR OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW APPROVAL MAY BE
GRANTED OR DENIED IF WE SEEK TO CHANGE THE INDENTURE OR THE DEBT SECURITIES OR
REQUEST A WAIVER.
SUBORDINATION PROVISIONS
Holders of subordinated debt securities should recognize that contractual
provisions in the subordinated debt indenture may prohibit us from making
payments on those securities. Subordinated debt securities are subordinate and
junior in right of payment, to the extent and in the manner stated in the
subordinated debt indenture, to all of our senior indebtedness, as defined in
the subordinated debt indenture, including all debt securities we have issued
and will issue under the senior debt indenture.
The subordinated debt indenture defines "senior indebtedness" as all
indebtedness and obligations of, or guaranteed or assumed by, us for borrowed
money or evidenced by bonds, debentures, notes or other similar instruments,
whether existing now or in the future, and all amendments, renewals, extensions,
modifications and refundings of any indebtedness or obligations of that kind.
Senior debt excludes the subordinated debt securities and any other indebtedness
or obligations that would otherwise constitute indebtedness if it is
specifically designated as being subordinate, or not superior, in right of
payment to the subordinated debt securities.
The subordinated debt indenture provides that, unless all principal of and
any premium or interest on the senior indebtedness has been paid in full, no
payment or other distribution may be made in respect of any subordinated debt
securities in the following circumstances:
- in the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization, assignment for creditors or
other similar proceedings or events involving us or our assets;
- (a) in the event and during the continuation of any default in the
payment of principal, premium or interest on any senior indebtedness
beyond any applicable grace period, (b) in the event that any event of
default with respect to any senior indebtedness has occurred and is
continuing, permitting the holders of that senior indebtedness (or a
trustee) to accelerate the maturity of that senior indebtedness, whether
or not the maturity is in fact accelerated (unless, in the case of (a) or
(b), the payment default or event of default has been cured or waived or
ceases to exist and any related acceleration has been rescinded) or (c)
in the event that any judicial proceeding is pending with respect to a
payment default or event of default described in (a) or (b); or
- in the event that any subordinated debt securities have been declared due
and payable before their stated maturity.
If the trustee under the subordinated debt indenture or any holders of the
subordinated debt securities receive any payment or distribution that is
prohibited under the subordination provisions, then the trustee or the holders
will have to repay that money to the holders of the senior indebtedness.
Even if the subordination provisions prevent us from making any payment
when due on the subordinated debt securities of any series, we will be in
default on our obligations under that series if we do not make the payment when
due. This means that the trustee under the subordinated debt indenture and the
holders of that series can take action against us, but they will not receive any
money until the claims of the holders of senior indebtedness have been fully
satisfied.
The subordinated debt indenture allows the holders of senior indebtedness
to obtain a court order requiring us and any holder of subordinated debt
securities to comply with the subordination provisions.
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DEFEASANCE
The following discussion of full defeasance and covenant defeasance will be
applicable to each series of debt securities that is denominated in U.S. dollars
and has a fixed rate of interest and will apply to other series of debt
securities if we so specify in the prospectus supplement. (Section 1301)
FULL DEFEASANCE
If there is a change in U.S. federal tax law, as described below, we can
legally release ourselves from any payment or other obligations on the debt
securities, called full defeasance, if we put in place the following other
arrangements for holders to be repaid:
- We must deposit in trust for the benefit of all holders of the debt
securities a combination of money and notes or bonds of the U.S.
government or a U.S. government agency or U.S. government-sponsored
entity (the obligations of which are backed by the full faith and credit
of the U.S. government) that will generate enough cash to make interest,
principal and any other payments on the debt securities on their various
due dates.
- There must be a change in current U.S. federal tax law or an IRS ruling
that lets us make the above deposit without causing the holders to be
taxed on the debt securities any differently than if we did not make the
deposit and just repaid the debt securities ourselves. (Under current
federal tax law, the deposit and our legal release from the obligations
pursuant to the debt securities would be treated as though we took back
your debt securities and gave you your share of the cash and notes or
bonds deposited in trust. In that event, you could recognize gain or loss
on the debt securities you give back to us.)
- We must deliver to the trustee a legal opinion of our counsel confirming
the tax law change described above. (Sections 1302 and 1304)
- In the case of the subordinated debt securities, the following
requirement must also be met:
-- No event or condition may exist that, under the provisions described
under "-- Subordination Provisions" above, would prevent us from making
payments of principal, premium or interest on those subordinated debt
securities on the date of the deposit referred to above or during the
90 days after that date.
If we ever did accomplish full defeasance, as described above, you would
have to rely solely on the trust deposit for repayment on the debt securities.
You could not look to us for repayment in the unlikely event of any shortfall.
COVENANT DEFEASANCE
Under current U.S. federal tax law, we can make the same type of deposit as
described above and we will be released from the restrictive covenants under the
debt securities that may be described in the prospectus supplement. This is
called covenant defeasance. In that event, you would lose the protection of
these covenants but would gain the protection of having money and U.S.
government or U.S. government agency notes or bonds set aside in trust to repay
the debt securities. In order to achieve covenant defeasance, we must do the
following:
- We must deposit in trust for the benefit of all holders of the debt
securities a combination of money and notes or bonds of the U.S.
government or a U.S. government agency or U.S. government sponsored
entity (the obligations of which are backed by the full faith and credit
of the U.S. government) that will generate enough cash to make interest,
principal and any other payments on the debt securities on their various
due dates.
- We must deliver to the trustee a legal opinion of our counsel confirming
that under current U.S. federal income tax law we may make the above
deposit without causing the holders to be taxed on the debt
13
securities any differently than if we did not make the deposit and just
repaid the debt securities ourselves.
If we accomplish covenant defeasance, certain provisions of the indenture
and the debt securities would no longer apply:
- Covenants applicable to the series of debt securities and described in
the prospectus supplement.
- Any events of default relating to breach of those covenants.
If we accomplish covenant defeasance, you can still look to us for
repayment of the debt securities if there were a shortfall in the trust deposit.
In fact, if one of the remaining events of default occurred (such as a
bankruptcy) and the debt securities become immediately due and payable, there
may be such a shortfall. (Sections 1303 and 1304)
EVENTS OF DEFAULT
You will have special rights if an event of default occurs and is not
cured, as described later in this subsection.
What Is An Event of Default? The term "Event of Default" means any of the
following:
- We do not pay the principal of or any premium on a debt security within 5
days of its due date.
- We do not pay interest on a debt security within 30 days of its due date.
- We do not deposit money in a separate account, known as a sinking fund,
when such deposit is due.
- We remain in breach of any covenant or warranty of the indenture for 60
days after we receive a notice of default stating we are in breach. The
notice must be sent by either the trustee or holders of 25% of the
principal amount of debt securities of the affected series.
- We file for bankruptcy or certain other events of bankruptcy, insolvency
or reorganization occur.
- Any other event of default described in the prospectus supplement occurs.
(Section 501)
Remedies If an Event of Default Occurs. If you are the holder of a
subordinated debt security, all remedies available upon the occurrence of an
event of default under the subordinated debt indenture will be subject to the
restrictions on the subordinated debt securities described above under
"-- Subordination Provisions." If an event of default occurs, the trustee will
have special duties. In that situation, the trustee will be obligated to use
those of its rights and powers under the indenture, and to use the same degree
of care and skill in doing so, that a prudent person would use in that situation
in conducting his or her own affairs. If an event of default has occurred and
has not been cured, the trustee or the holders of at least 25% in principal
amount of the debt securities of the affected series may declare the entire
principal amount (or, in the case of original issue discount securities, the
portion of the principal amount that is specified in the terms of the affected
debt security) of all the debt securities of that series to be due and
immediately payable. This is called a declaration of acceleration of maturity.
However, a declaration of acceleration of maturity may be cancelled, but only
before a judgment or decree based on the acceleration has been obtained, by the
holders of at least a majority in principal amount of the debt securities of the
affected series. (Section 502)
You should read carefully the prospectus supplement relating to any series
of debt securities which are original issue discount securities for the
particular provisions relating to acceleration of the maturity of a portion of
the principal amount of original issue discount securities upon the occurrence
of an event of default and its continuation.
Except in cases of default, where the trustee has the special duties
described above, the trustee is not required to take any action under the
indenture at the request of any holders unless the holders offer the trustee
reasonable protection from expenses and liability called an indemnity. (Section
603) If reasonable indemnity is provided, the holders of a majority in principal
amount of the outstanding securities of the relevant series may direct the time,
method and place of conducting any lawsuit or other formal legal action
14
seeking any remedy available to the trustee. These majority holders may also
direct the trustee in performing any other action under the applicable indenture
with respect to the debt securities of that series. (Section 512)
Before you bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to the debt securities the following must occur:
- The holder of the debt security must give the trustee written notice that
an event of default has occurred and remains uncured;
- The holders of 25% in principal amount of all outstanding securities of
the relevant series must make a written request that the trustee take
action because of the default, and must offer reasonable indemnity to the
trustee against the cost and other liabilities of taking that action; and
- The trustee must have not taken action for 60 days after receipt of the
above notice and offer of indemnity. (Section 507)
However, you are entitled at any time to bring a lawsuit for the payment of
money due on your debt security on or after its due date. (Section 508)
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS, BROKERS OR
OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION
TO OR MAKE A REQUEST OF THE TRUSTEE AND TO MAKE OR CANCEL A DECLARATION OF
ACCELERATION.
We will give to the trustee every year a written statement of certain of
our officers certifying that to their knowledge we are in compliance with the
applicable indenture and the debt securities issued under it, or else specifying
any default. (Section 1007)
OUR RELATIONSHIP WITH THE TRUSTEE
The Bank of New York is one of our lenders and from time to time provides
other banking services to us and our subsidiaries.
The Bank of New York is initially serving as the trustee for our senior
debt securities, our subordinated debt securities and the warrants issued under
our warrant indenture, as well as the trustee under any amended and restated
trust agreement and capital securities subordinated guarantee that we enter into
in connection with the issuance of capital securities. Consequently, if an
actual or potential event of default occurs with respect to any of these
securities, trust agreements or subordinated guarantees, the trustee may be
considered to have a conflicting interest for purposes of the Trust Indenture
Act of 1939. In that case, the trustee may be required to resign under one or
more of the indentures, trust agreement or subordinated guarantees and we would
be required to appoint a successor trustee. For this purpose, a "potential"
event of default means an event that would be an event of default if the
requirements for giving us default notice or for the default having to exist for
a specific period of time were disregarded.
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DESCRIPTION OF WARRANTS WE MAY OFFER
References to "AIG," "us," "we" or "our" in this section means American
International Group, Inc., and does not include the consolidated subsidiaries of
American International Group Inc. Also, in this section, references to "holders"
mean those who own warrants registered in their own names, on the books that we
or the applicable trustee or warrant agent maintain for this purpose, and not
those who own beneficial interests in warrants registered in street name or in
warrants issued in book-entry form through one or more depositaries. When we
refer to "you" in this section, we mean all purchasers of warrants being offered
by this prospectus, whether they are the holders or only indirect owners of
those warrants. Owners of beneficial interests in the warrants should read the
section below entitled "Legal Ownership and Book-Entry Issuance."
WARRANTS MAY BE DEBT WARRANTS OR UNIVERSAL WARRANTS
We may issue warrants that are debt warrants or universal warrants. We may
offer warrants separately or together with our debt securities. We may also
offer warrants together with other warrants, purchase contracts, debt securities
and preferred stock or common stock in the form of units, as summarized under
"Description of Units We May Offer."
We will issue the warrants under either a warrant indenture or a warrant
agreement. The warrant indenture, the warrant agreement and their associated
documents contain the full legal text of the matters described in this section.
The warrant indenture and the warrant agreement and the warrants issued
thereunder are governed by New York law.
WARRANT INDENTURE
The warrants may be governed by a document called an indenture. The warrant
indenture is a contract between AIG and The Bank of New York, which acts as
trustee. See "Description of Debt Securities We May Offer -- Our Relationship
with the Trustee" above for more information about the trustee.
Reference to the warrant indenture or the trustee with respect to any
warrants, means the indenture under which those warrants are issued and the
trustee under that indenture.
The trustee has two main roles:
1. The trustee can enforce the rights of holders against us if we
default on our obligations under the terms of the warrant indenture or the
warrants. There are some limitations on the extent to which the trustee
acts on behalf of holders, described below under "-- Events of
Default -- Remedies If an Event of Default Occurs."
2. The trustee performs administrative duties for us, such as sending
payments to holders and notices, and transferring a holder's warrants to a
new buyer if a holder sells.
WARRANT AGREEMENT
A warrant agreement is a contract between us and a bank, trust company or
other financial institution, as warrant agent. References to a warrant agreement
or warrant agent with respect to any warrants, means the warrant agreement under
which those warrants are issued and the warrant agent under that warrant
agreement.
The warrant agent is our agent and, unlike a trustee, has no obligations to
holders of the warrants issued under the warrant agreement. The main role of the
warrant agent is to perform administrative duties for us, such as sending
payments and notices to holders and transferring a holder's warrants to a new
buyer if a holder sells.
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GENERAL
We may issue as many distinct series of warrants as we wish.
This section summarizes terms of the warrant indenture and warrant
agreements and terms of the warrants that apply generally to the warrants,
although the prospectus supplement which describes the terms of the warrants may
also describe differences from the material terms summarized here.
Because this section is a summary, it does not describe every aspect of the
warrants. This summary is subject to and qualified in its entirety by reference
to all the provisions of the warrant indenture and warrant agreement, including
definitions of certain terms used in the warrant indenture and warrant
agreement. In this summary, we describe the meaning of only some of the more
important terms. Whenever we refer to particular sections or defined terms of
the warrant indenture or warrant agreement in this prospectus or in the
prospectus supplement, such sections or defined terms are incorporated by
reference here or in the prospectus supplement. You must look to the warrant
indenture or warrant agreement for the most complete description of what we
describe in summary form in this prospectus.
This summary also is subject to and qualified by reference to the
description of the particular terms of your warrants described in the prospectus
supplement. As you read this section, please remember that the specific terms of
your warrant as described in your prospectus supplement will supplement and, if
applicable, may modify or replace the general terms described in this section.
If there are differences between your prospectus supplement and this prospectus,
your prospectus supplement will control. Thus, the statements we make in this
section may not apply to your warrant.
When we refer to a series of warrants, we mean all warrants issued as part
of the same series under the applicable warrant indenture or warrant agreement.
When we refer to your prospectus supplement, we mean the prospectus supplement
describing the specific terms of the warrant you purchase. The terms used in
your prospectus supplement will have the meanings described in this prospectus,
unless otherwise specified.
In addition, the specific financial, legal and other specific terms of your
warrant will be described in the prospectus supplement relating to the warrants.
The prospectus supplement relating to the warrants may contain, where
applicable, the following information about your warrants:
- the specific designation and aggregate number of, and the price at which
we will issue, the warrants;
- the currency with which the warrants may be purchased;
- the warrant indenture or warrant agreement under which we will issue the
warrants;
- the date on which the right to exercise the warrants will begin and the
date on which that right will expire or, if you may not continuously
exercise the warrants throughout that period, the specific date or dates
on which you may exercise the warrants;
- whether the warrants will be redeemable by us before their expiration
date, and any applicable redemption dates or periods and the related
redemption prices;
- whether the warrants will be issued in fully registered form or bearer
form, in global or non-global form or in any combination of these forms,
although, in any case, the form of a warrant included in a unit will
correspond to the form of the unit and of any debt security or purchase
contract included in that unit;
- the identities of the trustee or warrant agent, any depositaries and any
paying, transfer, calculation or other agents for the warrants;
- any securities exchange or quotation system on which the warrants or any
securities deliverable upon exercise of the warrants may be listed;
- whether the warrants are to be sold separately or with other securities,
as part of units or otherwise; and
- any other terms of the warrants.
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If we issue warrants as part of a unit, your prospectus supplement will
specify whether the warrants will be separable from the other securities in the
unit before the warrants' expiration date.
Until a warrant is properly exercised, no holder of a warrant will have any
rights of a holder of the warrant property deliverable under the warrant.
An investment in a warrant may involve special risks, including risks
associated with indexed securities and currency-related risks if the warrant or
the warrant property is linked to an index or is payable in or otherwise linked
to a non-U.S. dollar currency. We describe some of these risks below under "Risk
Factors -- Indexed Securities" and "Risk Factors -- Non-U.S. Dollar Securities."
DEBT WARRANTS
We may issue warrants for the purchase of our debt securities on terms to
be determined at the time of sale. We refer to this type of warrant as a "debt
warrant."
If you purchase debt warrants, your prospectus supplement may contain,
where applicable, the following additional information about your debt warrants:
- the designation, aggregate principal amount, currency and terms of the
debt securities that may be purchased upon exercise of the debt warrants;
- the exercise price and whether the exercise price may be paid in cash, by
the exchange of any debt warrants or other securities or both and the
method of exercising the debt warrants; and
- the designation, terms and amount of debt securities, if any, to be
issued together with each of the debt warrants and the date, if any,
after which the debt warrants and debt securities will be separately
transferable.
UNIVERSAL WARRANTS
We may also issue warrants, on terms to be determined at the time of sale,
for the purchase or sale of, or whose cash value is determined by reference to
the performance, level or value of, one or more of the following:
- securities of one or more issuers, including our common or preferred
stock or other securities described in this prospectus or debt or equity
securities of third parties;
- one or more currencies;
- one or more commodities;
- any other financial, economic or other measure or instrument, including
the occurrence or non-occurrence of any event or circumstance; and
- one or more indices or baskets of the items described above.
We refer to this type of warrant as a "universal warrant." We refer to each
property described above as a "warrant property."
We may satisfy our obligations, if any, and the holder of a universal
warrant may satisfy its obligations, if any, with respect to any universal
warrants by delivering:
- the warrant property;
- the cash value of the warrant property; or
- the cash value of the warrants determined by reference to the
performance, level or value of the warrant property.
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Your prospectus supplement will describe what we may deliver to satisfy our
obligations, if any, and what the holder of a universal warrant may deliver to
satisfy its obligations, if any, with respect to any universal warrants.
If you purchase universal warrants, your prospectus supplement may contain,
where applicable, the following additional information about your universal
warrants:
- whether the universal warrants are put warrants or call warrants,
including in either case warrants that may be settled by means of net
cash settlement or cashless exercise, or any other type of warrants;
- the money or warrant property, and the amount or method of determining
the amount of money or warrant property, payable or deliverable upon
exercise of each universal warrant;
- the price at which and the currency with which the warrant property may
be purchased or sold by or on behalf of the holder of each universal
warrant upon the exercise of that warrant, or the method of determining
that price;
- whether the exercise price may be paid in cash, by the exchange of any
universal warrants or other securities or both, and the method of
exercising the universal warrants; and
- whether the exercise of the universal warrants is to be settled in cash
or by delivery of the warrant property or both and whether settlement
will occur on a net basis or a gross basis.
MARKET-MAKING TRANSACTIONS
One or more of our subsidiaries may resell warrants in market-making
transactions after their initial issuance. We discuss these transactions below
under "Plan of Distribution -- Market-Making Resales by Subsidiaries." We may
also purchase, in our discretion, warrants to be held, resold or canceled.
GENERAL PROVISIONS OF THE WARRANT INDENTURE
We may issue as many distinct series of warrants under the warrant
indenture as we wish, in such amounts as we wish. The provisions of the warrant
indenture allow us not only to issue warrants with terms different from those of
warrants previously issued under the warrant indenture, but also to "reopen" a
previous issue of a series of warrants and issue additional warrants of that
series. We may issue warrants in amounts that exceed the total amount specified
on the cover of your prospectus supplement at any time without your consent and
without notifying you.
The warrant indenture and the warrants do not limit our ability to incur
other contractual obligations or indebtedness or to issue other securities.
Also, the terms of the warrants do not impose financial or similar restrictions
on us.
We may issue universal warrants under the warrant indenture. Warrants of
this kind will not be secured by any property or our assets or the assets of our
subsidiaries. Thus, by owning a warrant issued under the warrant indenture, you
hold one of our unsecured obligations.
The warrants issued under the warrant indenture will be our contractual
obligations and will rank equally with all of our other unsecured contractual
obligations and unsecured and unsubordinated debt. The warrant indenture does
not limit our ability to incur additional contractual obligations or debt.
OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- ADDITIONAL TERMS relevant to the warrants under normal circumstances,
such as how holders transfer warrants, and the expiration and payment and
delivery mechanics relating to warrants;
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- Holders' rights in several SPECIAL SITUATIONS, such as if we merge with
another company or if we want to change a term of the warrants; and
- Holders' rights if we DEFAULT or experience other financial difficulties.
ADDITIONAL MECHANICS
FORM, EXCHANGE AND TRANSFER OF WARRANTS
Unless we specify otherwise in your prospectus supplement, we will issue
each warrant in registered global -- i.e., book-entry -- form only. Warrants in
book-entry form will be represented by a global security registered in the name
of a depositary, which will be the holder of all the warrants represented by the
global security. Those who own beneficial interests in a global warrant will do
so through participants in the depositary's system, and the rights of these
indirect owners will be governed solely by the applicable procedures of the
depositary and its participants. We describe book-entry securities below under
"Legal Ownership and Book-Entry Issuance."
If a warrant is issued as a registered global warrant, only the depositary
-- e.g., DTC, Euroclear or Clearstream -- will be entitled to transfer and
exchange the warrant as described in this subsection, since the depositary will
be the sole holder of the warrant.
If any warrants cease to be issued in registered global form, they will be
issued:
- only in fully registered form; and
- only in the denominations specified in your prospectus supplement.
Holders may exchange their warrants for certificates representing smaller
or larger number of warrants, as long as the total number of warrants is not
changed.
Holders may exchange or transfer their warrants at the office of the
trustee. They may also replace lost, stolen, destroyed or mutilated warrants at
that office. We have appointed the trustee to act as our agent for registering
warrants in the names of holders and transferring and replacing warrants. We may
appoint another entity to perform these functions or perform them ourselves.
Holders will not be required to pay a service charge to transfer or
exchange their warrants, but they may be required to pay for any tax or other
governmental charge associated with the transfer or exchange. The transfer or
exchange, and any replacement, will be made only if our transfer agent is
satisfied with the holder's proof of legal ownership. The transfer agent may
require an indemnity before replacing any warrants.
If we have the right to redeem, accelerate or settle any warrants before
their expiration, and we exercise our right as to less than all those warrants,
we may block the transfer or exchange of those warrants during the period
beginning 15 days before the day we mail the notice of exercise and ending on
the day of that mailing or during any other period specified in the prospectus
supplement, in order to freeze the list of holders to prepare the mailing. We
may also refuse to register transfers of or to exchange any warrant selected for
early settlement, except that we will continue to permit transfers and exchanges
of the unsettled portion of any warrant being partially settled.
If we have designated additional transfer agents for your warrant, they
will be named in your prospectus supplement. We may appoint additional transfer
agents or cancel the appointment of any particular transfer agent. We may also
approve a change in the office through which any transfer agent acts.
The rules for exchange described above apply to exchange of warrants for
other warrants of the same series and kind. If a warrant is exercisable for a
different kind of security, such as one that we have not issued, or for other
property, the rules governing that type of exercise will be described in your
prospectus supplement.
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EXPIRATION DATE AND PAYMENT OR SETTLEMENT DATE
The term "expiration date" with respect to any warrant means the date on
which the right to exercise the warrant expires. The term "payment or settlement
date" with respect to any warrant means the date when any money or warrant
property with respect to that warrant becomes payable or deliverable upon
exercise or redemption of that warrant in accordance with its terms.
CURRENCY OF WARRANTS
Amounts that become due and payable on your warrant may be payable in a
currency, composite currency, basket of currencies or currency unit or units
specified in your prospectus supplement. We refer to this currency, composite
currency, basket of currencies or currency unit or units as a "specified
currency." The specified currency for your warrant will be U.S. dollars, unless
your prospectus supplement states otherwise. You will have to pay for your
warrant by delivering the requisite amount of the specified currency to a firm
that we name in your prospectus supplement, unless other arrangements have been
made between you and us or you and that firm. We will make payments on your
warrants in the specified currency, except as described in your prospectus
supplement. See "Risk Factors -- Non-U.S. Dollar Securities" below for more
information about risks of investing in warrants of this kind.
REDEMPTION
We will not be entitled to redeem your warrant before its expiration date
unless your prospectus supplement specifies a redemption commencement date.
If your prospectus supplement specifies a redemption commencement date, it
will also specify one or more redemption prices. It may also specify one or more
redemption periods during which the redemption prices relating to a redemption
of warrants during those periods will apply.
If your prospectus supplement specifies a redemption commencement date,
your warrant will be redeemable at our option at any time on or after that date
or at a specified time or times. If we redeem your warrant, we will do so at the
specified redemption price. If different prices are specified for different
redemption periods, the price we pay will be the price that applies to the
redemption period during which your warrant is redeemed.
If we exercise an option to redeem any warrant, we will give the holder
written notice of the redemption price of the warrant to be redeemed, not less
than 30 days nor more than 60 days before the applicable redemption date or
within any other period before the applicable redemption date specified in your
prospectus supplement. We will give the notice in the manner described in your
prospectus supplement.
SPECIAL SITUATIONS
MERGERS AND SIMILAR EVENTS
We are generally permitted to consolidate or merge with another corporation
or firm. We are also permitted to sell substantially all of our assets to
another firm, or to buy or lease substantially all of the assets of another
firm. With regard to any warrant, however, we may not take any of these actions
unless all the following conditions are met:
- When we merge out of existence or sell or lease substantially all of our
assets, the other firm may not be organized under a foreign country's
laws, that is, it must be a corporation, partnership or trust organized
under the laws of a state of the United States or the District of
Columbia or under federal law, and it must agree to be legally
responsible for our obligations under that warrant and the warrant
indenture, as applicable.
- The merger, sale of assets or other transaction must not cause a default
under the warrant, and we must not already be in default (unless the
merger or other transaction would cure the default). For purposes of this
no-default test, a default under the warrant would include an event of
default with respect to
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that warrant or any event that would be an event of default with respect
to that warrant if the requirements for giving us default notice and for
our default having to continue for a specific period of time were
disregarded. We describe these matters below under "-- Events of
Default."
If the conditions described above are satisfied with respect to any
warrant, we will not need to obtain the approval of the holder of that warrant
in order to merge or consolidate or to sell our assets. Also, these conditions
will apply only if we wish to merge or consolidate with another entity or sell
substantially all of our assets to another entity. We will not need to satisfy
these conditions if we enter into other types of transactions, including any
transaction in which we acquire the stock or assets of another entity, any
transaction that involves a change of control but in which we do not merge or
consolidate and any transaction in which we sell less than substantially all of
our assets. It is possible that this type of transaction may result in a
reduction in our credit rating, may reduce our operating results or may impair
our financial condition. Holders of our warrants, however, will have no approval
right with respect to any transaction of this type.
MODIFICATION AND WAIVER OF THE WARRANTS
There are three types of changes we can make to the warrant indenture and
the warrants issued under that warrant indenture.
Changes Requiring Approval of All Holders. First, there are changes that
cannot be made to the warrant indenture or the warrants issued under that
warrant indenture without the approval of each holder of a warrant affected by
the change. Here is a list of those types of changes:
- change the exercise price of the warrant;
- change the terms of any warrant with respect to the payment or settlement
date of the warrant;
- reduce the amount of money payable or reduce the amount or change the
kind of warrant property deliverable upon the exercise of the warrant or
any premium payable upon redemption of the warrant;
- change the currency of any payment on a warrant;
- change the place of payment on a warrant;
- permit redemption of a warrant if not previously permitted;
- impair a holder's right to exercise its warrant, or sue for payment of
any money payable or delivery of any warrant property deliverable with
respect to its warrant on or after the payment or settlement date or, in
the case of redemption, the redemption date;
- if any warrant provides that the holder may require us to repurchase the
warrant, impair the holder's right to require repurchase of the warrant;
- reduce the percentage in number of the warrants of any one or more
affected series, taken separately or together, as applicable, whose
consent is needed to modify or amend the warrant indenture or those
warrants;
- reduce the percentage in number of the warrants of any one or more
affected series, taken separately or together, as applicable, whose
consent is needed to waive compliance with the warrant indenture or to
waive defaults; or
- modify any other aspect of the provisions dealing with modification and
waiver of the warrant indenture, except to increase any required
percentage referred to above or add to the provisions that cannot be
changed or waived without approval of the holder of the affected
warrants.
Changes Requiring a Majority Vote. The second type of change to the
warrant indenture and the warrants is the kind that requires a vote in favor by
holders of warrants owning not less than a majority of the amount of the
particular series affected. If the change affects the warrants of more than one
series issued under the warrant indenture, it must be approved by the holders of
a majority in number of all series affected by the change, with the warrants of
all the affected series voting together as one class for this purpose.
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Most changes fall into this category, except for clarifying changes and
certain other changes that would not adversely affect in any material respect
holders of the warrants. However, we cannot obtain a waiver of a payment default
or any other aspect of the warrant indenture or the warrants listed in the first
category described above under "-- Changes Requiring Approval of All Holders"
unless we obtain the individual consent of each holder to the waiver.
Changes Not Requiring Approval. The third type of change to the warrant
indenture and the warrants does not require any approval by holders of the
warrants. These changes are limited to clarifications and changes that would not
adversely affect in any material respect the holders of the warrants. Nor do we
need any approval to make changes that affect only warrants to be issued under
the warrant indenture after the changes take effect.
We may also make changes or obtain waivers that do not adversely affect a
particular warrant, even if they affect other warrants. In those cases, we do
not need to obtain the approval of the holder of that warrant; we need only
obtain any required approvals from the holders of the affected warrants.
Further Details Concerning Voting. We will generally be entitled to set
any day as a record date for the purpose of determining the holders that are
entitled to take action under the warrant indenture. In certain limited
circumstances, only the trustee will be entitled to set a record date for action
by holders. If we or the trustee set a record date for an approval or other
action to be taken by holders, that vote or action may be taken only by persons
or entities who are holders on the record date and must be taken during the
period that we specify for this purpose, or that the trustee specifies if it
sets the record date. We or the trustee, as applicable, may shorten or lengthen
this period from time to time. This period, however, may not extend beyond the
180th day after the record date for the action. In addition, record dates for
any global warrant may be set in accordance with procedures established by the
depositary from time to time. Accordingly, record dates for global warrants may
differ from those for other warrants.
BOOK-ENTRY AND OTHER INDIRECT OWNERS SHOULD CONSULT THEIR BANKS, BROKERS OR
OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR
DENIED IF WE SEEK TO CHANGE THE WARRANT INDENTURE OR ANY WARRANTS OR REQUEST A
WAIVER.
EVENTS OF DEFAULT
You will have special rights if an event of default with respect to your
warrant occurs and is continuing, as described in this subsection.
What is an Event of Default? Unless your prospectus supplement says
otherwise, when we refer to an event of default with respect to any warrant, we
mean that, upon satisfaction by the holder of the warrant of all conditions
precedent to our relevant obligation or covenant to be satisfied by the holder,
any of the following occurs:
- We do not pay any money or deliver any warrant property with respect to
that warrant within 5 days of the payment or settlement date in
accordance with the terms of that warrant.
- We remain in breach of any covenant and warranty we make in the warrant
indenture for the benefit of the holder of that warrant for 60 days after
we receive a notice of default stating that we are in breach and
requiring us to remedy the breach. The notice must be sent by the trustee
or the holders of at least 25% in number of the relevant series of
warrants.
- We file for bankruptcy or other events of bankruptcy, insolvency or
reorganization occur with respect to us.
- Any other event of default described in the prospectus supplement occurs.
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If we do not pay any money or deliver any warrant property when due with
respect to a particular warrant of a series, as described in the first bullet
point above, that failure to make a payment or delivery will not constitute an
event of default with respect to any other warrant of the same series or any
other series.
Remedies if an Event of Default Occurs. If an event of default occurs, the
trustee will have special duties. In that situation, the trustee will be
obligated to use those of its rights and powers under the warrant indenture, and
to use the same degree of care and skill in doing so, that a prudent person
would use in that situation in conducting his or her own affairs.
Except in cases of default, where the trustee has special duties, the
trustee is not required to take any action under the warrant indenture at the
request of any holders unless the holders offer the trustee reasonable
protection from expenses and liability called an indemnity. If reasonable
indemnity is provided, the holders of a majority in number of all warrants of
the relevant series may direct the time, method and place of conducting any
lawsuit or other formal legal action seeking any remedy available to the trustee
with respect to that series. These majority holders may also direct the trustee
in performing any other action under the warrant indenture with respect to the
warrants of that series.
Before you bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to any warrant, all of the following must occur:
- The holder of your warrant must give the trustee written notice that an
event of default has occurred, and the event of default must not have
been cured or waived;
- The holders of not less than 25% in number of all warrants of your series
must make a written request that the trustee take action because of the
default, and they or other holders must offer to the trustee indemnity
reasonably satisfactory to the trustee against the costs and other
liabilities of taking that action; and
- The trustee must not have taken action for 60 days after the above steps
have been taken.
However, you are entitled at any time to bring a lawsuit for the payment of
any money or delivery of any warrant property due on your warrant on or after
its payment or settlement date.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS, BROKERS OR
OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION
TO OR MAKE A REQUEST OF THE TRUSTEE AND TO MAKE OR CANCEL A DECLARATION OF
ACCELERATION.
We will give to the trustee every year a written statement of certain of
our officers certifying that to their knowledge we are in compliance with the
warrant indenture and the warrants issued under it, or else specifying any
default.
GENERAL PROVISIONS OF WARRANT AGREEMENTS
We may issue debt warrants and universal warrants in one or more series
under one or more warrant agreements, each to be entered into between us and a
bank, trust company or other financial institution as warrant agent. We may add,
replace or terminate warrant agents from time to time. We may also choose to act
as our own warrant agent or may choose one of our subsidiaries to do so.
We will describe the warrant agreement under which we issue any warrants in
your prospectus supplement. Each warrant agreement and any warrants issued under
the warrant agreements will be governed by New York law. We will file that
agreement with the SEC, either as an exhibit to an amendment to the registration
statement of which this prospectus forms a part or as an exhibit to a current
report on Form 8-K. See "Where You Can Find More Information" below for
information on how to obtain a copy of a warrant agreement when it is filed.
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We may also issue universal warrants under the warrant indenture. For these
warrants, the applicable provisions of the warrant indenture described above
would apply instead of the provisions described in this section.
WARRANT AGREEMENT WILL NOT BE QUALIFIED UNDER TRUST INDENTURE ACT
No warrant agreement will be qualified as an indenture, and no warrant
agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have
the protection of the Trust Indenture Act with respect to their warrants.
ENFORCEMENT OF RIGHTS
The warrant agent under a warrant agreement will act solely as our agent in
connection with the warrants issued under that agreement. The warrant agent will
not assume any obligation or relationship of agency or trust for or with any
holders of those warrants. Any holder of warrants may, without the consent of
any other person, enforce by appropriate legal action, on its own behalf, its
right to exercise those warrants in accordance with their terms. Until the
warrant is properly exercised, no holder of any warrant will be entitled to any
rights of a holder of the warrant property purchasable upon exercise of the
warrant.
FORM, EXCHANGE AND TRANSFER
Unless we specify otherwise in your prospectus supplement, we will issue
each warrant in global -- i.e., book-entry -- form only. Warrants in book-entry
form will be represented by a global security registered in the name of a
depositary, which will be the holder of all the warrants represented by the
global security. Those who own beneficial interests in a global warrant will do
so through participants in the depositary's system, and the rights of these
indirect owners will be governed solely by the applicable procedures of the
depositary and its participants. We describe book-entry securities below under
"Legal Ownership and Book-Entry Issuance."
In addition, we will issue each warrant in registered form, unless we say
otherwise in your prospectus supplement. Bearer warrants would be subject to
special provisions, as we describe below under "Considerations Relating to
Securities Issued in Bearer Form."
If any warrants are issued in non-global form, the terms described below
will apply to them:
- The warrants will be issued in fully registered form. Holders may
exchange their warrants for certificates representing smaller or larger
number of warrants, as long as the total number of warrants is not
changed.
- Holders may exchange or transfer their warrants at the office of the
warrant agent. They may also replace lost, stolen, destroyed or mutilated
warrants at that office. We may appoint another entity to perform these
functions or perform them ourselves.
- Holders will not be required to pay a service charge to transfer or
exchange their warrants, but they may be required to pay any tax or other
governmental charge associated with the transfer or exchange. The
transfer or exchange, and any replacement, will be made only if our
transfer agent is satisfied with the holder's proof of legal ownership.
The transfer agent may also require an indemnity before replacing any
warrants.
- If we have the right to redeem, accelerate or settle any warrants before
their expiration, and we exercise our right as to less than all those
warrants, we may block the transfer or exchange of those warrants during
the period beginning 15 days before the day we mail the notice of
exercise and ending on the day of that mailing, in order to freeze the
list of holders to prepare the mailing. We may also refuse to register
transfers of or exchange any warrant selected for early settlement,
except that we will continue to permit transfers and exchanges of the
unsettled portion of any warrant being partially settled.
Only the depositary will be entitled to transfer or exchange a warrant in
global form, because it will be the sole holder of the warrant.
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MERGERS AND SIMILAR EVENTS
The warrant agreements and any warrants issued under the warrant agreements
will not restrict our ability to merge or consolidate with, or sell our assets
to, another corporation or other entity or to engage in any other transactions.
If at any time we merge or consolidate with, or sell our substantially all of
our assets to, another corporation or other entity, the successor entity will
succeed to and assume our obligations under the warrants and warrant agreements.
We will then be relieved of any further obligation under the warrants and
warrant agreements. It is possible that this type of transaction may result in a
reduction in our credit rating, may reduce our operating results or may impair
our financial condition. Holders of our warrants, however, will have no right to
vote with respect to any transaction of this type.
NO EVENTS OF DEFAULT
The warrant agreements and any warrants issued under the warrant agreements
also will not provide for any specific events of default.
MODIFICATION OF THE WARRANT AGREEMENT
There are three types of amendments that we and the applicable warrant
agent may make to any warrant agreement or warrants issued under that warrant
agreement:
Changes Requiring Approval of All Holders. First, we may not amend any
particular warrant or a warrant agreement with respect to any particular warrant
unless we obtain the consent of the holder of that warrant, if the amendment
would:
- change the exercise price of the warrant;
- change the kind or reduce the amount of the warrant property or other
consideration receivable upon exercise, cancellation or expiration of the
warrant;
- shorten, advance or defer the period of time during which the holder may
exercise the warrant or otherwise impair the holder's right to exercise
the warrant; or
- reduce the percentage of outstanding, unexpired warrants of any series or
class the consent of whose holders is required to amend the series or
class, or the applicable warrant agreement with regard to that series or
class, as described below.
Changes Requiring a Majority Vote. Second, any other change to a
particular warrant agreement and the warrants issued under that agreement would
require the following approval:
- If the change affects only the warrants of a particular series issued
under that warrant agreement, the change must be approved by the holders
of a majority of the outstanding, unexpired warrants of that series.
- If the change affects the warrants of more than one series issued under
that warrant agreement, the change must be approved by the holders of a
majority of all outstanding, unexpired warrants of all series affected by
the change, with the warrants of all the affected series voting together
as one class for this purpose.
Changes Not Requiring Approval. Third, we and the applicable warrant agent
may amend any warrant or warrant agreement without the consent of any holder:
- to cure any ambiguity;
- to cure, correct or supplement any defective or inconsistent provision;
or
- to make any other change that we believe is necessary or desirable and
will not adversely affect the interests of the affected holders in any
material respect.
We do not need any approval to make changes that affect only warrants to be
issued after the changes take effect. We may also make changes that do not
adversely affect a particular warrant in any material
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respect, even if they adversely affect other warrants in a material respect. In
those cases, we do not need to obtain the approval of the holder of the
unaffected warrant; we need only obtain any required approvals from the holders
of the affected warrants.
PAYMENTS AND NOTICES
We will describe the plan we will use to make payments and give notices
with respect to our warrants issued under the warrant indenture or warrant
agreements in a separate supplement to this prospectus.
CALCULATION AGENT
Calculations relating to warrants will be made by the calculation agent, an
institution that we appoint as our agent for this purpose. That institution may
be a subsidiary of ours. The prospectus supplement for a particular warrant will
name the institution that we have appointed to act as the calculation agent for
that warrant as of its original issue date. We may appoint a different
institution to serve as calculation agent from time to time after the original
issue date of the warrant without your consent and without notifying you of the
change.
The calculation agent's determination of any amount of money payable or
warrant property deliverable with respect to a warrant will be final and binding
in the absence of manifest error.
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DESCRIPTION OF PURCHASE CONTRACTS WE MAY OFFER
References to "AIG," "us," "we" or "our" in this section means American
International Group, Inc., and does not include the consolidated subsidiaries of
American International Group, Inc. Also, in this section, references to
"holders" mean those who own purchase contracts registered in their own names,
on the books that we or our agent maintain for this purpose, and not those who
own beneficial interests in purchase contracts registered in street name or in
purchase contracts issued in book-entry form through one or more depositaries.
When we refer to "you" in this section, we mean all purchasers of the securities
being offered by this prospectus, whether they are the holders or only indirect
owners of those securities. Owners of beneficial interests in the purchase
contracts should read the section below entitled "Legal Ownership and Book-Entry
Issuance."
GENERAL
We may issue purchase contracts in such amounts and in as many distinct
series as we wish. In addition, we may issue a purchase contract separately or
as part of a unit, as described below under "Description of Units We May Offer."
Because this section is a summary, it does not describe every aspect of the
purchase contracts. In this summary, we describe the meaning of only some of the
more important terms.
As you read this section, please remember that the specific terms of your
purchase contract as described in your prospectus supplement will supplement
and, if applicable, may modify or replace the general terms described in this
section. If there are differences between your prospectus supplement and this
prospectus, your prospectus supplement will control. Thus, the statements we
make in this section may not apply to your purchase contract.
When we refer to a series of purchase contracts, we mean all the purchase
contracts issued as part of the same series under the applicable governing
instrument. The purchase contracts and any governing documents will be governed
by New York law. When we refer to your prospectus supplement, we mean the
prospectus supplement describing the specific terms of the purchase contract you
purchase. The terms used in your prospectus supplement will have the meanings
described in this prospectus, unless otherwise specified.
PREPAID PURCHASE CONTRACTS; APPLICABILITY OF DEBT INDENTURE
Some purchase contracts may require the holders to satisfy their
obligations under the contracts at the time the contracts are issued. We refer
to those contracts as "prepaid purchase contracts." Our obligation to settle a
prepaid purchase contract on the relevant settlement date will be subject to the
holder's delivery of one of our senior or subordinated debt securities, which
are described above under "Description of Debt Securities We May Offer." Prepaid
purchase contracts will be issued under the senior or subordinated debt
indenture, and the provisions of the applicable indenture will govern those
contracts.
NON-PREPAID PURCHASE CONTRACTS; NO TRUST INDENTURE ACT PROTECTION
Some purchase contracts do not require the holders to satisfy their
obligations under the contracts until settlement. We refer to those contracts as
"non-prepaid purchase contracts." The holder of a non-prepaid purchase contract
may remain obligated to perform under the contract for a substantial period of
time.
Non-prepaid purchase contracts will be issued under a unit agreement, if
they are issued in units, or under some other document, if they are not. For
example, we may issue non-prepaid purchase contracts under which the holder has
multiple obligations to purchase or sell, some of which are prepaid and some of
which are not, under one of our indentures. We describe unit agreements
generally under "Description of Units We May Offer" below. We will describe the
particular governing document that applies to your non-prepaid purchase
contracts in your prospectus supplement.
Non-prepaid purchase contracts will not be senior debt securities or
subordinated debt securities and will not be issued under an indenture, unless
we say otherwise in your prospectus supplement. Consequently, no
28
governing documents for non-prepaid purchase contracts will be qualified as
indentures, and no third party will be required to qualify as a trustee with
regard to those contracts, under the Trust Indenture Act. Holders of non-prepaid
purchase contracts will not have the protection of the Trust Indenture Act with
respect to those contracts.
PRINCIPAL PURCHASE CONTRACT TERMS
We may issue purchase contracts for the purchase or sale of, or whose cash
value is determined by reference or linked to the performance, level or value
of, one or more of the following:
- securities of one or more issuers, including our common or preferred
stock or other securities described in this prospectus or debt or equity
securities of third parties;
- one or more currencies;
- one or more commodities;
- any other financial, economic or other measure or instrument, including
the occurrence or non-occurrence of any event or circumstance; and
- one or more indices or baskets of the items described above.
We refer to each property described above as a "purchase contract
property." Each purchase contract will obligate:
- the holder to purchase or sell, and obligate us to sell or purchase, on
specified dates, one or more purchase contract properties at a specified
price or prices; or
- the holder or us to settle the purchase contract by reference to the
value, performance or level of one or more purchase contract properties,
on specified dates and at a specified price or prices.
Some purchase contracts may include multiple obligations to purchase or
sell different purchase contract properties, and both we and the holder may be
sellers or buyers under the same purchase contract. Until a purchase contract is
properly exercised, no holder of a purchase contract will have any rights of a
holder of the purchase contract property purchasable under the contract.
An investment in purchase contracts may involve special risks, including
risks associated with indexed securities and currency-related risks if the
purchase contract or purchase contract property is linked to an index or is
payable in or otherwise linked to a non-U.S. dollar currency. We describe some
of these risks below under "Risk Factors -- Indexed Securities" and "Risk
Factors -- Non-U.S. Dollar Securities."
Your prospectus supplement may contain, where applicable, the following
information about your purchase contract:
- whether the purchase contract obligates the holder to purchase or sell,
or both purchase and sell, one or more purchase contract properties and
the nature and amount of each of those properties, or the method of
determining those amounts;
- whether the purchase contract is to be prepaid or not and the governing
document for the contract;
- whether the purchase contract is to be settled by delivery, or by
reference or linkage to the value, performance or level of, the purchase
contract properties;
- any acceleration, cancellation, termination or other provisions relating
to the settlement of the purchase contract;
29
- whether the purchase contract will be issued as part of a unit and, if
so, the other securities comprising the unit and whether any unit
securities will be subject to a security interest in our favor as
described below; and
- whether the purchase contract will be issued in fully registered or
bearer form and in global or non-global form.
If we issue a purchase contract as part of a unit, your prospectus
supplement will state whether the contract will be separable from the other
securities in the unit before the contract settlement date.
MARKET-MAKING TRANSACTIONS
One or more of our subsidiaries may purchase and resell purchase contracts
after their initial issuance in market-making transactions. We describe these
transactions below under "Plan of Distribution -- Market-Making Resales by
Subsidiaries." We may also purchase, in our discretion, purchase contracts to be
held, resold or canceled.
FORM, EXCHANGE AND TRANSFER
Unless we specify otherwise in your prospectus supplement, we will issue
each purchase contract in global -- i.e., book-entry -- form only. Purchase
contracts in book-entry form will be represented by a global security registered
in the name of a depositary, which will be the holder of all the purchase
contracts represented by the global security. Those who own beneficial interests
in a purchase contract will do so through participants in the depositary's
system, and the rights of these indirect owners will be governed solely by the
applicable procedures of the depositary and its participants. We describe
book-entry securities under "Legal Ownership and Book-Entry Issuance."
In addition, we will issue each purchase contract in registered form,
unless we say otherwise in your prospectus supplement.
If any purchase contracts are issued in non-global form, the following will
apply to them:
- The purchase contracts will be issued in fully registered form. Holders
may exchange their purchase contracts for contracts of smaller or larger
number as long as the total number of contracts is not changed.
- Holders may exchange or transfer their purchase contracts at the office
of the trustee, unit agent or other agent we name in the prospectus
supplement. Holders may also replace lost, stolen, destroyed or mutilated
purchase contracts at that office. We may appoint another entity to
perform these functions or perform them ourselves.
- Holders will not be required to pay a service charge to transfer or
exchange their purchase contracts, but they may be required to pay for
any tax or other governmental charge associated with the transfer or
exchange. The transfer or exchange, and any replacement, will be made
only if our transfer agent is satisfied with the holder's proof of legal
ownership. The transfer agent may also require an indemnity before
replacing any purchase contracts.
- If we have the right to redeem, accelerate or settle any purchase
contracts before their maturity, and we exercise our right as to less
than all those purchase contracts, we may block the transfer or exchange
of those purchase contracts during the period beginning 15 days before
the day we mail the notice of exercise and ending on the day of that
mailing, in order to freeze the list of holders to prepare the mailing.
We may also refuse to register transfers of or exchange any purchase
contract selected for early settlement, except that we will continue to
permit transfers and exchanges of the unsettled portion of any purchase
contract being partially settled.
Only the depositary will be entitled to transfer or exchange a purchase
contract in global form, because it will be the sole holder of the purchase
contract.
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ADDITIONAL TERMS OF NON-PREPAID PURCHASE CONTRACTS
In addition to the general terms described above, a non-prepaid purchase
contract may include the following additional terms described below.
PLEDGE BY HOLDERS TO SECURE PERFORMANCE
If we specify in your prospectus supplement, the holder's obligations under
the purchase contract and governing document will be secured by collateral. In
that case, the holder, acting through the unit agent as its attorney-in-fact, if
applicable, will pledge the items described below to a collateral agent named in
the prospectus supplement, which will hold them, for our benefit, as collateral
to secure the holder's obligations. We refer to this as the "pledge" and all the
items described below as the "pledged items." The pledge will create in our
favor a security interest in the holder's entire interest in and to:
- any other securities included in the unit, if the purchase contract is
part of a unit, or any other property specified in the prospectus
supplement;
- all additions to and substitutions for the pledged items;
- all income, proceeds and collections received in respect of the pledged
items; and
- all powers and rights owned or acquired later with respect to the pledged
items.
The collateral agent will forward all payments from the pledged items to
us, unless the payments have been released from the pledge in accordance with
the purchase contract and the governing document. We will use the payments from
the pledged items to satisfy the holder's obligations under the purchase
contract.
SETTLEMENT OF PURCHASE CONTRACTS THAT ARE PART OF UNITS
The following will apply to a non-prepaid purchase contract that is issued
together with any of our debt securities as part of a unit. If the holder fails
to satisfy its obligations under the purchase contract, the unit agent may apply
the principal payments on the debt securities to satisfy those obligations as
provided in the governing document. If the holder is permitted to settle its
obligations by cash payment, the holder may be permitted to do so by delivering
the debt securities in the unit to the unit agent as provided in the governing
document.
BOOK-ENTRY AND OTHER INDIRECT OWNERS SHOULD CONSULT THEIR BANKS, BROKERS OR
OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW TO SETTLE THEIR PURCHASE
CONTRACTS.
FAILURE OF HOLDER TO PERFORM OBLIGATIONS UNDER A NON-PREPAID PURCHASE CONTRACT
If the holder fails to settle its obligations under a non-prepaid purchase
contract as required, the holder will not receive the purchase contract property
or other consideration to be delivered at settlement. Holders that fail to make
timely settlement may also be obligated to pay interest or other amounts.
ASSUMPTION OF OBLIGATIONS BY TRANSFEREE
When the holder of a non-prepaid purchase contract transfers the purchase
contract to a new holder, the new holder will assume the obligations of the
prior holder with respect to the purchase contract, and the prior holder will be
released from those obligations. Under the non-prepaid purchase contract, we
will consent to the transfer of the purchase contract, to the assumption of
those obligations by the new holder and to the release of the prior holder, if
the transfer is made in accordance with the provisions of the purchase contract.
MERGERS AND SIMILAR EVENTS
Purchase contracts that are not prepaid will not restrict our ability to
merge or consolidate with, or sell our assets to, another corporation or firm or
to engage in any other transactions. If at any time we merge or consolidate
with, or sell substantially all of our assets to, another corporation or firm,
the successor corporation
31
or firm will succeed to and assume our obligations, under these purchase
contracts. We will then be relieved of any further obligation under these
purchase contracts. Our successor may have a lower credit rating. Holders of our
purchase contracts, however, will have no right to vote with respect to any
transaction of this type.
NO EVENTS OF DEFAULT
Purchase contracts that are not prepaid will not provide for any specific
events of default.
PAYMENTS AND NOTICES
We will describe the plan we will use to make payments and give notices
with respect to purchase contracts in a separate supplement to this prospectus.
CALCULATION AGENT
Calculations relating to purchase contracts will be made by the calculation
agent, an institution that we appoint as our agent for this purpose. That
institution may be a subsidiary of ours. The prospectus supplement for a
particular purchase contract will name the institution that we have appointed to
act as the calculation agent for that purchase contract as of its original issue
date. We may appoint a different institution to serve as calculation agent from
time to time after the original issue date of the purchase contract without your
consent and without notifying you of the change.
The calculation agent's determination of any amount of money payable of
purchase contract property deliverable with respect to a purchase contract will
be final and binding in the absence of manifest error.
32
DESCRIPTION OF UNITS WE MAY OFFER
References to "AIG," "us," "we" or "our" in this section means American
International Group, Inc., and does not include the consolidated subsidiaries of
American International Group, Inc. Also, in this section, references to
"holders" mean those who own units registered in their own names, on the books
that we or our agent maintain for this purpose, and not those who own beneficial
interests in units registered in street name or in units issued in book-entry
form through one or more depositaries. When we refer to "you" in this section,
we mean all purchasers of the securities being offered by this prospectus,
whether they are the holders or only indirect owners of those securities. Owners
of beneficial interests in the units should read the section below entitled
"Legal Ownership and Book-Entry Issuance."
GENERAL
We may issue units comprised of any combination of our debt securities,
warrants, purchase contracts, preferred stock and common stock. Each unit will
be issued so that the holder of the unit is also the holder of each security
included in the unit. Thus, the holder of a unit will have the rights and
obligations of a holder of each included security. The unit agreement under
which a unit is issued may provide that the securities included in the unit may
not be held or transferred separately, at any time or at any time before a
specified date.
We may issue units in such amounts and in as many distinct series as we
wish. This section summarizes terms of the units that apply generally to all
series. We will describe most of the financial and other specific terms of your
series in the prospectus supplement accompanying this prospectus. As you read
this section, please remember that the specific terms of your unit as described
in your prospectus supplement will supplement and, if applicable, may modify or
replace the general terms described in this section. If there are differences
between your prospectus supplement and this prospectus, your prospectus
supplement will control. Thus, the statements we make in this section may not
apply to your unit.
When we refer to a series of units, we mean all units issued as part of the
same series under the applicable unit agreement. We will identify the series of
which your units are a part in your prospectus supplement. When we refer to your
prospectus supplement, we mean the prospectus supplement describing the specific
terms of the units you purchase. The terms used in your prospectus supplement
will have the meanings described in this prospectus, unless otherwise specified.
The applicable prospectus supplement may describe:
- the designation and terms of the units and of the securities comprising
the units, including whether and under what circumstances those
securities may be held or transferred separately;
- any provisions of the governing unit agreement that differ from those
described below; and
- any provisions for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the units.
The applicable provisions described in this section, as well as those
described under "Description of Debt Securities We May Offer," "Description of
Warrants We May Offer," "Description of Purchase Contracts We May Offer,"
"Description of Preferred Stock We May Offer" and "Description of Common Stock
We May Offer," will apply to each unit and to each security included in each
unit, respectively.
UNIT AGREEMENTS WILL NOT BE QUALIFIED UNDER TRUST INDENTURE ACT
No unit agreement will be qualified as an indenture, and no unit agent will
be required to qualify as a trustee, under the Trust Indenture Act. Therefore,
holders of units issued under unit agreements will not have the protections of
the Trust Indenture Act with respect to their units.
An investment in units may involve special risks, including risks
associated with indexed securities and currency-related risks if the securities
comprising the units are linked to an index or are payable in or
33
otherwise linked to a non-U.S. dollar currency. We describe some of these risks
below under "Risk Factors -- Indexed Securities" and "Risk Factors -- Non-U.S.
Dollar Securities."
MARKET-MAKING TRANSACTIONS
One or more of our subsidiaries may purchase and resell units after their
initial issuance in market-making transactions. We discuss these transactions
below under "Plan of Distribution -- Market-Making Resales by Subsidiaries."
UNIT AGREEMENTS: PREPAID, NON-PREPAID AND OTHER
We will issue the units under one or more unit agreements to be entered
into between us and a bank or other financial institution, as unit agent. We may
add, replace or terminate unit agents from time to time. We may also choose to
act as our own unit agent or may appoint one of our subsidiaries to do so. We
will identify the unit agreement under which your units will be issued and the
unit agent under that agreement in your prospectus supplement.
If a unit includes one or more purchase contracts and all those purchase
contracts are prepaid purchase contracts, we will issue the unit under a
"prepaid unit agreement." Prepaid unit agreements will reflect the fact that the
holders of the related units have no further obligations under the purchase
contracts included in their units. If a unit includes one or more non-prepaid
purchase contracts, we will issue the unit under a "non-prepaid unit agreement."
Non-prepaid unit agreements will reflect the fact that the holders have payment
or other obligations under one or more of the purchase contracts comprising
their units. We may also issue units under other kinds of unit agreements, which
we will describe in your prospectus supplement. In some cases, we may issue
units under one of our indentures.
A unit agreement may also serve as the governing document for a security
included in a unit. For example, a non-prepaid purchase contract that is part of
a unit may be issued under and governed by the relevant unit agreement.
In this prospectus, we refer to prepaid unit agreements, non-prepaid unit
agreements and other unit agreements, generally, as "unit agreements." The unit
agreements and the units will be governed by New York law. The unit agreement
under which we issue your units will be filed, either as an exhibit to an
amendment to the registration statement of which this prospectus forms a part or
as an exhibit to a current report on Form 8-K. See "Where You Can Find More
Information" below for information on how to obtain a copy of a unit agreement
when it is filed.
PRINCIPAL UNIT AGREEMENT TERMS
The following provisions will generally apply to all unit agreements unless
otherwise stated in your prospectus supplement.
ENFORCEMENT OF RIGHTS
The unit agent under a unit agreement will act solely as our agent in
connection with the units issued under that agreement. The unit agent will not
assume any obligation or relationship of agency or trust for or with any holders
of those units or of the securities comprising those units. The unit agent will
not be obligated to take any action on behalf of those holders to enforce or
protect their rights under the units or the included securities.
Except as described in the next paragraph, a holder of a unit may, without
the consent of the unit agent or any other holder, enforce its rights as holder
under any security included in the unit, in accordance with the terms of that
security and the indenture, warrant agreement or purchase contract under which
that security is issued. Those terms are described elsewhere in this prospectus
under the sections relating to debt securities, warrants and purchase contracts.
34
A unit agreement, however, may limit or otherwise affect the ability of a
holder of units issued under that agreement to enforce its rights, including any
right to bring a legal action, with respect to those units or any securities,
other than debt securities, prepaid purchase contracts or warrants issued under
an indenture qualified under the Trust Indenture Act, that are included in those
units. Limitations of this kind will be described in your prospectus supplement.
FORM, EXCHANGE AND TRANSFER
Unless otherwise stated in your prospectus supplement, we will issue each
unit in global -- i.e., book-entry -- form only. Units in book-entry form will
be represented by a global security registered in the name of a depositary,
which will be the holder of all the units represented by the global security.
Those who own beneficial interests in a unit will do so through participants in
the depositary's system, and the rights of these indirect owners will be
governed solely by the applicable procedures of the depositary and its
participants. We describe book-entry securities below under "Legal Ownership and
Book-Entry Issuance."
In addition, we will issue each unit in registered form, unless we say
otherwise in the prospectus supplement. Each unit and all securities comprising
the unit will be issued in the same form. If we issue any units in registered,
non-global form, the following will apply to them:
- The units will be issued in fully registered form. Holders may exchange
their units for units of smaller or larger number, as long as the total
number of units is not changed.
- Holders may exchange or transfer their units at the office of the unit
agent. Holders may also replace lost, stolen, destroyed or mutilated
units at that office. We may appoint another entity to perform these
functions or perform them ourselves.
- Holders will not be required to pay a service charge to transfer or
exchange their units, but they may be required to pay for any tax or
other governmental charge associated with the transfer or exchange. The
transfer or exchange, and any replacement, will be made only if our
transfer agent is satisfied with the holder's proof of legal ownership.
The transfer agent may also require an indemnity before replacing any
units.
- If we have the right to redeem, accelerate or settle any units before
their maturity, and we exercise our right as to less than all those units
or other securities, we may block the exchange or transfer of those units
during the period beginning 15 days before the day we mail the notice of
exercise and ending on the day of that mailing, in order to freeze the
list of holders to prepare the mailing. We may also refuse to register
transfers of or to exchange any unit selected for early settlement,
except that we will continue to permit transfers and exchanges of the
unsettled portion of any unit being partially settled. We may also block
the transfer or exchange of any unit in this manner if the unit includes
securities that are or may be selected for early settlement.
Only the depositary will be entitled to transfer or exchange a unit in
global form, because it will be the sole holder of the unit.
MODIFICATION AND WAIVER OF THE UNITS
There are three types of changes we can make to the unit agreement and the
units issued under that unit agreement:
Changes Requiring Approval of All Holders. First, we may not amend any
particular unit or a unit agreement with respect to any particular unit unless
we obtain the consent of the holder of that unit, if the amendment would:
- impair any right of the holder to exercise or enforce any right under a
security included in the unit if the terms of that security require the
consent of the holder to any changes that would impair the exercise or
enforcement of that right;
35
- impair the right of the holder to purchase or sell, as the case may be,
the purchase contract property under any non-prepaid purchase contract
issued under the unit agreement, or to require delivery of or payment for
that property when due; or
- reduce the percentage of outstanding units of any series or class the
consent of whose holders is required to amend that series or class, or
the applicable unit agreement with respect to that series or class, as
described below.
Changes Requiring a Majority Vote. Second, any other change to particular
unit agreement and the units issued under that agreement would require the
following approval:
- If the change affects only the units of a particular series, it must be
approved by the holders of a majority of the outstanding units of that
series.
- If the change affects the units of more than one series issued under that
agreement, it must be approved by the holders of a majority of all
outstanding units of all series affected by the change, with the units of
all the affected series voting together as one class for this purpose.
These provisions regarding changes with majority approval apply to changes
affecting any securities issued under a unit agreement, as the governing
document.
Changes Not Requiring Approval. Third, we and the applicable unit agent
may amend any unit or unit agreement without the consent of any holder:
- to cure any ambiguity;
- to correct or supplement any defective or inconsistent provision; or
- to make any other change that we believe is necessary or desirable and
will not adversely affect in any material respect the interests of the
affected holders.
We do not need any approval to make changes that affect only units to be
issued after the changes take effect. We may also make changes that do not
adversely affect in any material respect a particular unit, even if they
adversely affect in any material respect other units. In those cases, we do not
need to obtain the approval of the holder of the unaffected unit; we need only
obtain any required approvals from the holders of the affected units.
The foregoing applies also to any security issued under a unit agreement,
as the governing document.
ADDITIONAL PROVISIONS OF A NON-PREPAID UNIT AGREEMENT
In addition to the provisions described above, a non-prepaid unit agreement
will include the provisions described below:
OBLIGATIONS OF UNIT HOLDER
Each holder of units issued under a non-prepaid unit agreement will:
- be bound by the terms of each non-prepaid purchase contract included in
the holder's units and by the terms of the unit agreement with respect to
those contracts; and
- appoint the unit agent as its authorized agent to execute, deliver and
perform on the holder's behalf each non-prepaid purchase contract
included in the holder's units.
The unit agreement for a unit that includes a non-prepaid purchase contract
will also include provisions regarding the holder's pledge of collateral and
special settlement provisions. These are described above under "Description of
Purchase Contracts We May Offer -- Additional Terms of Non-Prepaid Purchase
Contracts."
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FAILURE OF HOLDER TO PERFORM OBLIGATIONS
If the holder fails to settle its obligations under a non-prepaid purchase
contract included in a unit as required, the holder will not receive the
purchase contract property or other consideration to be delivered at settlement
of the purchase contract. Holders that fail to make timely settlement may also
be obligated to pay interest or other amounts.
ASSUMPTION OF OBLIGATIONS BY TRANSFEREE
When the holder of a unit issued under a non-prepaid unit agreement
transfers the unit to a new holder, the new holder will assume the obligations
of the prior holder with respect to each purchase contract included in the unit,
and the prior holder will be released from those obligations. Under the
non-prepaid unit agreement, we will consent to the transfer of the unit, to the
assumption of those obligations by the new holder and to the release of the
prior holder, if the transfer is made in accordance with the provisions of that
agreement.
MERGERS AND SIMILAR EVENTS
The non-prepaid unit agreements will not restrict our ability to merge or
consolidate with, or sell our assets to, another corporation or firm or to
engage in any other transactions. If at any time we merge or consolidate with,
or sell substantially all of our assets to, another corporation or firm, the
successor corporation or firm will succeed to and assume our obligations under
the unit agreements. We will then be relieved of any further obligation under
the units and the unit agreements. Our successor may have a lower credit rating.
Holders of units will have no right to vote with respect to any transaction of
this type.
NO EVENTS OF DEFAULT
The non-prepaid unit agreements will not provide for any specific events of
default.
PAYMENTS AND NOTICES
We will describe the plan we will use to make payments and give notices
with respect to our units in a separate supplement to this prospectus.
37
DESCRIPTION OF PREFERRED STOCK WE MAY OFFER
References to "AIG," "us," "we" or "our" in this section means American
International Group, Inc., and does not include the consolidated subsidiaries of
American International Group, Inc. Also, in this section, references to
"holders" mean those who own shares of preferred stock or depositary shares, as
the case may be, registered in their own names, on the books that the registrar
or we maintain for this purpose, and not those who own beneficial interests in
shares registered in street name or in shares issued in book-entry form through
one or more depositaries. When we refer to "you" in this section, we mean all
purchasers of the securities being offered by this prospectus, whether they are
the holders or only indirect owners of those securities. Owners of beneficial
interests in shares of preferred stock or depositary shares should read the
section below entitled "Legal Ownership and Book-Entry Issuance."
GENERAL
We may issue preferred stock in one or more series. We may also "reopen" a
previously issued series of preferred stock and issue additional preferred stock
of that series. In addition, we may issue preferred stock together with other
preferred stock, debt securities, warrants, purchase contracts and common stock
in the form of units as described above under "Description of Units We May
Offer." This section summarizes terms of the preferred stock that apply
generally to all series. The description of most of the financial and other
specific terms of your series will be in your prospectus supplement. Those terms
may vary from the terms described here.
Because this section is a summary, it does not describe every aspect of the
preferred stock and any related depositary shares. As you read this section,
please remember that the specific terms of your series of preferred stock and
any related depositary shares as described in your prospectus supplement will
supplement and, if applicable, may modify or replace the general terms described
in this section. If there are differences between your prospectus supplement and
this prospectus, your prospectus supplement will control. Thus, the statements
we make in this section may not apply to your series of preferred stock or any
related depositary shares.
Reference to a series of preferred stock means all of the shares of
preferred stock issued as part of the same series under a certificate of
designations filed as part of our restated certificate of incorporation.
Reference to your prospectus supplement means the prospectus supplement
describing the specific terms of the preferred stock and any related depositary
shares you purchase. The terms used in your prospectus supplement will have the
meanings described in this prospectus, unless otherwise specified.
Our authorized capital stock includes 6,000,000 shares of preferred stock,
par value $5.00 per share. The preferred stock will be governed by Delaware law.
We do not have any preferred stock outstanding as of the date of this
prospectus. The prospectus supplement with respect to any offered preferred
stock will describe any preferred stock that may be outstanding as of the date
of the prospectus supplement.
PREFERRED STOCK ISSUED IN SEPARATE SERIES
The authorized but unissued shares of preferred stock are available for
issuance from time to time at the discretion of our board of directors without
shareholder approval. Our board of directors is authorized to divide the
preferred stock into series and, with respect to each series, to determine the
designations, the powers, preferences and rights and the qualifications,
limitations and restrictions of the series, including:
- dividend rights;
- conversion or exchange rights;
- voting rights;
- redemption rights and terms;
- liquidation preferences;
- sinking fund provisions;
- the serial designation of the series; and
- the number of shares constituting the series.
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In addition, as described below under "-- Fractional or Multiple Shares of
Preferred Stock Issued as Depositary Shares", we may, at our option, instead of
offering whole individual shares of any series of preferred stock, offer
depositary shares evidenced by depositary receipts, each representing a fraction
of a share or some multiple of shares of the particular series of preferred
stock issued and deposited with a depositary. The fraction of a share or
multiple of shares of preferred stock which each depositary share represents
will be stated in the prospectus supplement relating to any series of preferred
stock offered through depositary shares.
The rights of holders of preferred stock may be adversely affected by the
rights of holders of preferred stock that may be issued in the future. Our board
of directors may cause shares of preferred stock to be issued in public or
private transactions for any proper corporate purpose. Examples of proper
corporate purposes include issuances to obtain additional financing for
acquisitions and issuances to officers, directors and employees under their
respective benefit plans. Our issuance of shares of preferred stock may have the
effect of discouraging or making more difficult an acquisition.
Preferred stock will be fully paid and nonassessable when issued, which
means that our holders will have paid their purchase price in full and that we
may not ask them to surrender additional funds. Unless otherwise provided in
your prospectus supplement, holders of preferred stock will not have preemptive
or subscription rights to acquire more stock of AIG.
The transfer agent, registrar, dividend disbursing agent and redemption
agent for shares of each series of preferred stock will be named in the
prospectus supplement relating to that series.
MARKET-MAKING TRANSACTIONS
One or more of our subsidiaries may purchase and resell preferred stock and
depositary shares after their initial issuance in market-making transactions. We
describe these transactions below under "Plan of Distribution -- Market-Making
Resales by Subsidiaries." We may also purchase, in our discretion, preferred
stock and depositary shares to be held, resold or canceled.
FORM OF PREFERRED STOCK AND DEPOSITARY SHARES
We may issue preferred stock in book-entry form. Preferred stock in
book-entry form will be represented by a global security registered in the name
of a depositary, which will be the holder of all the shares of preferred stock
represented by the global security. Those who own beneficial interests in shares
of preferred stock will do so through participants in the depositary's system,
and the rights of these indirect owners will be governed solely by the
applicable procedures of the depositary and its participants. However,
beneficial owners of any preferred stock in book-entry form will have the right
to obtain their shares in non-global form. We describe book-entry securities
below under "Legal Ownership and Book-Entry Issuance." All preferred stock will
be issued in registered form.
We will issue depositary shares in book-entry form, to the same extent as
we describe above for preferred stock. All depositary shares will be issued in
registered form.
OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- PREFERRED STOCKHOLDERS' RIGHTS relative to common stockholders, such as
the right of preferred stockholders to receive dividends and amounts on
our liquidation, dissolution or winding-up before any such amounts may be
paid to our common shareholders;
- Our ability to issue FRACTIONAL OR MULTIPLE SHARES OF PREFERRED STOCK IN
THE FORM OF DEPOSITARY SHARES; and
- Various provisions of the DEPOSIT AGREEMENT, including how distributions
are made, how holders vote their depositary shares and how we may amend
the Deposit Agreement.
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PREFERRED STOCKHOLDERS' RIGHTS
RANK
Shares of each series of preferred stock will rank senior to our common
stock with respect to dividends and distributions of assets. However, we will
generally be able to pay dividends and distributions of assets to holders of our
preferred stock only if we have satisfied our obligations on our indebtedness
then due and payable.
DIVIDENDS
Holders of each series of preferred stock will be entitled to receive cash
dividends when, as and if declared by our board of directors, from funds legally
available for the payment of dividends. The rates and dates of payment of
dividends for each series of preferred stock will be stated in your prospectus
supplement. Dividends will be payable to holders of record of preferred stock as
they appear on our books on the record dates fixed by our board of directors.
Dividends on any series of preferred stock may be cumulative or noncumulative,
as set forth in the prospectus supplement.
REDEMPTION
If specified in your prospectus supplement, a series of preferred stock may
be redeemable at any time, in whole or in part, at our option or the holder's,
and may be redeemed mandatorily.
Any restriction on the repurchase or redemption by us of our preferred
stock while there is an arrearage in the payment of dividends will be described
in your prospectus supplement.
Any partial redemptions of preferred stock will be made in a way that our
board of directors decides is equitable.
Unless we default in the payment of the redemption price, dividends will
cease to accrue after the redemption date on shares of preferred stock called
for redemption and all rights of holders of these shares, including voting
rights, will terminate except for the right to receive the redemption price.
CONVERSION OR EXCHANGE RIGHTS
Our prospectus supplement relating to any series of preferred stock that is
convertible, exercisable or exchangeable will state the terms on which shares of
that series are convertible into or exercisable or exchangeable for shares of
common stock, another series of preferred stock or other securities or debt or
equity securities of third parties.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
AIG, holders of each series of preferred stock will be entitled to receive
distributions upon liquidation in the amount described in your prospectus
supplement, plus an amount equal to any accrued and unpaid dividends. These
distributions will be made before any distribution is made on our common stock.
If the liquidation amounts payable relating to the preferred stock of any series
and any other parity securities ranking on a parity regarding liquidation rights
are not paid in full, the holders of the preferred stock of that series and the
other parity securities will share in any distribution of our available assets
on a ratable basis in proportion to the full liquidation preferences of each
security. Holders of our preferred stock will not be entitled to any other
amounts from us after they have received their full liquidation preference and
accrued and unpaid dividends.
VOTING RIGHTS
The holders of preferred stock of each series will have no voting rights,
except:
- as stated in the prospectus supplement and in the certificate of
designations establishing the series; or
- as required by applicable law.
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FRACTIONAL OR MULTIPLE SHARES OF PREFERRED STOCK ISSUED AS DEPOSITARY SHARES
We may choose to offer fractional shares or some multiple of shares of our
preferred stock, rather than whole individual shares. If we decide to do so, we
will issue the preferred stock in the form of depositary shares. Each depositary
share would represent a fraction or multiple of a share of the preferred stock
and would be evidenced by a depositary receipt.
DEPOSIT AGREEMENT
We will deposit the shares of preferred stock to be represented by
depositary shares under a deposit agreement. The parties to the deposit
agreement will be:
- AIG;
- a bank or other financial institutional selected by us and named in the
prospectus supplement, as preferred stock depositary; and
- the holders from time to time of depositary receipts issued under that
deposit agreement.
Each holder of a depositary share will be entitled to all the rights and
preferences of the underlying preferred stock, including, where applicable,
dividend, voting, redemption, conversion and liquidation rights, in proportion
to the applicable fraction or multiple of a share of preferred stock represented
by the depositary share. The depositary shares will be evidenced by depositary
receipts issued under the deposit agreement. The depositary receipts will be
distributed to those persons purchasing the fractional or multiple shares of
preferred stock. A depositary receipt may evidence any number of whole
depositary shares.
We will file the deposit agreement, including the form of depositary
receipt, with the SEC, either as an exhibit to an amendment to the registration
statement of which this prospectus forms a part or as an exhibit to a current
report on Form 8-K. See "Where You Can Find More Information" below for
information on how to obtain a copy of the form of deposit agreement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute any cash dividends or other
cash distributions received in respect of the deposited preferred stock to the
record holders of depositary shares relating to the underlying preferred stock
in proportion to the number of depositary shares owned by the holders. The
preferred stock depositary will distribute any property received by it other
than cash to the record holders of depositary shares entitled to those
distributions, unless it determines that the distribution cannot be made
proportionally among those holders or that it is not feasible to make a
distribution. In that event, the preferred stock depositary may, with our
approval, sell the property and distribute the net proceeds from the sale to the
holders of the depositary shares in proportion to the number of depositary
shares they own.
The amounts distributed to holders of depositary shares will be reduced by
any amounts required to be withheld by the preferred stock depositary or by us
on account of taxes or other governmental charges.
REDEMPTION OF PREFERRED STOCK
If we redeem preferred stock represented by depositary shares, the
preferred stock depositary will redeem the depositary shares from the proceeds
it receives from the redemption. The preferred stock depositary will redeem the
depositary shares at a price per share equal to the applicable fraction or
multiple of the redemption price per share of preferred stock. Whenever we
redeem shares of preferred stock held by the preferred stock depositary, the
preferred stock depositary will redeem as of the same date the number of
depositary shares representing the redeemed shares of preferred stock. If fewer
than all the depositary shares are to be redeemed, the preferred stock
depositary will select the depositary shares to be redeemed by lot or ratably or
by any other equitable method it chooses.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be deemed to be outstanding, and all rights of the
holders of those shares will cease, including voting rights, except the
41
right to receive the amount payable and any other property to which the holders
were entitled upon the redemption. To receive this amount or other property, the
holders must surrender the depositary receipts evidencing their depositary
shares to the preferred stock depositary. Any funds that we deposit with the
preferred stock depositary for any depositary shares that the holders fail to
redeem will be returned to us after a period of two years from the date we
deposit the funds.
WITHDRAWAL OF PREFERRED STOCK
Unless the related depositary shares have previously been called for
redemption, any holder of depositary shares may receive the number of whole
shares of the related series of preferred stock and any money or other property
represented by those depositary receipts after surrendering the depositary
receipts at the corporate trust office of the preferred stock depositary, paying
any taxes, charges and fees provided for in the deposit agreement and complying
with any other requirement of the deposit agreement. Holders of depositary
shares making these withdrawals will be entitled to receive whole shares of
preferred stock, but holders of whole shares of preferred stock will not be
entitled to deposit that preferred stock under the deposit agreement or to
receive depositary receipts for that preferred stock after withdrawal. If the
depositary shares surrendered by the holder in connection with withdrawal exceed
the number of depositary shares that represent the number of whole shares of
preferred stock to be withdrawn, the preferred stock depositary will deliver to
that holder at the same time a new depositary receipt evidencing the excess
number of depositary shares.
VOTING DEPOSITED PREFERRED STOCK
When the preferred stock depositary receives notice of any meeting at which
the holders of any series of deposited preferred stock are entitled to vote, the
preferred stock depositary will mail the information contained in the notice to
the record holders of the depositary shares relating to the applicable series of
preferred stock. Each record holder of the depositary shares on the record date,
which will be the same date as the record date for the preferred stock, may
instruct the preferred stock depositary to vote the amount of the preferred
stock represented by the holder's depositary shares. To the extent possible, the
preferred stock depositary will vote the amount of the series of preferred stock
represented by depositary shares in accordance with the instructions it
receives. We will agree to take all reasonable actions that the preferred stock
depositary determines are necessary to enable the preferred stock depositary to
vote as instructed. If the preferred stock depositary does not receive specific
instructions from the holders of any depositary shares representing a series of
preferred stock, the preferred stock depositary will vote all shares of that
series in proportion to the instructions received.
CONVERSION OF PREFERRED STOCK
If our prospectus supplement relating to the depositary shares says that
the deposited preferred stock is convertible into or exercisable or exchangeable
for common stock, preferred stock of another series or other securities, or debt
or equity securities of one or more third parties, our depositary shares, as
such, will not be convertible into or exercisable or exchangeable for any
securities. Rather, any holder of the depositary shares may surrender the
related depositary receipts to the preferred stock depositary with written
instructions to instruct us to cause conversion, exercise or exchange of our
preferred stock represented by the depositary shares into or for whole shares of
common stock, shares of another series of preferred stock or other securities or
debt or equity securities of the relevant third party, as applicable. Upon
receipt of those instructions and any amounts payable by the holder in
connection with the conversion, exercise or exchange, we will cause the
conversion, exercise or exchange using the same procedures as those provided for
conversion, exercise or exchange of the deposited preferred stock. If only some
of the depositary shares are to be converted, exercised or exchanged, a new
depositary receipt or receipts will be issued for any depositary shares not to
be converted, exercised or exchanged.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We may amend the form of depositary receipt evidencing the depositary
shares and any provision of the deposit agreement at any time and from time to
time by agreement with the preferred stock depositary.
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However, any amendment that imposes additional charges or materially and
adversely alters any substantial existing right of the holders of depositary
shares will not be effective unless the holders of at least a majority of the
affected depositary shares then outstanding approve the amendment. We will make
no amendment that impairs the right of any holder of depositary shares, as
described above under "-- Withdrawal of Preferred Stock," to receive shares of
the related series of preferred stock and any money or other property
represented by those depositary shares, except in order to comply with mandatory
provisions of applicable law. Holders who retain or acquire their depositary
receipts after an amendment becomes effective will be deemed to have agreed to
the amendment and will be bound by the amended deposit agreement.
The deposit agreement will automatically terminate if:
- all outstanding depositary shares have been redeemed or converted or
exchanged for any other securities into which they or the underlying
preferred stock are convertible or exchangeable; or
- a final distribution in respect of our preferred stock has been made to
the holders of depositary shares in connection with any liquidation,
dissolution or winding up of AIG.
We may terminate the deposit agreement at any time, and the preferred stock
depositary will give notice of that termination to the recordholders of all
outstanding depositary receipts not less than 30 days before the termination
date. In that event, the preferred stock depositary will deliver or make
available for delivery to holders of depositary shares, upon surrender of the
depositary receipt evidencing the depositary shares, the number of whole or
fractional shares of the related series of preferred stock as are represented by
those depositary shares.
CHARGES OF PREFERRED STOCK DEPOSITARY; TAXES AND OTHER GOVERNMENTAL CHARGES
We will pay the fees, charges and expenses of our preferred stock
depositary provided in the deposit agreement. Holders of depositary receipts
will pay any taxes and governmental charges and any charges provided in the
deposit agreement to be payable by them, including a fee for the withdrawal of
shares of preferred stock upon surrender of depositary receipts. If the
preferred stock depositary incurs fees, charges or expenses for which it is not
otherwise liable at the election of a holder of a depositary receipt or other
person, that holder or other person will be liable for those fees, charges and
expenses.
RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by giving us notice,
and we may remove or replace the preferred stock depositary at any time.
REPORTS TO HOLDERS
We will deliver all required reports and communications to holders of the
preferred stock to the preferred stock depositary, who will forward those
reports and communications to the holders of depositary shares.
LIMITATION ON LIABILITY OF THE PREFERRED STOCK DEPOSITARY
The preferred stock depositary will not be liable if we are prevented or
delayed by law or any circumstances beyond our control in performing our
obligations under the deposit agreement. The obligations of the preferred stock
depositary under the deposit agreement will be limited to performance in good
faith of its duties under the agreement, and the preferred stock depositary will
not be obligated to prosecute or defend any legal proceeding in respect of any
depositary shares, depositary receipts or shares of preferred stock unless
satisfactory and reasonable protection from expenses and liability is furnished.
This is called an indemnity. The preferred stock depositary may rely upon
written advice of counsel or accountants, upon information provided by holders
of depositary receipts or other persons believed to be competent and upon
documents believed to be genuine.
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DESCRIPTION OF COMMON STOCK WE MAY OFFER
Our authorized capital stock includes 5,000,000,000 shares of common stock.
As of March 31, 2003, there were 2,608,397,880 shares of common stock
outstanding.
GENERAL
All of the outstanding shares of our common stock are fully paid and
nonassessable. Subject to the prior rights of the holders of shares of preferred
stock that may be issued and outstanding, none of which are currently
outstanding, the holders of common stock are entitled to receive:
- dividends when, as and if declared by our board of directors out of funds
legally available for the payment of dividends (there are restrictions
that apply under applicable insurance laws, however, to the payment of
dividends to us by our insurance subsidiaries); and
- in the event of dissolution of AIG, to share ratably in all assets
remaining after payment of liabilities and satisfaction of the
liquidation preferences, if any, of then outstanding shares of preferred
stock, as provided in our amended and restated certificate of
incorporation.
Each holder of common stock is entitled to one vote for each share held of
record on all matters presented to a vote at a shareholders meeting, including
the election of directors. Holders of common stock have no cumulative voting
rights or preemptive rights to purchase or subscribe for any additional shares
of common stock or other securities and there are no conversion rights or
redemption or sinking fund provisions with respect to the common stock.
Additional authorized shares of common stock may be issued without shareholder
approval.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law applies to us. In
general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes a merger, asset sale or a
transaction resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or, in certain cases, within the preceding three years, did
own) 15% or more of the corporation's outstanding voting stock. Under Section
203, a business combination between us and an interested stockholder is
prohibited unless it satisfies one of the following conditions:
- before the stockholder became an interested stockholder, our board of
directors must have approved either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder;
- on consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of our voting stock outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, shares owned by persons who are directors and officers; or
- the business combination is approved by our board of directors and
authorized at an annual or special meeting of the stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder.
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MARKET PRICE AND DIVIDEND INFORMATION
The table below sets forth, for the calendar quarters indicated, the high
and low closing sales prices per share of common stock as reported on the New
York Stock Exchange and the dividends per share of common stock declared by us
during those periods.
Shares of common stock are listed on the New York Stock Exchange under the
symbol "AIG."
COMMON STOCK(A)
----------------------------
HIGH LOW DIVIDENDS
------- ------ ---------
2000:
First Quarter............................................. $ 76.04 $54.29 $.033
Second Quarter............................................ 82.17 67.75 .033
Third Quarter............................................. 95.69 78.79 .037
Fourth Quarter............................................ 103.69 90.13 .037
2001:
First Quarter............................................. 96.88 75.12 .037
Second Quarter............................................ 86.51 76.18 .037
Third Quarter............................................. 87.06 67.05 .042
Fourth Quarter............................................ 86.01 76.74 .042
2002:
First Quarter............................................. 79.61 70.15 .042
Second Quarter............................................ 75.26 62.84 .042
Third Quarter............................................. 67.91 51.10 .047
Fourth Quarter............................................ 67.89 52.45 .047
2003:
First Quarter............................................. 63.50 44.47 .047
---------------
(a) Common stock information for 2000 has been adjusted to reflect a stock split
effected as a 50% common stock dividend paid July 28, 2000.
Subject to the dividend preference of any of our preferred stock that may
be outstanding, the holders of common stock will be entitled to receive
dividends that may be declared by our board of directors from funds legally
available for the payment of dividends. There are restrictions that apply under
applicable insurance laws, however, to the payment of dividends to us by our
insurance subsidiaries.
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RISK FACTORS
INDEXED SECURITIES
We use the term "indexed securities" to mean debt securities, warrants and
purchase contracts whose value is linked to an underlying asset or index, as
well as units that include a debt security, warrant or purchase contract of this
kind.
AN INVESTMENT IN INDEXED SECURITIES PRESENTS SIGNIFICANT RISKS NOT ASSOCIATED
WITH OTHER TYPES OF SECURITIES
An investment in indexed securities presents certain significant risks not
associated with other types of securities. If we issue indexed securities, we
will describe certain risks associated with any such particular indexed security
more fully in the applicable pricing supplement. Indexed securities may present
a high level of risk, and you may lose your entire investment if you purchase
these types of securities.
The treatment of indexed securities for United States federal income tax
purposes is often unclear due to the absence of any authority specifically
addressing the issues presented by any particular indexed security. Accordingly,
you, or your tax adviser, should, in general, be capable of independently
evaluating the federal income tax consequences of purchasing an indexed security
applicable in your particular circumstances.
INVESTORS IN INDEXED SECURITIES COULD LOSE PRINCIPAL OR INTEREST
The principal amount of an indexed security payable at maturity, the amount
of interest payable on an interest payment date, the cash value or physical
settlement value of a physically settled debt security and the cash value or
physical settlement value of an indexed warrant or purchase contract, will be
determined by reference to one or more of the following:
- currencies, including baskets or indices of currencies;
- commodities, including baskets or indices of commodities;
- securities, including baskets or indices of securities; or
- any other index or financial measure, including the occurrence or
non-occurrence of any event or circumstances.
The direction and magnitude of the change in the value of the relevant
index will determine either or both the principal amount of an indexed security
payable at maturity, the amount of interest payable on an interest payment date,
the cash value or physical settlement value of a physically settled debt
security and the cash value or physical settlement value of an indexed warrant
or purchase contract. The terms of a particular indexed security may or may not
include a guaranteed return of a percentage of the face amount at maturity or a
minimum interest rate. An indexed warrant or purchase contract generally will
not provide for any guaranteed minimum settlement value. Accordingly, if you
invest in an indexed security, you may lose all or a portion of the amount
invested in such indexed security and may receive no interest on the security.
MARKET PRICE OF INDEXED SECURITIES INFLUENCED BY MANY UNPREDICTABLE FACTORS
Several factors, many of which are beyond our control, will influence the
value of indexed securities, including:
- the market price of the index stock or other property, which we call the
reference property;
- the volatility (frequency and magnitude of changes in price) of the
reference property;
- the dividend rate on the reference property;
- economic, financial, political, regulatory or judicial events that affect
markets generally and which may affect the market price of the reference
property;
46
- interest and yield rates in the market; and
- the time remaining until (a) you can exchange your indexed securities for
the reference property, (b) we can call the indexed securities and (c)
the indexed securities mature.
These factors will influence the price that you will receive if you sell
your indexed securities prior to maturity. For example, you may have to sell
your indexed securities at a substantial discount from the issue price if the
market price of the reference property is at, below or not sufficiently above
the price of the reference property at pricing.
You cannot predict the future performance of an index or an indexed
security based on its historical performance.
THE ISSUER OF REFERENCE PROPERTY COULD TAKE ACTIONS THAT MAY ADVERSELY AFFECT
AN INDEXED SECURITY
The issuer of a stock or other security that serves as the reference
property or as part of the reference property for an indexed security will,
unless otherwise provided in the pricing supplement, have no involvement in the
offer and sale of the indexed security and no obligations to the holder of the
indexed security. The issuer may take actions, such as a merger or sale of
assets, without regard to the interests of the holders of our indexed
securities. Any of these actions could adversely affect the value of a security
indexed to the reference property.
The issuer of the reference property is not involved in the offering of the
indexed securities in any way and has no obligation to consider your interest as
owner of these indexed securities in taking any corporate actions that might
affect the value of your securities. None of the money you pay for an indexed
security will go to a third-party issuer.
AN INDEXED SECURITY MAY BE LINKED TO A VOLATILE INDEX, WHICH COULD HURT YOUR
INVESTMENT
Certain indices are highly volatile, which means that their value may
change significantly, up or down, over a short period of time. The expected
principal amount payable at maturity, the amount of interest payable on an
interest payment date, the cash value or physical settlement value of a
physically settled debt security and the cash value or physical settlement value
of an indexed warrant or purchase contract based on a volatile index may vary
substantially from time to time. Because the amount payable on an indexed
security is generally calculated based on the value of the relevant index on a
specified date or over a limited period of time, volatility in the index
increases the risk that the return on the indexed securities may be adversely
affected by a fluctuation in the level of the relevant index.
The volatility of an index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets. Any of these could adversely affect the value of an indexed
security.
AN INDEX TO WHICH A SECURITY IS LINKED COULD BE CHANGED OR BECOME UNAVAILABLE
Certain indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of such an index
typically reserves the right to alter the composition of the index and the
manner in which the value of the index is calculated. Such an alteration may
result in a decrease in the value of or return on an indexed security which is
linked to such index.
An index may become unavailable due to such factors as war, natural
disasters, cessation of publication of the index, or suspension of or disruption
in trading in the currency or currencies, commodity or commodities, security or
securities or other financial instrument or instruments comprising or underlying
such index. If an index becomes unavailable, the determination of the amount
payable on an indexed security may be delayed or an alternative method may be
used to determine the value of the unavailable index. Alternative methods of
valuation are generally intended to produce a value similar to the value
resulting from reference to the relevant index. However, it is unlikely that
such alternative methods of valuation will produce values identical to those
47
which would be produced were the relevant index to be used. An alternative
method of valuation may result in a decrease in the value of or return on an
indexed security.
Certain indexed securities are linked to indices which are not commonly
utilized or have been recently developed. The lack of a trading history may make
it difficult to anticipate the volatility or other risks to which such a
security is subject. In addition, there may be less trading in such indices or
instruments underlying such indices, which could increase the volatility of such
indices and decrease the value of or return on indexed securities relating to
them.
YOU HAVE NO RIGHTS WITH RESPECT TO THE REFERENCE PROPERTY
As an owner of indexed securities, you will not have voting rights or the
right to receive dividends or other distributions or any other rights with
respect to reference property.
WE MAY ENGAGE IN HEDGING ACTIVITIES THAT COULD ADVERSELY AFFECT THE VALUE OF
AN INDEXED SECURITY
In order to hedge an exposure on a particular indexed security, we may,
directly or through our subsidiaries, enter into transactions involving the
currencies, commodities, securities, or other financial instruments that
underlie the index for that security, or derivative instruments, such as
options, on those currencies, commodities, securities or other financial
instruments. Transactions of this kind could affect the value of the indexed
security in a manner adverse to the investor.
YOU HAVE NO RIGHT TO ANY OF OUR HEDGING PROFITS
We may engage in activities to hedge our exposure under an indexed
security. We may have profits or losses from these hedging activities. It is
possible that we could achieve substantial profits from our hedging transactions
while the value of the indexed security may decline. The holders of an indexed
security will have no right to any such profit.
INFORMATION ABOUT INDICES MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE
If we issue an indexed security, we may include historical information
about the relevant index in the applicable pricing supplement. Any information
about indices that we may provide will be furnished as a matter of information
only, and you should not regard the information as indicative of the range of,
or trends in, fluctuations in the relevant index that may occur in the future.
WE MAY HAVE CONFLICTS OF INTEREST REGARDING AN INDEXED SECURITY
One or more of our affiliates may have conflicts of interest with respect
to some indexed securities. These affiliates may engage in trading, including
trading for hedging purposes, for their proprietary accounts or for other
accounts under their management, in indexed securities and in the currencies,
commodities, securities, or other financial instruments on which the index is
based or in other derivative instruments related to the index. These trading
activities could adversely affect the value of indexed securities. We and our
affiliates may also issue securities or derivative instruments that are linked
to the same index as one or more indexed securities. By introducing competing
products into the marketplace in this manner, we could adversely affect the
value of an indexed security.
To the extent that one of our affiliates calculates or compiles a
particular index or serves as calculation agent with respect to an indexed
security, it may have considerable discretion in performing the calculation or
compilation. Exercising discretion in this manner could adversely affect the
value of or the rate of return on an indexed security based on that index.
48
NON-U.S. DOLLAR SECURITIES
THIS PROSPECTUS AND ANY ATTACHED PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING
SUPPLEMENT) DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN THE SECURITIES
DENOMINATED IN OTHER THAN U.S. DOLLARS. YOU SHOULD CONSULT YOUR OWN FINANCIAL
AND LEGAL ADVISORS ABOUT THE RISKS OF AN INVESTMENT IN THE SECURITIES
DENOMINATED IN A CURRENCY, INCLUDING ANY COMPOSITE CURRENCY, OTHER THAN U.S.
DOLLARS. IF YOU ARE UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY
TRANSACTIONS, THESE SECURITIES ARE NOT AN APPROPRIATE INVESTMENT FOR YOU.
INFORMATION ABOUT EXCHANGE RATES MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE
With respect to any security denominated in other than U.S. dollars, the
applicable pricing supplement may include a currency supplement on the
applicable specified currency. A currency supplement may include historical
exchange rates for the specified currency. Information concerning exchange rates
is furnished as a matter of information only. You should not regard such
information as indicative of the range of or trends in fluctuations in currency
exchange rates that may occur in the future.
THE INFORMATION SET FORTH IN THIS PROSPECTUS IS APPLICABLE TO YOU ONLY IF YOU
ARE A U.S. RESIDENT. WE DISCLAIM ANY RESPONSIBILITY TO ADVISE PROSPECTIVE
PURCHASERS WHO ARE RESIDENTS OF COUNTRIES OTHER THAN THE UNITED STATES, WITH
RESPECT TO ANY MATTERS THAT MAY AFFECT THE PURCHASE, HOLDING OR RECEIPT OF
PAYMENTS ON THE SECURITIES. IF YOU ARE NOT A U.S. RESIDENT, YOU SHOULD CONSULT
YOUR OWN FINANCIAL AND LEGAL ADVISORS WITH REGARD TO SUCH MATTERS.
AN INVESTMENT IN A NON-U.S. DOLLAR SECURITY INVOLVES CURRENCY-RELATED RISKS
If you invest in securities that are denominated in other than U.S.
dollars, your investment may be subject to significant risks that are not
associated with a similar investment in a security denominated in U.S. dollars.
These risks include, for example, the possibility of significant changes in
rates of exchange between the U.S. dollar and the various foreign currencies or
composite currencies and the possibility of the imposition or modification of
foreign exchange controls by either the U.S. or foreign governments. These risks
depend on events over which we have no control, such as economic and political
events and the supply of and demand for the relevant currencies.
CHANGES IN CURRENCY EXCHANGE RATES CAN BE VOLATILE AND UNPREDICTABLE
In recent years, rates of exchange between the U.S. dollar and many other
currencies have been highly volatile, and this volatility may be expected to
continue and perhaps spread to other currencies in the future. Fluctuations in
currency exchange rates could adversely affect an investment in a security with
a specified currency other than U.S. dollars. Depreciation of the specified
currency against the U.S. dollar could result in a decrease in the U.S.
dollar-equivalent value of payments on the security, including the principal
payable at maturity or the settlement value payable upon exercise. That in turn
could cause the market value of the security to fall. Depreciation of the
specified currency against the U.S. dollar could result in a loss to the
investor on a U.S. dollar basis.
GOVERNMENT POLICY CAN ADVERSELY AFFECT CURRENCY EXCHANGE RATES AND AN
INVESTMENT IN A NON-U.S. DOLLAR SECURITY
Currency exchange rates can either float or be fixed by sovereign
governments. From time to time, governments use a variety of techniques, such as
intervention by a country's central bank or imposition of regulatory controls or
taxes, to affect the exchange rate of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or exchange characteristics by devaluation or revaluation of a currency. Thus, a
special risk in purchasing non-U.S. dollar-denominated securities is that
49
their U.S. dollar-equivalent yields or payouts could be significantly and
unpredictably affected by governmental actions. Even in the absence of
governmental action directly affecting currency exchange rates, political or
economic developments in the country issuing the specified currency for a
non-U.S. dollar security or elsewhere could lead to significant and sudden
changes in the exchange rate between the dollar and the specified currency.
These changes could affect the U.S. dollar equivalent value of the security as
participants in the global currency markets move to buy or sell the specified
currency or U.S. dollars in reaction to those developments.
Governments have imposed from time to time and may in the future impose
exchange controls or other conditions with respect to the exchange or transfer
of a specified currency that could affect exchange rates as well as the
availability of a specified currency for a security at its maturity or on any
other payment date. In addition, the ability of a holder to move currency freely
out of the country in which payments in the currency, or to convert the currency
at a freely determined market rate, could be limited by governmental actions.
NON-U.S. DOLLAR SECURITIES WILL PERMIT US TO MAKE PAYMENTS IN DOLLARS IF WE
ARE UNABLE TO OBTAIN THE SPECIFIED CURRENCY
Securities payable in a currency other than U.S. dollars will provide that,
if the other currency is not available to us at or about the time when a payment
on the securities comes due because of circumstances beyond our control, we will
be entitled to make the payment in U.S. dollars. These circumstances could
include the imposition of exchange controls or our inability to obtain the
currency because of a disruption in the currency markets. If we made payment in
U.S. dollars, the exchange rate we would use would be based on the noon buying
rate in New York City for cable transfers of the other currency, as published in
the H.10 daily update, as of whatever date the exchange rate was then most
recently available from the Federal Reserve Bank of New York. The most recently
available rate may be for a date substantially before the payment date. As a
result, the amount of dollars an investor would receive on the payment date may
not reflect currency market conditions at the time of payment.
PAYMENTS DUE IN OTHER CURRENCIES MAY BE MADE FROM AN OVERSEAS BANK
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. Accordingly, payments
on securities made in a specified currency other than U.S. dollars are likely to
be made from an account with a bank located in the country issuing the specified
currency.
Unless otherwise specified in the applicable pricing supplement, securities
denominated in other than U.S. dollars will not be sold in, or to residents of,
the country issuing the specified currency in which particular securities are
denominated.
WE WILL NOT ADJUST NON-U.S. DOLLAR SECURITIES TO COMPENSATE FOR CHANGES IN
CURRENCY EXCHANGE RATES
Except as described in your prospectus supplement, we will not make any
adjustment or change in the terms of a security payable in a currency other than
U.S. dollars in the event of any change in exchange rates for that currency,
whether in the event of any devaluation, revaluation or imposition of exchange
or other regulatory controls or taxes or in the event of other developments
affecting that currency, the U.S. dollar or any other currency. Consequently,
investors in non-U.S. dollar securities will bear the risk that their investment
may be adversely affected by these types of events.
50
IN A LAWSUIT FOR PAYMENT ON A NON-U.S. DOLLAR SECURITY, AN INVESTOR MAY BEAR
CURRENCY EXCHANGE RISK
The securities we are offering will be governed by New York law. Under New
York law, a New York state court rendering a judgment on a security denominated
in a currency other than U.S. dollars would be required to render the judgment
in the specified currency; however, the judgment would be converted into U.S.
dollars at the exchange rate prevailing on the date of entry of the judgment.
Consequently, in a lawsuit for payment on a security denominated in a currency
other than U.S. dollars, investors would bear currency exchange risk until a New
York state court judgment is entered, which could be a long time.
In courts outside of New York, investors may not be able to obtain a
judgment in a specified currency other than U.S. dollars. For example, a
judgment for money in an action based on a non-U.S. dollar security in many
other U.S. federal or state courts ordinarily would be enforced in the United
States only in U.S. dollars. The date used to determine the rate of conversion
of the currency in which any particular security is denominated into U.S.
dollars will depend upon various factors, including which court renders the
judgment.
51
LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE
In this section, we describe special considerations that will apply to
registered securities issued in global -- i.e., book-entry -- form. First we
describe the difference between legal ownership and indirect ownership of
registered securities. Then we describe special provisions that apply to global
securities.
WHO IS THE LEGAL OWNER OF A REGISTERED SECURITY?
Each debt security, warrant, purchase contract, unit, share of preferred or
common stock in registered form will be represented either by a certificate
issued in definitive form to a particular investor or by one or more global
securities representing securities. We refer to those who have securities
registered in their own names, on the books that we or the trustee, warrant
agent or other agent maintain for this purpose, as the "holders" of those
securities. These persons are the legal holders of the securities. We refer to
those who, indirectly through others, own beneficial interests in securities
that are not registered in their own names as indirect owners of those
securities. As we discuss below, indirect owners are not legal holders, and
investors in securities issued in book-entry form or in street name will be
indirect owners.
BOOK-ENTRY OWNERS
Unless otherwise noted in your prospectus supplement, we will issue each
security in book-entry form only. This means securities will be represented by
one or more global securities registered in the name of a financial institution
that holds them as depositary on behalf of other financial institutions that
participate in the depositary's book-entry system. These participating
institutions, in turn, hold beneficial interests in the securities on behalf of
themselves or their customers.
Under each indenture, warrant agreement, purchase contract, unit agreement
or depositary agreement, only the person in whose name a security is registered
is recognized as the holder of that security. Consequently, for securities
issued in global form, we will recognize only the depositary as the holder of
the securities and we will make all payments on the securities, including
deliveries of any property other than cash, to the depositary. The depositary
passes along the payments it receives to its participants, which in turn pass
the payments along to their customers who are the beneficial owners. The
depositary and its participants do so under agreements they have made with one
another or with their customers; they are not obligated to do so under the terms
of the securities.
As a result, investors will not own securities directly. Instead, they will
own beneficial interests in a global security, through a bank, broker or other
financial institution that participates in the depositary's book-entry system or
holds an interest through a participant. As long as the securities are issued in
global form, investors will be indirect owners, and not holders, of the
securities.
STREET NAME OWNERS
We may terminate an existing global security or issue securities initially
in non-global form. In these cases, investors may choose to hold their
securities in their own names or in street name. Securities held by an investor
in street name would be registered in the name of a bank, broker or other
financial institution that the investor chooses, and the investor would hold
only a beneficial interest in those securities through an account he or she
maintains at that institution.
For securities held in street name, we will recognize only the intermediary
banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities and we will make all payments
on those securities, including deliveries of any property other than cash, to
them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their
customer agreements or because they are legally required to do so. Investors who
hold securities in street name will be indirect owners, not holders, of those
securities.
52
LEGAL HOLDERS
Our obligations, as well as the obligations of the trustee under any
indenture and the obligations, if any, of any warrant agents and unit agents and
any other third parties employed by us or any of those agents, run only to the
holders of the securities. We do not have obligations to investors who hold
beneficial interests in global securities, in street name or by any other
indirect means. This will be the case whether an investor chooses to be an
indirect owner of a security or has no choice because we are issuing the
securities only in global form.
For example, once we make a payment or give a notice to the holder, we have
no further responsibility for that payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect owners but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose -- for example, to
amend the indenture for a series of debt securities or warrants or the warrant
agreement for a series of warrants or to relieve us of the consequences of a
default or of our obligation to comply with a particular provision of an
indenture -- we would seek the approval only from the holders, and not the
indirect owners, of the relevant securities. Whether and how the holders contact
the indirect owners is up to the holders.
When we refer to "you" in this prospectus, we mean all purchasers of the
securities being offered by this prospectus, whether they are the holders or
only indirect owners of those securities. When we refer to "your securities" in
this prospectus, we mean the securities in which you will hold a direct or
indirect interest.
SPECIAL CONSIDERATIONS FOR INDIRECT OWNERS
If you hold securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- whether and how you can instruct it to exercise any rights or purchase or
sell warrant property under a warrant or purchase contract property under
a purchase contract or to exchange or convert a security for or into
other property;
- how it would handle a request for the holders' consent, if ever required;
- how it would exercise rights under the securities if there were a default
or other event triggering the need for holders to act to protect their
interests; and
- if the securities are in book-entry form, how the depositary's rules and
procedures will affect these matters.
WHAT IS A GLOBAL SECURITY?
Unless otherwise noted in the applicable pricing supplement, we will issue
each security in book-entry form only. Each security issued in book-entry form
will be represented by a global security that we deposit with and register in
the name of one or more financial institutions or clearing systems, or their
nominees, which we select. A financial institution or clearing system that we
select for any security for this purpose is called the "depositary" for that
security. A security will usually have only one depositary but it may have more.
Each series of securities will have one or more of the following as the
depositaries:
- The Depository Trust Company, New York, New York, which is known as
"DTC;"
- Euroclear System, which is known as "Euroclear;"
- Clearstream Banking, societe anonyme, Luxembourg, which is known as
"Clearstream;" and
- any other clearing system or financial institution named in the
prospectus supplement.
The depositaries named above may also be participants in one another's
systems. Thus, for example, if DTC is the depositary for a global security,
investors may hold beneficial interests in that security through
53
Euroclear or Clearstream, as DTC participants. The depositary or depositaries
for your securities will be named in your prospectus supplement; if none is
named, the depositary will be DTC.
A global security may represent one or any other number of individual
securities. Generally, all securities represented by the same global security
will have the same terms. We may, however, issue a global security that
represents multiple securities of the same kind, such as debt securities, that
have different terms and are issued at different times. We call this kind of
global security a master global security. Your prospectus supplement will not
indicate whether your securities are represented by a master global security.
A global security may not be transferred to or registered in the name of
anyone other than the depositary or its nominee, unless special termination
situations arise. We describe those situations below under "-- Holder's Option
to Obtain a Non-Global Security; Special Situations When a Global Security Will
Be Terminated." As a result of these arrangements, the depositary, or its
nominee, will be the sole registered owner and holder of all securities
represented by a global security, and investors will be permitted to own only
indirect interests in a global security. Indirect interests must be held by
means of an account with a broker, bank or other financial institution that in
turn has an account with the depositary or with another institution that does.
Thus, an investor whose security is represented by a global security will not be
a holder of the security, but only an indirect owner of an interest in the
global security.
If the prospectus supplement for a particular security indicates that the
security will be issued in global form only, then the security will be
represented by a global security at all times unless and until the global
security is terminated. We describe the situations in which this can occur below
under "-- Holder's Option to Obtain a Non-Global Security; Special Situations
When a Global Security Will Be Terminated." If termination occurs, we may issue
the securities through another book-entry clearing system or decide that the
securities may no longer be held through any book-entry clearing system.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES
As an indirect owner, an investor's rights relating to a global security
will be governed by the account rules of the depositary and those of the
investor's bank, broker, financial institution or other intermediary through
which it holds its interest (e.g., Euroclear or Clearstream, if DTC is the
depositary), as well as general laws relating to securities transfers. We do not
recognize this type of investor or any intermediary as a holder of securities
and instead deal only with the depositary that holds the global security.
If securities are issued only in the form of a global security, an investor
should be aware of the following:
- An investor cannot cause the securities to be registered in his or her
own name, and cannot obtain non-global certificates for his or her
interest in the securities, except in the special situations we describe
below;
- An investor will be an indirect holder and must look to his or her own
bank, broker or other financial institution for payments on the
securities and protection of his or her legal rights relating to the
securities, as we describe above under "-- Who Is the Legal Owner of a
Registered Security?;"
- An investor may not be able to sell interests in the securities to some
insurance companies and other institutions that are required by law to
own their securities in non-book-entry form;
- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the securities
must be delivered to the lender or other beneficiary of the pledge in
order for the pledge to be effective;
- The depositary's policies will govern payments, deliveries, transfers,
exchanges, notices and other matters relating to an investor's interest
in a global security, and those policies may change from time to time.
We, the trustee and any warrant agents and unit agents will have no
responsibility for any aspect of the depositary's policies, actions or
records of ownership interests in a global security. We, the trustee and
any warrant agents and unit agents also do not supervise the depositary
in any way;
54
- The depositary may require that those who purchase and sell interests in
a global security within its book-entry system use immediately available
funds and your bank, broker or other financial institution may require
you to do so as well; and
- Financial institutions that participate in the depositary's book-entry
system and through which an investor holds its interest in the global
securities, directly or indirectly, may also have their own policies
affecting payments, deliveries, transfers, exchanges, notices and other
matters relating to the securities, and those policies may change from
time to time. For example, if you hold an interest in a global security
through Euroclear or Clearstream, when DTC is the depositary, Euroclear
or Clearstream, as applicable, may require those who purchase and sell
interests in that security through them to use immediately available
funds and comply with other policies and procedures, including deadlines
for giving instructions as to transactions that are to be effected on a
particular day. There may be more than one financial intermediary in the
chain of ownership for an investor. We do not monitor and are not
responsible for the policies or actions or records of ownership interests
of any of those intermediaries.
HOLDER'S OPTION TO OBTAIN A NON-GLOBAL SECURITY; SPECIAL SITUATIONS WHEN A
GLOBAL SECURITY WILL BE TERMINATED
If we issue any series of securities in book-entry form but we choose to
give the beneficial owners of that series the right to obtain non-global
securities, any beneficial owner entitled to obtain non-global securities may do
so by following the applicable procedures of the depositary, any transfer agent
or registrar for that series and that owner's bank, broker or other financial
institution through which that owner holds its beneficial interest in the
securities. If you are entitled to request a non-global certificate and wish to
do so, you will need to allow sufficient lead time to enable us or our agent to
prepare the requested certificate.
In addition, in a few special situations described below, a global security
will be terminated and interests in it will be exchanged for certificates in
non-global form representing the securities it represented. After that exchange,
the choice of whether to hold the securities directly or in street name will be
up to the investor. Investors must consult their own banks, brokers or other
financial institutions, to find out how to have their interests in a global
security transferred on termination to their own names, so that they will be
holders. We have described the rights of holders and street name investors above
under "-- Who Is the Legal Owner of a Registered Security?"
The special situations for termination of a global security are as follows:
- if the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security and we do
not appoint another institution to act as depositary within 60 days;
- if we notify the trustee, warrant agent or unit agent, as applicable,
that we wish to terminate that global security; or
- in the case of a global security representing debt securities or warrants
issued under an indenture, if an event of default has occurred with
regard to these debt securities or warrants and has not been cured or
waived.
If a global security is terminated, only the depositary, and not we, the
trustee for any debt securities, the warrant agent for any warrants or the unit
agent for any units, is responsible for deciding the names of the institutions
in whose names the securities represented by the global security will be
registered and, therefore, who will be the holders of those securities.
CONSIDERATIONS RELATING TO DTC
DTC has informed us that it is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds
55
securities that DTC participants deposit with DTC. DTC also facilitates the
settlement among DTC participants of securities transactions, such as transfers
and pledges in deposited securities through electronic computerized book-entry
changes in DTC participants' accounts, thereby eliminating the need for physical
movement of certificates. DTC participants include securities brokers and
dealers, banks, trust companies and clearing corporations, and may include other
organizations. DTC is owned by a number of its DTC participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, LLC and the National
Association of Securities Dealers, Inc. Indirect access to the DTC system also
is available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly. The rules applicable to DTC and DTC participants are on
file with the SEC.
Purchases of securities within the DTC system must be made by or through
DTC participants, which will receive a credit for the securities on DTC's
records. Transfers of ownership interests in the securities are to be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners.
Redemption notices will be sent to DTC's nominee, Cede & Co., as the
registered holder of the securities. If less than all of the securities are
being redeemed, DTC will determine the amount of the interest of each direct
participant to be redeemed in accordance with its then current procedures.
In instances in which a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to the securities. Under its usual
procedures, DTC would mail an omnibus proxy to the relevant trustee as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts such
securities are credited on the record date (identified in a listing attached to
the omnibus proxy).
Distribution payments on the securities will be made by the relevant
trustee to DTC. DTC's usual practice is to credit direct participants' accounts
on the relevant payment date in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by participants to beneficial owners
will be governed by standing instructions and customary practices and will be
the responsibility of such participants and not of DTC, the relevant trustee or
us, subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of distributions to DTC is the responsibility of the
relevant trustee, and disbursements of such payments to the beneficial owners
are the responsibility of direct and indirect participants.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be accurate, but we assume no
responsibility for the accuracy thereof. We do not have any responsibility for
the performance by DTC or its participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
CONSIDERATIONS RELATING TO EUROCLEAR AND CLEARSTREAM
Euroclear and Clearstream are securities clearance systems in Europe. Both
systems clear and settle securities transactions between their participants
through electronic, book-entry delivery of securities against payment.
Euroclear and Clearstream may be depositaries for a global security. In
addition, if DTC is the depositary for a global security, Euroclear and
Clearstream may hold interests in the global security as participants in DTC.
As long as any global security is held by Euroclear or Clearstream, as
depositary, you may hold an interest in the global security only through an
organization that participates, directly or indirectly, in Euroclear or
Clearstream. If Euroclear or Clearstream is the depositary for a global security
and there is no depositary in the United States, you will not be able to hold
interests in that global security through any securities clearance system in the
United States.
Payments, deliveries, transfers, exchanges, notices and other matters
relating to the securities made through Euroclear or Clearstream must comply
with the rules and procedures of those systems. Those systems
56
could change their rules and procedures at any time. We have no control over
those systems or their participants and we take no responsibility for their
activities. Transactions between participants in Euroclear or Clearstream, on
one hand, and participants in DTC, on the other hand, when DTC is the
depositary, would also be subject to DTC's rules and procedures.
SPECIAL TIMING CONSIDERATIONS RELATING TO TRANSACTIONS IN EUROCLEAR AND
CLEARSTREAM
Investors will be able to make and receive through Euroclear and
Clearstream payments, deliveries, transfers, exchanges, notices and other
transactions involving any securities held through those systems only on days
when those systems are open for business. Those systems may not be open for
business on days when banks, brokers and other financial institutions are open
for business in the United States.
In addition, because of time-zone differences, U.S. investors who hold
their interests in the securities through these systems and wish to transfer
their interests, or to receive or make a payment or delivery or exercise any
other right with respect to their interests, on a particular day may find that
the transaction will not be effected until the next business day in Luxembourg
or Brussels, as applicable. Thus, investors who wish to exercise rights that
expire on a particular day may need to act before the expiration date. In
addition, investors who hold their interests through both DTC and Euroclear or
Clearstream may need to make special arrangements to finance any purchases or
sales of their interests between the U.S. and European clearing systems, and
those transactions may settle later than would be the case for transactions
within one clearing system.
CONSIDERATIONS RELATING TO SECURITIES ISSUED IN BEARER FORM
If we issue securities in bearer, rather than registered, form, those
securities will be subject to special provisions described in this section. This
section primarily describes provisions relating to debt securities issued in
bearer form. Other provisions may apply to securities of other kinds issued in
bearer form. To the extent the provisions described in this section are
inconsistent with those described elsewhere in this prospectus, they supersede
those described elsewhere with regard to any bearer securities. Otherwise, the
relevant provisions described elsewhere in this prospectus will apply to bearer
securities.
GENERAL
TEMPORARY AND PERMANENT BEARER GLOBAL SECURITIES
If we issue securities in bearer form, and unless otherwise noted in the
applicable pricing supplement, all securities of the same series and kind will
initially be represented by a temporary bearer global security, which we will
deposit with a common depositary for Euroclear and Clearstream. Euroclear and
Clearstream will credit the account of each of their subscribers with the amount
of securities the subscriber purchases. We will promise to exchange the
temporary bearer global security for a permanent bearer global security, which
we will deliver to the common depositary upon the later of the following two
dates:
- the date that is 40 days after the later of (a) the completion of the
distribution of the securities as determined by the underwriter, dealer
or agent and (b) the closing date for the sale of the securities by us;
we may extend this date as described below under "-- Extensions for
Further Issuances;" and
- the date on which Euroclear and Clearstream provide us or our agent with
the necessary tax certificates described below under "-- U.S. Tax
Certificate Required."
Unless we say otherwise in your prospectus supplement, owners of beneficial
interests in a permanent bearer global security will be able to exchange those
interests at their option, in whole but not in part, for:
- non-global securities in bearer form with interest coupons attached, if
applicable; or
- non-global securities in registered form without coupons attached.
A beneficial owner will be able to make this exchange by giving us or our
designated agent 60 days' prior written notice in accordance with the terms of
the securities.
57
EXTENSIONS FOR FURTHER ISSUANCES
Without the consent of the trustee, any holders or any other person, we may
issue additional securities identical to a prior issue from time to time. If we
issue additional securities before the date on which we would otherwise be
required to exchange the temporary bearer global security representing the prior
issue for a permanent bearer global security as described above, that date will
be extended until the 40th day after the completion of the distribution and the
closing, whichever is later, for the additional securities. Extensions of this
kind may be repeated if we sell additional identical securities. As a result of
these extensions, beneficial interests in the temporary bearer global security
may not be exchanged for interests in a permanent bearer global security until
the 40th day after the additional securities have been distributed and sold.
U.S. TAX CERTIFICATE REQUIRED
We will not pay or deliver interest or other amounts in respect of any
portion of a temporary bearer global security unless and until Euroclear or
Clearstream delivers to us or our agent a tax certificate with regard to the
owners of the beneficial interests in that portion of the global security or a
security in any other form. Also, we will not exchange any portion of a
temporary bearer global security for a permanent bearer global security unless
and until we receive from Euroclear or Clearstream a tax certificate with regard
to the owners of the beneficial interests in the portion to be exchanged. In
each case, this tax certificate must state that each of the relevant owners:
- is not a United States person, as defined below under "-- Limitations on
Issuance of Bearer Debt Securities;"
- is a foreign branch of a United States financial institution purchasing
for its own account or for resale, or is a United States person who
acquired the security through a financial institution of this kind and
who holds the security through that financial institution on the date of
certification, provided in either case that the financial institution
provides a certificate to us or the distributor selling the security to
it stating that it agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the U.S. Internal Revenue Code and the U.S.
Treasury Regulations under that Section; or
- is a financial institution holding for purposes of resale during the
"restricted period," as defined in U.S. Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7). A financial institution of this kind, whether or
not it is also described in either of the two preceding bullet points,
must certify that it has not acquired the security for purposes of resale
directly or indirectly to a United States person or to a person within
the United States or its possessions.
The tax certificate must be signed by an authorized person satisfactory to us.
No one who owns an interest in a temporary bearer global security will
receive payment or delivery of any amount or property in respect of its
interest, and will not be permitted to exchange its interest for an interest in
a permanent bearer global security or a security in any other form, unless we or
our agent have received the required tax certificate on its behalf.
Special requirements and restrictions imposed by United States federal tax
laws and regulations will apply to bearer debt securities. We describe these
below under "-- Limitations on Issuance of Bearer Debt Securities."
LEGAL OWNERSHIP OF BEARER SECURITIES
Securities in bearer form are not registered in any name. Whoever is the
bearer of the certificate representing a security in bearer form is the legal
owner of that security. Legal title and ownership of bearer securities will pass
by delivery of the certificates representing the securities. Thus, when we use
the term "holder" in this prospectus with regard to bearer securities, we mean
the bearer of those securities.
The common depositary for Euroclear and Clearstream will be the bearer, and
thus the holder and legal owner, of both the temporary and permanent bearer
global securities described above. Investors in those
58
securities will own beneficial interests in the securities represented by those
global securities; they will be only indirect owners, not holders or legal
owners, of the securities.
As long as the common depositary is the bearer of any bearer security in
global form, the common depositary will be considered the sole legal owner and
holder of the securities represented by the bearer security in global form.
Ownership of beneficial interests in any bearer security in global form will be
shown on records maintained by Euroclear or Clearstream, as applicable, or by
the common depositary on their behalf, and by the direct and indirect
participants in their systems, and ownership interests can be held and
transferred only through those records. We will pay any amounts owing with
respect to a bearer global security only to the common depositary.
Neither we, the trustee nor any of our agents will recognize any owner of
indirect interests as a holder or legal owner. Nor will we, the trustee or any
of our agents have any responsibility for the ownership records or practices of
Euroclear or Clearstream, the common depositary or any direct or indirect
participants in those systems or for any payments, transfers, deliveries,
notices or other transactions within those systems, all of which will be subject
to the rules and procedures of those systems and participants. If you own an
indirect interest in a bearer global security, you must look only to the common
depositary for Euroclear or Clearstream, and to their direct and indirect
participants through which you hold your interest, for your ownership rights.
You should read the section above entitled "Legal Ownership and Book-Entry
Issuance" for more information about holding interests through Euroclear and
Clearstream.
PAYMENT AND EXCHANGE OF NON-GLOBAL BEARER SECURITIES
Payments and deliveries owing on non-global bearer securities will be made,
in the case of interest payments, only to the holder of the relevant coupon
after the coupon is surrendered to the paying agent. In all other cases,
payments and deliveries will be made only to the holder of the certificate
representing the relevant security after the certificate is surrendered to the
paying agent.
Non-global bearer securities, with all unmatured coupons relating to the
securities, if any, may be exchanged for a like aggregate amount of registered
securities of like kind. Non-global registered securities may be exchanged for a
like aggregate amount of non-global registered securities of like kind, as
described above in the sections on the different types of securities we may
offer. However, we will not issue bearer securities in exchange for any
registered securities.
Replacement certificates and coupons for non-global bearer securities will
not be issued in lieu of any lost, stolen or destroyed certificates and coupons
unless we and our transfer agent receive evidence of the loss, theft or
destruction, and an indemnity against liabilities, satisfactory to us and our
agent. Upon redemption or any other settlement before the stated maturity or
expiration, as well as upon any exchange, of a non-global bearer security, the
holder will be required to surrender all unmatured coupons to us or our
designated agent. If any unmatured coupons are not surrendered, we or our agent
may deduct the amount of interest relating to those coupons from the amount
otherwise payable or deliverable or we or our agent may demand an indemnity
against liabilities satisfactory to us and our agent.
We may make payments, deliveries and exchanges in respect of bearer
securities in global form in any manner acceptable to us and the depositary.
NOTICES
If we are required to give notice to the holders of bearer securities, we
will do so by publication in a daily newspaper of general circulation in a city
in Western Europe. The term "daily newspaper" means a newspaper that is
published on each day, other than a Saturday, Sunday or holiday, in the relevant
city. If these bearer securities are listed on the Luxembourg Stock Exchange and
its rules so require, that city will be Luxembourg and that newspaper will be
the Luxemburger Wort, unless publication in that newspaper is impractical. A
notice of this kind will be presumed to have been received on the date it is
first published. If we cannot give notice as described in this paragraph because
the publication of any newspaper is suspended or it is otherwise impractical to
publish the notice, then we will give notice in another form. That alternate
form of notice will be
59
deemed to be sufficient notice to each holder. Neither the failure to give
notice to a particular holder, nor any defect in a notice given to a particular
holder, will affect the sufficiency of any notice given to another holder.
We may give any required notice with regard to bearer securities in global
form to the common depositary for the securities, in accordance with its
applicable procedures. If these provisions do not require that notice be given
by publication in a newspaper, we may omit giving notice by publication.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States federal income tax laws and regulations,
bearer debt securities, including bearer debt securities in global form, will
not be offered, sold, resold or delivered, directly or indirectly, in the United
States or its possessions or to United States persons, as defined below, except
as otherwise permitted by U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D).
Any underwriters, dealers or agents participating in the offerings of bearer
debt securities, directly or indirectly, must agree that they will not, in
connection with the original issuance of any bearer debt securities or during
the restricted period applicable under the Treasury Regulations cited earlier,
offer, sell, resell or deliver, directly or indirectly, any bearer debt
securities in the United States or its possessions or to United States persons,
other than as permitted by the applicable Treasury Regulations described above.
In addition, any underwriters, dealers or agents must have procedures
reasonably designed to ensure that their employees or agents who are directly
engaged in selling bearer debt securities are aware of the above restrictions on
the offering, sale, resale or delivery of bearer debt securities.
We will make payments on bearer debt securities only outside the United
States and its possessions except as permitted by the applicable Treasury
Regulations described above.
Bearer debt securities and any coupons will bear the following legend:
"Any United States person who holds this obligation will be subject to
limitations under the United States income tax laws, including the
limitations provided in sections 165(j) and 1,287(a) of the Internal Revenue
Code."
The sections referred to in this legend provide that, with certain limited
exceptions, a United States person will not be permitted to deduct any loss, and
will not be eligible for capital gain treatment with respect to any gain,
realized on the sale, exchange or redemption of that bearer debt security or
coupon.
As used in this subsection, the term "bearer debt securities" includes
bearer debt securities that are part of units. As used in this section entitled
"Considerations Relating to Securities Issued in Bearer Form," "United States
person" means a person that is, for U.S. federal income tax law purposes:
- a citizen or resident of the United States;
- a corporation or partnership, including an entity treated as a
corporation or partnership for United States federal income tax purposes,
created or organized in or under the laws of the United States, any state
of the United States or the District of Columbia;
- an estate the income of which is subject to United States federal income
taxation regardless of its source; or
- a trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust.
"United States" means the United States of America, including the States
and the District of Columbia, and "possessions" of the United States include
Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.
60
PLAN OF DISTRIBUTION
INITIAL OFFERING AND SALE OF SECURITIES
We may sell securities:
- to or through underwriting syndicates represented by managing
underwriters;
- through one or more underwriters without a syndicate for them to offer
and sell to the public;
- through dealers or agents; and
- to investors directly in negotiated sales or in competitively bid
transactions.
Any underwriter or agent involved in the offer and sale of any series of
the securities will be named in the prospectus supplement. One or more of our
subsidiaries may act as an underwriter or agent.
The prospectus supplement for each series of securities will describe:
- the terms of the offering of these securities, including the name of the
agent or the name or names of any underwriters;
- the public offering or purchase price;
- any discounts and commissions to be allowed or paid to the agent or
underwriters and all other items constituting underwriting compensation;
- any discounts and commissions to be allowed or paid to dealers; and
- other specific terms of the particular offering or sale.
Only the agents or underwriters named in a prospectus supplement are agents
or underwriters in connection with the securities being offered by that
prospectus supplement.
Underwriters, agents and dealers may be entitled, under agreements with us,
to indemnification against certain civil liabilities, including liabilities
under the Securities Act of 1933.
Underwriters to whom securities are sold by us for public offering and sale
are obliged to purchase all of those particular securities if any are purchased.
This obligation is subject to certain conditions and may be modified in the
prospectus supplement.
Any subsidiary of ours, such as AIG Financial Securities Corp., that
participates in a particular offering of securities will comply with the
applicable requirements of Rule 2720 of the National Association of Securities
Dealers, Inc. In compliance with guidelines of the NASD, the maximum commission
or discount to be received by any NASD member or independent broker dealer may
not exceed 8% of the aggregate principal amount of securities offered pursuant
to this prospectus. We anticipate, however, that the maximum commission or
discount to be received in any particular offering of securities will be
significantly less than this amount.
Underwriters, dealers or agents may engage in transactions with, or perform
services for, us or our affiliates in the ordinary course of business.
MARKET-MAKING RESALES BY SUBSIDIARIES
This prospectus may be used by our subsidiaries in connection with offers
and sales of the securities in market-making transactions. In a market-making
transaction, one of our subsidiaries may resell a security it acquires from
other holders, after the original offering and sale of the security. Resales of
this kind may occur in the open market or may be privately negotiated, at
prevailing market prices at the time of resale or at related or negotiated
prices. In these transactions, one of our subsidiaries may act as principal or
agent. Our subsidiaries may receive compensation in the form of discounts and
commissions from both the purchaser and seller. Our subsidiaries may also engage
in transactions of this kind and may use this prospectus for this purpose.
61
The aggregate initial offering price specified on the cover of this
prospectus relates to the initial offering of the securities not yet issued as
of the date of this prospectus. This amount does not include the securities to
be sold in market-making transactions. The latter includes securities to be
issued after the date of this prospectus, as well as securities previously
issued.
We do not expect to receive any proceeds from market-making transactions.
We do not expect that any of our subsidiaries that engage in these transactions
will pay any proceeds from market-making resales to us.
Information about the trade and settlement dates, as well as the purchase
price, for a market-making transaction will be provided to the purchaser in a
separate confirmation of sale.
Unless we or an agent informs you in your confirmation of sale that your
security is being purchased in its original offering and sale, you may assume
that you are purchasing your security in a market-making transaction.
MATTERS RELATING TO INITIAL OFFERING AND MARKET-MAKING RESALES
Each series of securities will be a new issue, and there will be no
established trading market for any security prior to its original issue date. We
may not list a particular series of securities on a securities exchange or
quotation system. Any underwriters to whom we sell securities for public
offering may make a market in those securities. However, no such underwriter
that makes a market is obligated to do so, and any of them may stop doing so at
any time without notice. No assurance can be given as to the liquidity or
trading market for any of the securities.
Unless otherwise indicated in your prospectus supplement or confirmation of
sale, the purchase price of the securities will be required to be paid in
immediately available funds in New York City.
In this prospectus, the term "this offering" means the initial offering of
the securities made in connection with their original issuance. This term does
not refer to any subsequent resales of securities in market-making transactions.
VALIDITY OF THE SECURITIES
Unless we state otherwise in any prospectus supplement, the validity of the
securities will be passed upon for us by Sullivan & Cromwell LLP, New York, New
York or by Kathleen E. Shannon, Senior Vice President, Secretary and Deputy
General Counsel of AIG and for any underwriters or agents by counsel named in
your prospectus supplement. Partners of Sullivan & Cromwell LLP involved in the
representation of AIG beneficially own approximately 11,360 shares of AIG common
stock. Ms. Shannon is regularly employed by AIG, participates in various AIG
employee benefit plans under which she may receive shares of AIG common stock
and currently beneficially owns less than 1% of the outstanding shares of AIG
common stock.
EXPERTS
The consolidated financial statements and financial statement schedules of
AIG and subsidiaries incorporated in this prospectus by reference to AIG's
Annual Report on Form 10-K for the year ended December 31, 2002 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and current reports, proxy
statements and other information with the SEC. These reports, proxy statements
and other information can be inspected and copied at:
SEC Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
62
Please call the SEC at 1-800-SEC-0330 for further information.
AIG's filings are also available to the public through:
- The SEC web site at http://www.sec.gov
- The New York Stock Exchange
20 Broad Street
New York, New York 10005
AIG's common stock is listed on the NYSE and trades under the symbol "AIG."
The SEC allows us to "incorporate by reference" the information AIG files
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference in
this prospectus is considered to be part of this prospectus, and later
information that AIG files with the SEC will automatically update and supersede
that information as well as the information included in this prospectus. AIG
incorporates by reference the documents below, any filings that we make after
the date of the initial filing of this registration statement and prior to the
effectiveness of that registration statement and any future filings made with
the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934 until all the securities are sold. This prospectus is part of a
registration statement AIG filed with the SEC.
- Annual Report on Form 10-K for the year ended December 31, 2002.
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
- The description of common stock in the registration statement on Form
8-A, dated September 20, 1984, filed pursuant to Section 12(b) of the
Securities Exchange Act.
We will provide without charge a copy of these filings, other than any
exhibits unless the exhibits are specifically incorporated by reference into
this prospectus.
Requests for such documents should be directed to AIG's Director of
Investor Relations, 70 Pine Street, New York, New York 10270, telephone (212)
770-6293.
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
We have included or incorporated by reference in this prospectus statements
that may constitute "forward-looking statements" within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are not historical facts but instead represent only
AIG's belief regarding future events, many of which, by their nature, are
inherently uncertain and outside of AIG's control. It is possible that AIG's
actual results may differ, possibly materially, from the anticipated results
indicated in these forward-looking statements.
Information regarding important factors that could cause actual results to
differ, perhaps materially, from those in AIG's forward-looking statements is
contained under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Cautionary Statement Regarding Forward-
Looking Information" in AIG's Annual Report on Form 10-K for the year ended
December 31, 2002, which is incorporated into this prospectus by reference. See
"Where You Can Find More Information" above for information about how to obtain
a copy of this annual report.
63
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL ONLY THE SECURITIES IT DESCRIBES, BUT ONLY UNDER CIRCUMSTANCES
AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
---------------------
$5,139,770,000
AMERICAN INTERNATIONAL GROUP, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS (Subject to completion, dated June 11, 2003)
$5,139,770,000
[AIG LOGO]
AIG CAPITAL TRUST I
AIG CAPITAL TRUST II
CAPITAL SECURITIES
GUARANTEED ON A SUBORDINATED BASIS, AS DESCRIBED IN THIS PROSPECTUS, BY
AMERICAN INTERNATIONAL GROUP, INC.
The AIG Capital Trusts may offer from time to time capital securities
guaranteed on a subordinated basis by American International Group, Inc. These
capital securities will have an initial public offering price or purchase price
of up to $5,139,770,000, although we may increase this amount in the future.
This prospectus describes some of the general terms that may apply to these
securities and the general manner in which they will be offered. The specific
terms of any securities to be offered will be included in a supplement to this
prospectus. Your prospectus supplement will also describe the specific manner in
which we will offer the securities. This prospectus may not be used to sell
securities unless accompanied by a prospectus supplement.
As used in this prospectus, except as otherwise specified, the terms "AIG,"
"we," "us" and "our" refer to American International Group, Inc. We use the term
the "AIG Capital Trusts" to refer to the AIG Capital Trusts throughout this
prospectus.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
We may offer and sell these securities to or through one or more
underwriters, dealers and agents, or directly to purchasers, on a continuous or
delayed basis.
---------------------
AIG FINANCIAL SECURITIES CORP.
---------------------
The date of this prospectus is , 2003
TABLE OF CONTENTS
PAGE
----
ABOUT THIS PROSPECTUS....................................... 1
AMERICAN INTERNATIONAL GROUP, INC. ......................... 1
THE AIG CAPITAL TRUSTS...................................... 1
USE OF PROCEEDS............................................. 1
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES............ 1
INFORMATION ABOUT THE AIG CAPITAL TRUSTS.................... 2
DESCRIPTION OF COMMON SECURITIES THE AIG CAPITAL TRUSTS MAY
OFFER..................................................... 3
DESCRIPTION OF CAPITAL SECURITIES THE AIG CAPITAL TRUSTS MAY
OFFER..................................................... 4
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES............... 17
LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE..................... 30
DESCRIPTION OF THE SUBORDINATED GUARANTEES.................. 36
RELATIONSHIP AMONG THE CAPITAL SECURITIES AND THE RELATED
INSTRUMENTS............................................... 39
PLAN OF DISTRIBUTION........................................ 40
VALIDITY OF THE SECURITIES.................................. 41
EXPERTS..................................................... 41
WHERE YOU CAN FIND MORE INFORMATION......................... 41
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995............................. 42
---------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT OR INFORMATION CONTAINED IN DOCUMENTS WHICH YOU ARE
REFERRED TO BY THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE ARE OFFERING TO SELL THE
SECURITIES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS
ACCURATE ONLY AS OF THE DATE ON THE FRONT OF THOSE DOCUMENTS, REGARDLESS OF THE
TIME OF DELIVERY OF THE DOCUMENTS OR ANY SALE OF THE SECURITIES.
i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a shelf registration process. Under
this shelf process, we may sell the securities described in this prospectus in
one or more offerings up to a total dollar amount of $5,139,770,000. This
prospectus provides you with a general description of the securities we may
offer.
Each time we sell capital securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read this prospectus and any prospectus
supplement together with additional information described in the section
entitled "Where You Can Find More Information."
To see more detail, you should read our registration statement and the
exhibits filed with our registration statement.
AMERICAN INTERNATIONAL GROUP, INC.
AIG, a Delaware corporation, is a holding company which through its
subsidiaries is engaged in a broad range of insurance and insurance-related
activities in the U.S. and abroad. AIG's primary activities include both general
and life insurance operations. Other significant activities include financial
services and retirement savings and asset management.
AIG's principal executive offices are located at 70 Pine Street, New York,
New York 10270, and its telephone number is 212-770-7000.
THE AIG CAPITAL TRUSTS
We, as sponsor, created the AIG Capital Trusts, each of which is a Delaware
statutory trust. Each AIG Capital Trust will have a term of approximately 55
years from the date it issues the trust securities, but may terminate earlier as
provided in the applicable trust agreement. Each AIG Capital Trust exists solely
to:
- issue and sell its securities;
- use the proceeds from the sale of its securities to purchase AIG's junior
subordinated debentures; and
- engage in other activities that are necessary, convenient or incidental
to the above purposes, such as registering the transfer of its
securities.
The AIG Capital Trusts' principal executive offices are located at 70 Pine
Street, New York, New York 10270, and their telephone number is 212-770-7000.
USE OF PROCEEDS
The AIG Capital Trusts will use substantially all proceeds from the sale of
trust securities to purchase junior subordinated debentures from us. Unless
otherwise set forth in your prospectus supplement, we intend to use the net
proceeds from the sale of our junior subordinated debentures for general
corporate purposes.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of AIG and its consolidated subsidiaries for the periods indicated. For
more information on our consolidated ratios of earnings to fixed charges, see
our Annual Report on Form 10-K for the year ended December 31, 2002 and our
Quarterly
1
Report for the quarter ended March 31, 2003, both of which are incorporated by
reference into this prospectus as described under "Where You Can Find More
Information."
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- --------------------------------
2003 2002 2002 2001 2000 1999 1998
---- -------- ---- ---- ---- ---- ----
3.82 3.91 3.10 2.92 3.59 3.96 3.57
Earnings represent:
- Income from operations before income taxes, adjustments for minority
interest and income/loss from equity investees
plus
- Fixed charges other than capitalized interest
- Amortization of capitalized interest
- The distributed income of equity investees
less
- The minority interest in pre-tax income of subsidiaries that do not have
fixed charges.
Fixed charges include:
- Interest, whether expensed or capitalized
- Amortization of debt issuance costs
- One-third of rental expense. Our management believes this is
representative of the interest factor.
INFORMATION ABOUT THE AIG CAPITAL TRUSTS
The following description summarizes the formation, purposes and material
terms of each AIG Capital Trust. This description is followed by descriptions
later in this prospectus of:
- the capital securities to be issued by each AIG Capital Trust;
- the junior subordinated debentures to be issued by us to each AIG Capital
Trust, and the junior debt indenture under which they will be issued;
- our subordinated guarantees for the benefit of the holders of the capital
securities; and
- the relationship among the capital securities, the junior subordinated
debentures, the expense agreement and the subordinated guarantees.
FORMATION, PURPOSES AND MATERIAL TERMS
Before the AIG Capital Trusts issue trust securities, the trust agreement
for each AIG Capital Trustee will be amended and restated in its entirety
substantially in the form filed as an exhibit to our registration statement. The
trust agreements will be qualified as indentures under the Trust Indenture Act
of 1939. The trust securities will be governed by Delaware law. See "Where You
Can Find More Information" below for information on how to obtain a copy.
Each AIG Capital Trust may offer to the public preferred securities
representing preferred beneficial interests in the applicable AIG Capital Trust,
which we call "capital securities." In addition to the capital securities
offered to the public, each AIG Capital Trust will sell common securities
representing common ownership interests in such AIG Capital Trust to AIG, which
we call "common securities." When we refer to "trust securities" in this
prospectus, we mean both the common securities and the capital securities. See
"Description of Common Securities the AIG Capital Trusts May Offer" and
"Description of Capital Securities the AIG Capital Trusts May Offer" below for
more information.
2
Because the AIG Capital Trusts will use the proceeds from the sale of its
trust securities to purchase AIG's junior subordinated debentures, our junior
subordinated debentures will be the sole assets of each AIG Capital Trust, and
payments under the junior subordinated debentures owned by each AIG Capital
Trust will be its sole source of revenues. Each AIG Capital Trust will use these
funds to make any cash payments due to holders of its capital securities. The
junior subordinated debentures will be governed by a document we refer to in
this prospectus as the "junior debt indenture." See "Description of Junior
Subordinated Debentures" below for more information. The payments terms of the
junior subordinated debentures will be virtually the same as the terms of each
AIG Capital Trust's capital securities.
Under certain circumstances, we may redeem the junior subordinated
debentures that we sold to an AIG Capital Trust. If this happens, the AIG
Capital Trust will redeem a like amount of the capital securities which it sold
to the public and the common securities which it sold to us. See "Description of
Capital Securities the AIG Capital Trusts May Offer -- Rights of Holders of
Capital Securities -- Redemption or Exchange" for more information.
Under certain circumstances, we may terminate an AIG Capital Trust and
cause the junior subordinated debentures to be distributed to the holders of the
capital securities. If this happens, owners of the capital securities will no
longer have any interest in such AIG Capital Trust and will only own the junior
subordinated debentures we issued to such AIG Capital Trust.
ADMINISTRATION OF THE AIG CAPITAL TRUSTS
The business and affairs of the AIG Capital Trusts will be administered by
the property trustee. Unless otherwise specified in your prospectus supplement,
the property trustee for each AIG Capital Trust will be The Bank of New York,
101 Barclay Street, New York, New York 10286. The AIG Capital Trusts will each
have a Delaware trustee, as required under Delaware law, which is an entity or a
natural person that is a resident of the State of Delaware. Unless otherwise
specified in your prospectus supplement, the name and address of the Delaware
trustee for each AIG Capital Trust will be The Bank of New York (Delaware),
White Clay Center, Route 273, Newark, Delaware 19711. The AIG Capital Trusts
will each have three administrators. Unless otherwise specified in your
prospectus supplement, the administrators will be officers, employees or
affiliates of AIG and will be named in your prospectus supplement.
We will pay all fees and expenses related to the organization of the AIG
Capital Trusts and the offering of the trust securities. We will also pay all
ongoing costs and expenses of the AIG Capital Trusts, except each trust's
obligations under the trust securities. Each AIG Capital Trust will also be a
party to an expense agreement with AIG. Under the terms of the expense
agreement, each AIG Capital Trust will have the right to be reimbursed by us for
certain expenses.
DESCRIPTION OF COMMON SECURITIES THE AIG CAPITAL TRUSTS MAY OFFER
We will hold directly or indirectly all of the common securities of each of
the AIG Capital Trusts. Unless otherwise specified in your prospectus
supplement, the common securities will represent an aggregate liquidation amount
equal to at least 3% of each AIG Capital Trust's total capitalization. The
capital securities will represent the remaining percentage of each AIG Capital
Trust's total capitalization. The common securities will have terms
substantially identical to, and will rank equal in priority of payment with, the
capital securities. However, if we default in payments due under the junior
subordinated debentures owned by an AIG Capital Trust, then distributions,
redemption payments and liquidation distributions must be paid to the holders of
the capital securities of the applicable AIG Capital Trust before any payments
are paid to the holders of the common securities of that trust.
Only we, as direct or indirect owner of the common securities, can remove
or replace the administrators. In addition, we can increase or decrease the
number of administrators. Also, we, as direct or indirect holder of the common
securities, will generally have the sole right to remove or replace the property
trustee and Delaware trustee. However, if we default in payments due on the
junior subordinated debentures owned by an AIG Capital Trust, then, so long as
that default is continuing, the holders of a majority in liquidation amount
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of the outstanding capital securities of that trust may remove and replace the
property trustee and Delaware trustee for that trust.
DESCRIPTION OF CAPITAL SECURITIES THE AIG CAPITAL TRUSTS MAY OFFER
Each AIG Capital Trust may issue only one series of capital securities and
one series of common securities pursuant to the trust agreement for each AIG
Capital Trust.
Because this section is a summary, it does not describe every aspect of the
capital securities and the trust agreements. This summary is subject to and
qualified in its entirety by reference to all the provisions of the trust
agreements, including the definitions of certain terms, and those provisions
made part of each trust agreement by the Trust Indenture Act. A form of the
trust agreement to be used in connection with the issuance of the capital
securities and a form of the capital securities are filed as exhibits to our
registration statement that includes this prospectus. Wherever particular
defined terms of a trust agreement are referred to in this prospectus, those
defined terms are incorporated in this prospectus by reference. A copy of the
form of the trust agreement is available upon request from the property trustee
of the relevant trust.
This summary also is subject to and qualified by reference to the
description of the particular terms of your capital securities described in your
prospectus supplement. Those terms may vary from the terms described in this
prospectus. Your prospectus supplement relating to the capital securities will
be attached to the front of this prospectus.
GENERAL
Pursuant to the terms of the trust agreement for each AIG Capital Trust,
the AIG Capital Trusts will sell capital securities and common securities. The
capital securities will represent preferred undivided beneficial interests in
the assets of an AIG Capital Trust and will benefit from a subordinated
guarantee executed by us for the benefit of the holders of an AIG Capital
Trust's capital securities. The guarantee will be made on a subordinated basis
and will not guarantee payment of distributions or amounts payable on redemption
or liquidation of such capital securities when the applicable AIG Capital Trust
does not have funds on hand available to make such payments. See "Description of
the Subordinated Guarantees."
Each AIG Capital Trust will describe the specific terms of the capital
securities it is offering in your prospectus supplement, including:
- the specific designation, liquidation amount, number to be issued by the
AIG Capital Trust and purchase price;
- the currency or currency units based on or relating to currencies in
which distributions and other payments will or may be payable;
- the distribution rates, or the method by which the rates will be
determined, if any;
- the dates on which any distributions will be payable;
- any provisions relating to deferral of distribution payments;
- the places where distributions and other amounts payable on the capital
securities will be payable;
- any repayment, redemption, prepayment or sinking fund provisions;
- any conversion or exchange provisions;
- the voting rights, if any, of holders of the capital securities;
- the terms and conditions, if any, upon which the assets of the AIG
Capital Trust may be distributed to holders of the capital securities;
- any securities exchange on which the capital securities will be listed;
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- any applicable U.S. federal income tax consequences; and
- any other specific terms of the capital securities.
If indicated in your prospectus supplement, the terms of the trust
agreement for, and capital securities offered by, an AIG Capital Trust may
differ from the terms summarized in this prospectus.
OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- RIGHTS OF HOLDERS OF CAPITAL SECURITIES, relative to holders of common
securities, such as the right of holders of capital securities to receive
distributions and amounts on the liquidation, dissolution or winding-up
of an AIG Capital Trust;
- Holders' rights in several SPECIAL SITUATIONS, such as if an AIG Capital
Trust merges with another trust or if the holders of trust securities
want to amend the trust agreements;
- Information relating to the TRUSTEES AND ADMINISTRATORS OF THE AIG
CAPITAL TRUSTS;
- Trust securities holders' rights if certain DEFAULTS occur under the
trust agreement or we default under the junior debt indenture or
experience other financial difficulties; and
- Certain MISCELLANEOUS matters relating to the conduct and operation of
the AIG Capital Trusts, the absence of preemptive rights of the holders
of trust securities, notices to holders of trust securities, the payment
of expenses and taxes of the AIG Capital Trusts and the form in which the
capital securities may be issued.
RIGHTS OF HOLDERS OF CAPITAL SECURITIES
DISTRIBUTIONS
Distributions on the capital securities will be cumulative and payable at a
rate specified in your prospectus supplement. Distributions will accumulate from
the date of original issuance and will be payable on the dates specified in your
prospectus supplement. Unless otherwise specified in your prospectus supplement,
the amount of distributions payable for any period less than a full distribution
period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual days elapsed in a partial month in that period. Distributions to
which holders of capital securities are entitled may accumulate additional
distributions at the rate per annum if and as specified in your prospectus
supplement. The term "distributions" includes these additional distributions
unless we state otherwise in your prospectus.
If provided in your prospectus supplement, so long as no payment default on
the junior subordinated debentures owned by an AIG Capital Trust has occurred
and is continuing, we will have the right at any time and from time to time
during the term of any series of junior subordinated debentures to defer payment
of interest for up to the number of consecutive interest payment periods that is
specified in the applicable prospectus supplement, referred to as an "extension
period." If an extension period occurs with respect to the junior subordinated
debentures, distributions on the capital securities will be correspondingly
deferred, but would continue to accumulate additional distributions at the rate
per annum set forth in the prospectus supplement for the capital securities. See
"Description of Junior Subordinated Debentures -- Option to Defer Interest
Payments."
The revenue of each AIG Capital Trust available for distribution to holders
of its capital securities will be limited to payments under the junior
subordinated debentures that the AIG Capital Trust will acquire with the
proceeds from the issuance and sale of its trust securities. If we do not make
interest payments on the junior subordinated debentures, the property trustee
will not have funds available to pay distributions on the capital securities.
The payment of distributions, if and to the extent the AIG Capital Trust has
funds legally available
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for the payment of distributions and cash sufficient to make payments, is
guaranteed by us on a subordinated basis as described under the heading
"Description of the Subordinated Guarantees."
REDEMPTION OR EXCHANGE
Mandatory Redemption. Upon the repayment or redemption, in whole or in
part, of any junior subordinated debentures, whether at maturity or upon earlier
redemption, as provided in the junior debt indenture, the proceeds from the
repayment or redemption will be applied by the property trustee to redeem a like
amount of the trust securities at a redemption price equal to the aggregate
liquidation amount of such trust securities plus accumulated but unpaid
distributions to the date of redemption and the related amount of the premium,
if any, paid by us upon the concurrent redemption of the junior subordinated
debentures. See "Description of Junior Subordinated Debentures -- Redemption."
If less than all of any series of junior subordinated debentures are to be
repaid or redeemed on a redemption date, then the proceeds from the repayment or
redemption will be allocated to the redemption pro rata of the capital
securities and the common securities based upon the relative liquidation amounts
of these classes. The amount of premium, if any, paid by us upon the redemption
of all or any part of any series of any junior subordinated debentures to be
repaid or redeemed on a redemption date will be allocated to the redemption pro
rata of the capital securities and the common securities. The redemption price
will be payable on each redemption date only to the extent that the AIG Capital
Trust has funds then on hand and available in the payment account for the
payment of the redemption price.
We will have the right to redeem any series of junior subordinated
debentures:
- on or after such date as may be specified in your prospectus supplement,
in whole at any time or in part from time to time;
- at any time, in whole, but not in part, upon the occurrence of a tax
event or an investment company event; or
- as may be otherwise specified in your prospectus supplement.
Distribution of Junior Subordinated Debentures. We have the right at any
time to terminate any AIG Capital Trust and, after satisfaction of the
liabilities of creditors of the AIG Capital Trust as provided by applicable law,
cause the junior subordinated debentures with respect to the capital securities
and common securities issued by the AIG Capital Trust to be distributed to the
holders of the capital securities and common securities in liquidation of the
AIG Capital Trust.
Tax Event or Investment Company Event Redemption. We have rights if
certain events, called tax events and investment company events, occur and are
continuing. The tax events and investment company events are described under
"Description of Junior Subordinated Debentures -- Redemption."
If a tax event or an investment company event with respect to the capital
securities and common securities has occurred and is continuing, we have the
right to:
- redeem the junior subordinated debentures in whole, but not in part, and
thereby cause a mandatory redemption of the capital securities and common
securities in whole, but not in part, at the redemption price within 90
days following the occurrence of the tax event or investment company
event; or
- liquidate the applicable AIG Capital Trust and cause the junior
subordinated debentures to be distributed to holders of the capital
securities and common securities in liquidation of the AIG Capital Trust.
If a tax event has occurred and is continuing with respect to a series of
capital securities and common securities and we do not elect to redeem the
junior subordinated debentures or liquidate the AIG Capital Trust and cause the
distribution of the junior subordinated debenture, such capital securities will
remain outstanding and certain additional sums may be payable on the junior
subordinated debentures.
The term "additional sums" means the additional amounts as may be necessary
in order that the amount of distributions then due and payable by an AIG Capital
Trust on the outstanding capital securities and
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common securities of such AIG Capital Trust will not be reduced as a result of
any additional taxes, duties and other governmental charges to which such AIG
Capital Trust has become subject as a result of a tax event.
The term "like amount" means:
- with respect to a redemption of trust securities of an AIG Capital Trust,
trust securities of that series having a liquidation amount equal to the
principal amount of junior subordinated debentures to be
contemporaneously redeemed in accordance with the junior debt indenture,
the proceeds of which will be used to pay the redemption price of the
trust securities; and
- with respect to a distribution of junior subordinated debentures to
holders of trust securities of an AIG Capital Trust in connection with a
dissolution or liquidation of such AIG Capital Trust, junior subordinated
debentures having a principal amount equal to the liquidation amount of
the trust securities with respect to which the distribution is made.
The term "liquidation amount" means the stated amount per trust security.
This amount will be $25 unless another amount is set forth in your prospectus
supplement.
After the liquidation date fixed for any distribution of junior
subordinated debentures for any series of capital securities:
- the series of capital securities will no longer be deemed to be
outstanding;
- The Depository Trust Company, commonly referred to as DTC, or its
nominee, as the record holder of the applicable capital securities, will
receive a registered global certificate or certificates representing the
junior subordinated debentures to be delivered upon the distribution; and
- any certificates representing the capital securities not held by DTC or
its nominee will be deemed to represent the junior subordinated
debentures having a principal amount equal to the stated liquidation
amount of the capital securities, and bearing accrued and unpaid interest
in an amount equal to the accrued and unpaid distributions on the capital
securities until the certificates are presented to the administrators or
their agent for transfer or reissuance.
REDEMPTION PROCEDURES
Capital securities redeemed on each redemption date will be redeemed at the
redemption price with the applicable proceeds from the contemporaneous
redemption of the junior subordinated debentures. Redemptions of the capital
securities will be made and the redemption price will be payable on each
redemption date only to the extent that the applicable AIG Capital Trust has
funds on hand available for the payment of the redemption price. See also
"-- Subordination of Common Securities."
If the property trustee gives a notice of redemption with respect to any
capital securities, then, while such capital securities are in book-entry form,
by 12:00 noon, New York City time, on the redemption date, to the extent funds
are available, the property trustee will deposit irrevocably with DTC funds
sufficient to pay the applicable redemption price and will give DTC irrevocable
instructions and authority to pay the redemption price to the holders of the
capital securities. If the capital securities are no longer in book-entry form,
the property trustee, to the extent funds are available, will irrevocably
deposit with the paying agent for the capital securities funds sufficient to pay
the applicable redemption price and will give the paying agent irrevocable
instructions and authority to pay the redemption price to the holders upon
surrender of their certificates evidencing the capital securities. Distributions
payable on or prior to the redemption date for any capital securities called for
redemption will be payable to the holders of the capital securities on the
relevant record dates for the related distribution dates. If notice of
redemption has been given and funds deposited as required, then upon the date of
the deposit, all rights of the holders of the capital securities so called for
redemption will cease, except the right of the holders of the capital securities
to receive the redemption price and any distributions payable with respect to
the capital securities on or prior to the redemption date and the capital
securities will cease to be outstanding. Your prospectus supplement will contain
additional information about procedures for redemption of the capital
securities.
7
In the event that payment of the redemption price with respect to capital
securities called for redemption is improperly withheld or refused and not paid
either by an AIG Capital Trust or by us pursuant to the applicable subordinated
guarantee as described under "Description of the Subordinated Guarantees,"
distributions on the capital securities will continue to accrue at the then
applicable rate from the redemption date originally established by the
applicable AIG Capital Trust for the capital securities to the date the
redemption price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the redemption price.
Subject to applicable law, we or our subsidiaries may at any time and from
time to time purchase outstanding capital securities, in the open market or by
private agreement.
Payment of the redemption price on the capital securities and any
distribution of junior subordinated debentures to holders of capital securities
will be made to the applicable record holders as they appear on the register for
the capital securities on the relevant record date, which, as long as the
capital securities remain in book-entry form, will be one business day prior to
the relevant redemption date or liquidation date, as applicable; provided,
however, that in the event that the capital securities are not in book-entry
form, the relevant record date for the capital securities will be a date at
least 15 days prior to the redemption date or liquidation date, as applicable,
as specified in your prospectus supplement.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS, BROKERS OR
OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS.
If less than all of the capital securities and common securities issued by
an AIG Capital Trust are to be redeemed on a redemption date, then the aggregate
liquidation amount of the capital securities and common securities to be
redeemed will be allocated pro rata to the capital securities and the common
securities based upon the relative liquidation amounts of these classes. The
particular capital securities to be redeemed will be selected on a pro rata
basis not more than 60 days prior to the redemption date by the property trustee
from the outstanding capital securities not previously called for redemption, by
a customary method that the property trustee deems fair and appropriate and
which may provide for the selection for redemption of portions (equal to $25 or
an integral multiple of $25, unless a different amount is specified in your
prospectus supplement) of the liquidation amount of capital securities. The
property trustee will promptly notify the securities registrar in writing of the
capital securities selected for redemption and, in the case of any capital
securities selected for partial redemption, the liquidation amount to be
redeemed. For all purposes of each trust agreement, unless the context otherwise
requires, all provisions relating to the redemption of capital securities will
relate, in the case of any capital securities redeemed or to be redeemed only in
part, to the portion of the aggregate liquidation amount of capital securities
which has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust securities to be
redeemed at its registered address. Unless we default in payment of the
redemption price on the junior subordinated debentures, on and after the
redemption date interest will cease to accrue on the junior subordinated
debentures or portions thereof called for redemption and, consequently,
distributions will cease to accrue on the applicable capital securities or
portions thereof.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and other amounts payable under, the capital
securities and the common securities issued by an AIG Capital Trust will be made
proportionately based on the liquidation amount of the capital securities and
the common securities. However, unless otherwise provided in your prospectus
supplement, if on any distribution date or other payment date, an event of
default with respect to the junior subordinated debentures owned by the AIG
Capital Trust has occurred and is continuing as a result of any failure by us to
pay any amounts with respect to the junior subordinated debentures when due, no
payment of any distribution on, or other amounts payable under, the common
securities will be made unless cash payment in full of all accumulated amounts
then due and payable with respect to all of the AIG Capital Trust's
8
outstanding capital securities has been made or provided for, and all funds
available to the property trustee will first be applied to the cash payment in
full of all distributions on, and all other amounts with respect to, capital
securities then due and payable. See below under "Description of Junior
Subordinated Debentures -- Events of Default" for more information about what
constitutes an event of default with respect to the junior subordinated
debentures owned by the AIG Capital Trust.
In the case of any event of default under the trust agreement resulting
from any failure by us to pay any amounts with respect to the junior
subordinated debentures owned by the AIG Capital Trust, we, as the holder of the
applicable AIG Capital Trust's common securities, will have no right to act with
respect to such event of default under the applicable trust agreement until the
effect of all those events of default with respect to the capital securities
have been cured, waived or otherwise eliminated. Until the events of default
under the trust agreement resulting from such payment defaults with respect to
the junior subordinated debentures have been cured, waived or otherwise
eliminated, the property trustee will act solely on behalf of the holders of the
capital securities and not on behalf of the holders of the common securities,
and only the holders of the capital securities will have the right to direct the
property trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to each trust agreement, each AIG Capital Trust will terminate on
the first to occur of:
- the expiration of its term;
- certain events of bankruptcy, dissolution or liquidation of the holder of
the common securities;
- the distribution of a like amount of the junior subordinated debentures
to the holders of its trust securities, if we, as sponsor, in our sole
discretion, have given written direction to the property trustee to
terminate the applicable AIG Capital Trust;
- redemption of all of such AIG Capital Trust's capital securities as
described above under "-- Redemption or Exchange -- Mandatory
Redemption;" and
- the entry of an order for the dissolution of such AIG Capital Trust by a
court of competent jurisdiction.
If an early termination occurs as described in the second, third and fifth
bullet points above, the applicable AIG Capital Trust will be liquidated by the
AIG Capital Trust trustees as expeditiously as the AIG Capital Trust trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the AIG Capital Trust as provided by applicable law, to the holders
of the trust securities a like amount of the junior subordinated debentures in
exchange for their trust securities, unless the distribution is determined by
the administrators not to be practical, in which event the holders will be
entitled to receive out of the assets of the AIG Capital Trust available for
distribution to holders, after satisfaction of liabilities to creditors of such
AIG Capital Trust as provided by applicable law, an amount equal to, in the case
of holders of capital securities, the aggregate of the liquidation amount plus
accrued and unpaid distributions to the date of payment, which we refer to as
the "liquidation distribution." If the liquidation distribution can be paid only
in part because the AIG Capital Trust has insufficient assets available to pay
in full the aggregate liquidation distribution, then the amounts payable
directly by the AIG Capital Trust on its capital securities will be paid on a
pro rata basis. The holder of the AIG Capital Trust's common securities will be
entitled to receive distributions upon any liquidation pro rata with the holders
of its capital securities, except that if an event of default with respect to
the junior subordinated debentures owned by the AIG Capital Trust has occurred
and is continuing as a result of any failure by us to pay any amounts with
respect to the junior subordinated debentures when due, the capital securities
will have a priority over the common securities. See "-- Subordination of Common
Securities" above.
PAYMENT AND PAYING AGENTS
Your prospectus supplement will specify the manner in which payments of
distributions with respect to the capital securities will be made. The paying
agent for capital securities will initially be the property trustee and any
co-paying agent chosen by the property trustee and acceptable to the
administrators. The paying agent
9
will be permitted to resign as paying agent upon 30 days' written notice to the
property trustee and the administrators. If the property trustee is no longer
the paying agent, the property trustee will appoint a successor (which must be a
bank or trust company) reasonably acceptable to the administrators to act as
paying agent.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS, BROKERS OR
OTHER FINANCIAL INSTITUTIONS FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable prospectus supplement, the
property trustee will act as registrar and transfer agent for the capital
securities.
Holders will not be required to pay a service charge to transfer or
exchange their capital securities, but they may be required to pay for any tax
or other governmental charges associated with such transfer or exchange.
The registrar shall not be required to:
- issue, register the transfer of or exchange any capital securities during
a period beginning at the opening of business 15 days before the day of
selection for redemption of capital securities and ending at the close of
business on the day of mailing of the relevant notice of redemption; or
- register the transfer of or exchange any capital security so selected for
redemption in whole or in part, except, in the case of any such capital
security to be redeemed in part, any portion thereof not to be redeemed.
SPECIAL SITUATIONS
MERGERS AND SIMILAR EVENTS RELATING TO THE AIG CAPITAL TRUSTS
An AIG Capital Trust may not merge with or into, consolidate or amalgamate
with, be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any entity, except as described below or as
otherwise set forth in the applicable trust agreement. An AIG Capital Trust may,
at the request of the holders of its common securities and with the consent of
the holders of at least a majority in aggregate liquidation amount of its
outstanding capital securities, merge with or into, consolidate or amalgamate
with, be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, an entity organized as a trust under the laws
of any state of the U.S., so long as:
- the successor entity either:
-- agrees to be legally responsible for all the obligations of the AIG
Capital Trust under the trust agreement and the capital securities, or
-- substitutes for the capital securities of that AIG Capital Trust other
securities having substantially the same terms as those capital
securities so long as the successor securities have the same priority
as the capital securities with respect to distributions and payments
upon liquidation, redemption and otherwise;
- the successor entity has a trustee possessing the same powers and duties
as the property trustee;
- the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect in any material respect the
rights, preferences and privileges of the holders of the capital
securities (including any successor capital securities);
- the successor entity has a purpose substantially identical to that of the
AIG Capital Trust;
10
- prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the property trustee and Delaware trustee
have received an opinion from counsel experienced in these matters to the
effect that:
-- the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect in any material respect the
rights, preferences and privileges of the holders of the capital
securities (including any successor capital securities) of that AIG
Capital Trust, and
-- following the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the AIG Capital Trust nor the
successor entity will be required to register as an "investment
company" under the Investment Company Act of 1940; and
- AIG or any permitted transferee to whom AIG has transferred the common
securities owns, directly or indirectly, all of the common securities of
the successor entity and guarantees the obligations of the successor
entity with respect to the successor securities at least to the extent
provided by the applicable subordinated guarantee with respect to the
capital securities.
An AIG Capital Trust may not, except with the consent of holders of 100% in
aggregate liquidation amount of the capital securities of that AIG Capital
Trust, merge with or into, consolidate or amalgamate with, or be replaced by, or
convey, transfer or lease its properties and assets substantially as an entirety
to, any other entity or permit any other entity to merge with or into,
consolidate or amalgamate with, or replace it if such consolidation,
amalgamation, merger, replacement, conveyance, transfer or lease would cause the
AIG Capital Trust or the successor entity to be taxable as a corporation for
U.S. federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENTS
Except as provided in this section and below under "-- Trustees and
Administrators of the AIG Capital Trusts -- Removal of AIG Capital Trustees;
Appointment of Successors" and "Description of the Subordinated
Guarantees -- Additional Information Relating to the Subordinated
Guarantees -- Amendments and Assignment" and as otherwise required by law and
the applicable trust agreement, the holders of the capital securities will have
no voting rights.
There are three types of changes holders of the trust securities can make
to a trust agreement and the capital securities issued under that trust
agreement.
Changes Requiring Approval of All Holders of Trust Securities and the
Property Trustee. First, there are changes that cannot be made to your capital
securities without the consent of each holder of trust securities affected by
the change under a trust agreement and the property trustee:
- change the amount or timing of any distribution on the trust securities
or otherwise adversely affect in any material respect the amount of any
distribution required to be made with respect to the trust securities as
of a specified date; or
- restrict the right of a holder of trust securities to institute suit for
the enforcement of payment of any distribution on the trust securities on
or after such date.
Changes Requiring Approval of the Holders of Common Securities and the
Property Trustee. The second type of change to the trust agreement and the
capital securities is the kind that does not require the consent of any holders
of capital securities. This type of change is limited to clarifications and
certain other changes that would not adversely affect in any material respect
holders of the capital securities. Such changes may be made to:
- cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to make
any other provisions with respect to matters or questions arising under
the trust agreement, provided that the amendment will not adversely
affect in any material respect the interests of any holder of trust
securities; or
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- modify, eliminate or add to any provisions of the trust agreement to the
extent necessary to ensure that the AIG Capital Trust will not be taxable
as a corporation for United States federal income tax purposes or to
ensure that the AIG Capital Trust will not be required to register as an
"investment company" under the Investment Company Act of 1940.
Any amendment of the trust agreement and the capital securities without the
consent of the holders of the capital securities will become effective when
notice of the amendment is given to the holders of trust securities.
Changes Requiring Consent of a Majority of Holders of Capital
Securities. The third type of change to the trust agreements and the capital
securities is the kind that requires the consent of at least a majority in
aggregate liquidation amount of the outstanding capital securities. Each trust
agreement may be amended by the holders of at least a majority in aggregate
liquidation amount of the common securities and the property trustee so long as
holders representing at least a majority in aggregate liquidation amount of the
outstanding capital securities consent. Most changes fall into this category,
except for clarifying changes and certain other changes that would not adversely
affect in any material respect holders of the capital securities.
Further Details Concerning Voting. Any required approval of holders of
capital securities may be given at a meeting of holders of capital securities
convened for that purpose or pursuant to written consent. The property trustee
will cause a notice of any meeting at which holders of capital securities are
entitled to vote, or of any matter upon which action by written consent of the
holders is to be taken, to be given to each registered holder of capital
securities in the manner set forth in the applicable trust agreement.
No vote or consent of the holders of capital securities will be required to
redeem and cancel the capital securities in accordance with the applicable trust
agreement.
Any capital securities that are owned by us or any of our affiliates will,
for purposes of a vote or consent under any of the circumstances described
above, be treated as if they were not outstanding.
The property trustee may not take any of the actions referenced above in
this subsection until the Delaware trustee and the property trustee receive of
an opinion of counsel that the amendment or the exercise of any power granted to
the Delaware trustee and the property trustee in accordance with the amendment
will not cause the AIG Capital Trust to be taxable as a corporation for U.S.
federal income tax purposes or affect the AIG Capital Trust's exemption from
status as an "investment company" under the Investment Company Act of 1940.
Details Concerning Voting and the Junior Subordinated Debentures. So long
as any junior subordinated debentures are held by an AIG Capital Trust, the
property trustee will not:
- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee under the junior debt indenture, which we
refer to as the "indenture trustee,"
- waive any past default that may be waived under the junior debt indenture
unless all defaults have been cured and all payment obligations have been
made current,
- exercise any right to rescind or annul a declaration of acceleration of
the maturity of the principal amount of the junior subordinated
debentures unless all defaults have been cured and a sum sufficient to
pay all amounts then owing has been deposited with the indenture trustee,
or
- consent to any amendment, modification or termination of the junior debt
indenture or junior subordinated debentures, where consent is required,
without, in each case, obtaining the prior approval of the holders of at least a
majority in aggregate liquidation amount of the outstanding capital securities.
However, if a consent under the junior debt indenture would require the consent
of each holder of the junior subordinated debentures affected, no consent will
be given by the property trustee without the prior consent of each holder of
capital securities. See "Description of Junior Subordinated Debentures -- Events
of Default" for more information.
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The property trustee may not revoke any action previously authorized or
approved by a vote of the holders of the capital securities issued by an AIG
Capital Trust except by subsequent vote of the holders of the capital
securities.
The property trustee may not take any of the actions referenced above until
it receives an opinion of counsel that the amendment or the exercise of any
power granted to the Delaware trustee and the property trustee in accordance
with the amendment will not cause the AIG Capital Trust to be taxable as a
corporation for U.S. federal income tax purposes.
TRUSTEES AND ADMINISTRATORS OF THE AIG CAPITAL TRUSTS
INFORMATION CONCERNING THE TRUSTEES
The business and affairs of the AIG Capital Trusts will be administered by
the property trustee. Unless otherwise specified in your prospectus supplement,
the property trustee for each AIG Capital Trust will be The Bank of New York,
101 Barclay Street, New York, New York 10286. For information concerning the
relationships between The Bank of New York and us, see "-- Our Relationship with
the Property Trustee" below.
The property trustee will have various duties and powers, including, but
not limited to, the delivery of certain notices to the holders of trust
securities, the collection of payments made on the junior subordinated
debentures and the making of distributions to the holders of the trust
securities. Unless otherwise specified in your prospectus supplement, the
property trustee will act as registrar, transfer agent and paying agent with
respect to the capital securities. The duties and obligations of the property
trustee will be governed by the applicable trust agreement.
The property trustee, other than during the occurrence and continuance of
an event of default under the applicable trust agreement undertakes to perform
only those duties specifically set forth in each trust agreement or provided by
the Trust Indenture Act and, after an event of default under a trust agreement
has occurred that has not been cured or waived, must exercise the rights and
powers vested in it by the applicable trust agreement for the benefit of the
holders of trust securities using the same degree of care and skill as a prudent
person would exercise in the conduct of his or her own affairs. Subject to this
provision, the property trustee is under no obligation to exercise any of the
rights or powers vested in it by the applicable trust agreement, other than
those vested in it upon the occurrence of an event of default under a trust
agreement, at the request of any holder of trust securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred in complying with the request or direction. See "-- Events of Default"
below for more information about what constitutes an event of default under a
trust agreement.
The AIG Capital Trusts will each have a Delaware trustee for the sole and
limited purpose of fulfilling the requirements of the laws of the State of
Delaware and for taking such actions as are required to be taken by the laws of
the State of Delaware. The Delaware trustee must be an entity or a natural
person that is a resident of the State of Delaware. Unless otherwise specified
in your prospectus supplement, the name and address of the Delaware trustee for
each AIG Capital Trust will be The Bank of New York (Delaware), White Clay
Center, Route 273, Newark, Delaware 19711.
INFORMATION CONCERNING THE ADMINISTRATORS
The AIG Capital Trusts will each have three administrators. Unless
otherwise specified in your prospectus supplement, the administrators will be
officers, employees or affiliates of AIG and will be named in your prospectus
supplement. The administrators will have various duties and powers including,
but not limited to, executing documents in connection with the sale of the trust
securities and the purchase of the junior subordinated debentures, executing the
trust securities on behalf of the AIG Capital Trusts and assisting in the
compliance with state and federal securities laws.
Only AIG, as the owner of the common securities, can remove or replace the
administrators. In addition, AIG can increase or decrease the number of
administrators.
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REMOVAL OF AIG CAPITAL TRUSTEES; APPOINTMENT OF SUCCESSORS
The holders of at least a majority in aggregate liquidation amount of the
outstanding capital securities may remove the property trustee or the Delaware
trustee if an event of default with respect to the junior subordinated
debentures owned by the AIG Capital Trust has occurred and is continuing as a
result of any failure by us to pay any amounts with respect to the junior
subordinated debentures when due. If a property trustee or Delaware trustee is
removed by the holders of the outstanding capital securities, the successor may
be appointed by the holders of at least a majority in liquidation amount of the
outstanding capital securities. If a property trustee or Delaware trustee
resigns, the resigning property trustee or Delaware trustee will appoint its
successor. If a resigning property trustee or Delaware trustee fails to appoint
a successor and if an event of default with respect to the junior subordinated
debentures has occurred and is continuing as a result of any failure by us to
pay any amounts with respect to the junior subordinated debentures when due, the
holders of at least a majority in liquidation amount of the outstanding capital
securities may appoint a successor; otherwise, the holder of the common
securities may appoint a successor. If a successor has not been appointed by the
holders, any holder of capital securities or common securities or the property
trustee or the Delaware trustee may petition a court of competent jurisdiction
to appoint a successor. Any Delaware trustee must meet the applicable
requirements of Delaware law. Any property trustee must be a national- or
state-chartered bank and at the time of appointment have capital and surplus of
at least $50,000,000. No resignation or removal of a property trustee or
Delaware trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor trustee in accordance with
the provisions of the applicable trust agreement.
MERGER OR CONSOLIDATION OF AIG CAPITAL TRUSTEES
Any entity into which a property trustee or Delaware trustee is merged or
converted or with which it is consolidated, or any entity resulting from any
merger, conversion or consolidation to which the property trustee or the
Delaware trustee is a party, or any entity succeeding to all or substantially
all the corporate trust business of the property trustee or the Delaware
trustee, will be the successor of that property trustee or Delaware trustee
under each trust agreement, provided it is otherwise qualified and eligible.
OUR RELATIONSHIP WITH THE PROPERTY TRUSTEE
The Bank of New York is one of our lenders and from time to time provides
other banking services to us and our subsidiaries.
The Bank of New York is initially serving as the trustee for our senior
debt securities, our subordinated debt securities and the warrants issued under
our warrant indenture, as well as the trustee under the amended and restated
trust agreements and subordinated guarantees. Consequently, if an actual or
potential event of default occurs with respect to any of these securities or a
trust agreement or subordinated guarantee, the trustee may be considered to have
a conflicting interest for purposes of the Trust Indenture Act of 1939. In that
case, the trustee may be required to resign under one or more of the indentures
or trust agreements, and we would be required to appoint a successor trustee.
For this purpose, a "potential" event of default means an event that would be an
event of default if the requirements for giving us default notice or for the
default having to exist for a specific period of time were disregarded.
EVENTS OF DEFAULT
You will have special rights if an event of default with respect to your
capital security occurs and is continuing, as described in this subsection.
What is an Event of Default? Each of the following is an event of default
under a trust agreement:
- the occurrence of an event of default with respect to the junior
subordinated debentures held by the applicable AIG Capital Trust. For
more information, see "Description of Junior Subordinated
Debentures -- Events of Default;"
14
- default by the applicable AIG Capital Trust in the payment of any
distribution on the capital securities when it becomes due and payable,
and continuation of the default for a period of 30 days;
- default by the applicable AIG Capital Trust in the payment of any
redemption price of any trust security issued pursuant to its trust
agreement when it becomes due and payable and the continuation of the
default for a period of five days; or
- the occurrence of certain events of bankruptcy or insolvency with respect
to the property trustee or all or substantially all of its property if a
successor property trustee has not been appointed within 90 days of the
event.
Within five business days after the occurrence of any event of default
under the trust agreement actually known to the property trustee, the property
trustee will transmit notice of the event of default to the holders of the trust
securities and the administrators, unless the event of default under the trust
agreement has been cured or waived. In addition, the property trustee will
notify each holder of the capital securities of any notice of default received
by it with respect to the junior subordinated debentures.
We, as sponsor, and the administrators are required to file annually with
the property trustee a certificate as to whether or not the applicable AIG
Capital Trust is in compliance with all the conditions and covenants under its
trust agreement.
If an event of default with respect to the junior subordinated debentures
has occurred and is continuing as a result of any failure by us to pay any
amounts with respect to the junior subordinated debentures owned by an AIG
Capital Trust when due, the capital securities issued by that AIG Capital Trust
will have a preference over the common securities issued by the AIG Capital
Trust with respect to payments of any amounts with respect to the capital
securities as described above under "-- Rights of Holders of Capital
Securities -- Subordination of Common Securities." THE EXISTENCE OF AN EVENT OF
DEFAULT DOES NOT ENTITLE THE HOLDERS OF CAPITAL SECURITIES TO ACCELERATE THE
MATURITY OF THE CAPITAL SECURITIES OR DEMAND EARLY REPAYMENT OF THE CAPITAL
SECURITIES.
MISCELLANEOUS
CONDUCT AND OPERATION OF THE TRUST
The administrators and the property trustee of each AIG Capital Trust are
authorized and directed to conduct the affairs of, and to operate, the
applicable AIG Capital Trust in such a way that the AIG Capital Trust will not
be deemed to be an "investment company" required to be registered under the
Investment Company Act or taxed as a corporation for U.S. federal income tax
purposes and so that the junior subordinated debentures owned by the applicable
AIG Capital Trust will be treated as indebtedness of AIG for U.S. federal income
tax purposes. In this regard, the property trustee and the holders of common
securities are authorized to take any action, not inconsistent with applicable
law or the certificate of trust or the trust agreement of the applicable AIG
Capital Trust, that the property trustee and the holders of common securities
determine in their discretion to be necessary or desirable for those purposes,
as long as the action does not materially adversely affect the interests of the
holders of the capital securities of the applicable AIG Capital Trust.
The AIG Capital Trusts may not borrow money, issue debt or mortgage or
pledge any of their assets.
PREEMPTIVE RIGHTS
Holders of the trust securities have no preemptive or similar rights.
NOTICES
The property trustee will send notices regarding the capital securities
only to holders, using their addresses as listed in the trustee's records. With
respect to who is deemed a "holder" for this purpose, see "Legal Ownership and
Book-Entry Issuance."
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EXPENSES AND TAXES
In the junior subordinated debentures owned by an AIG Capital Trust, we, as
borrower, will agree to pay all debts and other obligations, other than with
respect to the capital securities issued by an AIG Capital Trust, and all costs
and expenses of an AIG Capital Trust and to pay any and all taxes and all costs
and expenses with respect to those taxes, other than U.S. withholding taxes, to
which an AIG Capital Trust might become subject. The foregoing obligations under
the junior subordinated debentures owned by an AIG Capital Trust are for the
benefit of, and shall be enforceable by, any person to whom any of those debts,
obligations, costs, expenses and taxes payable by an AIG Capital Trust are owed,
whether or not that person has received notice of the debts, obligations, costs,
expenses or taxes. Any such person may enforce these obligations directly
against us, and we will irrevocably waive any right or remedy to require that
person to take any action against an AIG Capital Trust or any other person
before proceeding against us. We will also agree in the junior subordinated
debentures owned by an AIG Capital Trust to execute additional agreements
necessary or desirable to give full effect to the foregoing.
GLOBAL CAPITAL SECURITIES
Unless otherwise set forth in a prospectus supplement, any capital
securities will be represented by fully registered global certificates issued as
global capital securities that will be deposited with, or on behalf of, a
depositary with respect to that series instead of paper certificates issued to
each individual holder. The depositary arrangements that will apply, including
the manner in which the liquidation amount of and premium, if any, and
distributions on capital securities will be payable, are discussed in more
detail under the heading "Legal Ownership and Book-Entry Issuance."
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DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The junior subordinated debentures will be governed by a supplemental
indenture to our subordinated indenture, and will be a contract between AIG and
the indenture trustee, which will initially be The Bank of New York. We refer to
such supplemental indenture as the junior debt indenture in this prospectus.
The indenture trustee has two main roles:
1. The indenture trustee can enforce the rights of holders against us if
we default on our obligations under the terms of the junior debt
indenture or the junior subordinated debentures. There are some
limitations on the extent to which the indenture trustee acts on behalf
of holders, described below under "-- Events of Default -- Remedies If
an Event of Default Occurs."
2. The indenture trustee performs administrative duties for us, such as
sending interest payments to holders and notices, and transferring a
holder's junior subordinated debentures to a new buyer if a holder
sells.
The junior debt indenture and its associated documents contain the full
legal text of the matters described in this section. The junior debt indenture
and the junior subordinated debentures are governed by New York law. A copy of
our subordinated indenture is an exhibit to our registration statement. See
"Where You Can Find More Information" below for information on how to obtain a
copy.
GENERAL
We may issue as many distinct series of junior subordinated debentures
under the junior debt indenture as we wish. The provisions of the junior debt
indenture allow us not only to issue junior subordinated debentures with terms
different from those previously issued, but also to "reopen" a previous issue of
a series of junior subordinated debentures and issue additional junior
subordinated debentures of that series.
This section summarizes the material terms of the junior subordinated
debentures that are common to all series, although the prospectus supplement may
also describe differences from the material terms summarized here.
Because this section is a summary, it does not describe every aspect of the
junior subordinated debentures. This summary is subject to and qualified in its
entirety by reference to all the provisions of the junior debt indenture,
including definitions of certain terms used in the junior debt indenture. In
this summary, we describe the meaning of only some of the more important terms.
You must look to the junior debt indenture for the most complete description of
what we describe in summary form in this prospectus.
The prospectus supplement relating to any offered junior subordinated
debentures will describe the following terms of the series:
- the title of the series of the junior subordinated debentures;
- any limit on the aggregate principal amount of the junior subordinated
debentures;
- the date or dates on which the junior subordinated debentures will
mature;
- the rate or rates, which may be fixed or variable per annum, at which the
junior subordinated debentures will bear interest, if any, and the date
or dates from which that interest, if any, will accrue;
- the dates on which interest, if any, on the junior subordinated
debentures will be payable and the regular record dates for the interest
payment dates;
- our right, if any, to defer or extend an interest payment date;
- any mandatory or optional sinking funds or similar provisions;
17
- any additions, modifications or deletions in the events of default under
the junior debt indenture or covenants of AIG specified in the junior
debt indenture with respect to the junior subordinated debentures;
- the date, if any, after which and the price or prices at which the junior
subordinated debentures may, in accordance with any optional or mandatory
redemption provisions, be redeemed and the other detailed terms and
provisions of those optional or mandatory redemption provisions, if any;
- if other than denominations of $25 and any of its integral multiples, the
denominations in which the junior subordinated debentures will be
issuable;
- the currency of payment of principal, premium, if any, and interest on
the junior subordinated debentures;
- the applicability of the provisions described under "-- Defeasance"
below;
- any event of default under the junior subordinated debentures if
different from those described under "-- Events of Default" below;
- any index or indices used to determine the amount of payments of
principal of and premium, if any, on the junior subordinated debentures
and the manner in which such amounts will be determined;
- the terms and conditions of any obligation or right of us or a holder to
convert or exchange the junior subordinated debentures into capital
securities;
- the form of trust agreement, guarantee agreement and expense agreement,
if applicable;
- the relative degree, if any, to which such junior subordinated debentures
of the series will be senior to or be subordinated to other series of
such junior subordinated debentures or other indebtedness of AIG in right
of payment, whether such other series of junior subordinated debentures
or other indebtedness are outstanding or not; and
- any other special feature of the junior subordinated debentures.
OVERVIEW OF REMAINDER OF THIS DESCRIPTION
The remainder of this description summarizes:
- ADDITIONAL MECHANICS relevant to the junior subordinated debentures under
normal circumstances, such as how holders transfer ownership and where we
make payments;
- Our OPTION TO DEFER INTEREST PAYMENTS on the junior subordinated
debentures;
- Our right to REDEEM the junior subordinated debentures;
- Holders' rights in several SPECIAL SITUATIONS, such as if we merge with
another company or if we want to change a term of the junior subordinated
debentures;
- SUBORDINATION PROVISIONS that may prohibit us from making payment on the
junior subordinated debentures;
- Our right to release ourselves from all or some of our obligations under
the junior subordinated debentures and the junior debt indenture by a
process called DEFEASANCE;
- Holders' rights if we DEFAULT or experience other financial difficulties;
- Our ability to CONVERT OR EXCHANGE junior subordinated debentures into
junior subordinated debentures of another series or capital securities of
another series; and
- AGREEMENTS CONTAINED IN THE JUNIOR DEBT INDENTURE included for the
benefit of the holders of the junior subordinated debentures.
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ADDITIONAL MECHANICS
FORM, EXCHANGE AND TRANSFER
Unless we specify otherwise in the prospectus supplement, the junior
subordinated debentures will be issued:
- only in fully registered form; and
- in denominations that are even multiples of $25.
Unless the junior subordinated debentures are distributed to the holders of
the trust securities, all of the junior subordinated debentures will be held
solely by an AIG Capital Trust. The following provisions only apply if there is
a distribution of the junior subordinated debentures to holders of the trust
securities. The circumstances under which the junior subordinated debentures may
be exchanged for trust securities is described under "Description of Capital
Securities the AIG Capital Trusts May Offer -- Rights of Holders of Capital
Securities -- Redemption or Exchange."
If a junior subordinated debenture is issued as a global junior
subordinated debenture, only the depositary -- e.g., DTC Euroclear and
Clearstream, each as defined below under "Legal Ownership and Book-Entry
Issuance" -- will be entitled to transfer and exchange the junior subordinated
debenture as described in this subsection, since the depositary will be the sole
holder of that junior subordinated debenture. Those who own beneficial interests
in a global security do so through participants in the depositary's securities
clearance system, and the rights of these indirect owners will be governed
solely by the applicable procedures of the depositary and its participants. We
describe book-entry procedures below under "Legal Ownership and Book-Entry
Issuance."
Holders may have their junior subordinated debentures broken into more
junior subordinated debentures of smaller denominations of not less than $25 or
combined into fewer junior subordinated debentures of larger denominations, as
long as the total principal amount is not changed. This is called an exchange.
Subject to the restrictions relating to junior subordinated debentures
represented by global securities, holders may exchange or transfer junior
subordinated debentures at the office of the indenture trustee. They may also
replace lost, stolen or mutilated junior subordinated debentures at that office.
The indenture trustee acts as our agent for registering junior subordinated
debentures in the names of holders and transferring junior subordinated
debentures. We may change this appointment to another entity or perform it
ourselves. The entity performing the role of maintaining the list of registered
holders is called the security registrar. It will also perform transfers. The
indenture trustee's agent may require an indemnity before replacing any junior
subordinated debentures.
Holders will not be required to pay a service charge to transfer or
exchange junior subordinated debentures, but holders may be required to pay for
any tax or other governmental charge associated with the exchange or transfer.
The transfer or exchange will only be made if the security registrar is
satisfied with your proof of ownership.
If we designate additional transfer agents, they will be named in the
prospectus supplement. We may cancel the designation of any particular transfer
agent. We may also approve a change in the office through which any transfer
agent acts.
In the event of any redemption, neither we nor the indenture trustee will
be required to:
- issue, register the transfer of or exchange junior subordinated
debentures of any series during the period beginning at the opening of
business 15 days before the day of selection for redemption of junior
subordinated debentures of that series and ending at the close of
business on the day of mailing of the relevant notice of redemption; and
- transfer or exchange any junior subordinated debentures so selected for
redemption, except, in the case of any junior subordinated debentures
being redeemed in part, any portion thereof not being redeemed.
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PAYMENT AND PAYING AGENTS
Your prospectus supplement will specify the manner in which payments will
be made. The paying agent for the junior subordinated debentures will initially
be the indenture trustee.
NOTICES
We and the indenture trustee will send notices regarding the junior
subordinated debentures only to holders, using their addresses as listed in the
indenture trustee's records.
OPTION TO DEFER INTEREST PAYMENTS
If provided in your prospectus supplement, so long as no event of default
with respect to the junior subordinated debentures owned by an AIG Capital Trust
has occurred and is continuing as a result of any failure by us to pay any
amounts with respect to the junior subordinated debentures, we will have the
right at any time and from time to time during the term of any series of junior
subordinated debentures to defer payment of interest for an extension period of
up to the number of consecutive interest payment periods specified in your
prospectus supplement. The extension period is subject to the terms, conditions
and covenants, if any, specified in your prospectus supplement and may not
extend beyond the stated maturity of the applicable series of junior
subordinated debentures. U.S. federal income tax consequences and other special
considerations applicable to any such junior subordinated debentures will be
described in your prospectus supplement.
As a consequence of any such deferral, distributions on the capital
securities would be deferred by the AIG Capital Trust during the extension
period. However, the capital securities would continue to accumulate additional
distributions at the rate per annum described in the prospectus supplement.
During any applicable extension period, we may not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of our capital
stock; or
- make any payment of principal of or interest or premium, if any, on or
repay, repurchase or redeem any of our debt securities that rank on a
parity in all respects with or junior in interest to the junior
subordinated debentures other than:
-- repurchases, redemptions or other acquisitions of shares of our capital
stock in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of one or more employees,
officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with
the issuance of our capital stock (or securities convertible into or
exercisable for our capital stock) as consideration in an acquisition
transaction or business combination;
-- as a result of any exchange or conversion of any class or series of our
capital stock (or any capital stock of a subsidiary of AIG) for any
class or series of our capital stock or of any class or series of our
indebtedness for any class or series of our capital stock;
-- the purchase of fractional interests in shares of our capital stock in
accordance with the conversion or exchange provisions of such capital
stock or the security being converted or exchanged;
-- any declaration of a dividend in connection with any stockholders'
rights plan, or the issuance of rights, stock or other property under
any stockholders' rights plan, or the redemption or repurchase of
rights in accordance with any stockholders' rights plan; or
-- any dividend in the form of stock, warrants, options or other rights
where the dividend stock or the stock issuable upon exercise of the
warrants, options or other rights is the same stock as that on which
the dividend is being paid or ranks on a parity with or junior to such
stock.
Prior to the termination of any applicable extension period, we may further
defer the payment of interest.
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REDEMPTION
Unless otherwise indicated in the applicable prospectus supplement, we may,
at our option redeem the junior subordinated debentures of any series in whole
at any time or in part from time to time. If the junior subordinated debentures
of any series are redeemable only on or after a specified date or upon the
satisfaction of additional conditions, the applicable prospectus supplement will
specify this date or describe these conditions. Unless otherwise indicated in
the form of security for such series, junior subordinated debentures in
denominations larger than $25 may be redeemed in part but only in integral
multiples of $25. Except as otherwise specified in the applicable prospectus
supplement, the redemption price for any junior subordinated debenture will
equal any accrued and unpaid interest, including additional interest, to the
redemption date, plus 100% of the principal amount.
Except as otherwise specified in the applicable prospectus supplement, if a
tax event or an investment company event of the kind described below with
respect to a series of junior subordinated debentures has occurred and is
continuing, we may, at our option redeem that series of junior subordinated
debentures in whole, but not in part, at any time within 90 days following the
occurrence of the tax event or investment company event, at a redemption price
equal to 100% of the principal amount of the junior subordinated debentures then
outstanding plus accrued and unpaid interest to the date fixed for redemption.
An "investment company event" means the receipt by an AIG Capital Trust and
us of an opinion of counsel experienced in such matters to the effect that the
trust is or will be considered an "investment company" that is required to be
registered under the Investment Company Act, as a result of a change in law or
regulation or a change in interpretation or application of law or regulation.
A "tax event" means the receipt by us and the AIG Capital Trust of an
opinion of independent counsel, experienced in tax matters, to the effect that,
as a result of any tax change, there is more than an insubstantial risk that any
of the following will occur:
- the AIG Capital Trust is, or will be within 90 days after the date of the
opinion of counsel, subject to U.S. federal income tax on income received
or accrued on the junior subordinated debentures;
- interest payable by us on the junior subordinated debentures is not, or
within 90 days after the opinion of counsel will not be, deductible by
us, in whole or in part, for U.S. federal income tax purposes; or
- the AIG Capital Trust is, or will be within 90 days after the date of the
opinion of counsel, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
As used above, the term "tax change" means any of the following:
- any amendment to or change, including any announced prospective change,
in the laws or any regulations under the laws of the U.S. or of any
political subdivision or taxing authority of or in the U.S., if the
amendment or change is enacted, promulgated or announced on or after the
date the capital securities are issued; or
- any official administrative pronouncement, including any private letter
ruling, technical advice memorandum, field service advice, regulatory
procedure, notice or announcement, including any notice or announcement
of intent to adopt any procedures or regulations, or any judicial
decision interpreting or applying such laws or regulations, whether or
not the pronouncement or decision is issued to or in connection with a
proceeding involving us or the trust or is subject to review or appeal,
if the pronouncement or decision is enacted, promulgated or announced on
or after the date of the issuance of the capital securities.
Notice of any redemption will be mailed at least 45 days but not more than
75 days before the redemption date to each holder of junior subordinated
debentures to be redeemed at its registered address. Unless we default in
payment of the redemption price, on and after the redemption date interest will
cease to accrue on the junior subordinated debentures or portions thereof called
for redemption.
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SPECIAL SITUATIONS
MERGERS AND SIMILAR EVENTS
We are generally permitted to consolidate or merge with another company or
firm. We are also permitted to sell or lease substantially all of our assets to
another firm, or to buy or lease substantially all of the assets of another
firm. However, we may not take any of these actions unless all the following
conditions are met:
- When we merge or consolidate out of existence or sell or lease
substantially all of our assets, the other firm may not be organized
under a foreign country's laws, that is, it must be a corporation,
partnership or trust organized under the laws of a state of the U.S. or
the District of Columbia or under federal law, and it must agree to be
legally responsible for the junior subordinated debentures.
- The merger, sale of assets or other transaction must not cause a default
on the junior subordinated debentures, and we must not already be in
default (unless the merger or other transaction would cure the default).
For purposes of this no-default test, a default would include an event of
default that has occurred and not been cured. A default for this purpose
would also include any event that would be an event of default if the
requirements for giving us default notice or our default having to exist
for a specific period of time were disregarded.
If the conditions described above are satisfied with respect to any series
of junior subordinated debentures, we will not need to obtain the approval of
the holders of those junior subordinated debentures in order to merge or
consolidate or to sell our assets. Also, these conditions will apply only if we
wish to merge or consolidate with another entity or sell our assets
substantially as an entirety to another entity. We will not need to satisfy
these conditions if we enter into other types of transactions, including any
transaction in which we acquire the stock or assets of another entity, any
transaction that involves a change of control but in which we do not merge or
consolidate and any transaction in which we sell less than substantially all of
our assets. It is possible that this type of transactions may result in a
reduction in our credit rating or may reduce our operating results or impair our
financial condition. Holders of our junior subordinated debentures, however,
will have no approval right with respect to any transaction of this type.
MODIFICATION AND WAIVER OF THE JUNIOR SUBORDINATED DEBENTURES
Unless and until the junior subordinated debentures are distributed to the
holders of the trust securities, the property trustee of an AIG Capital Trust
has agreed not to consent to any amendment or modification of the junior debt
indenture or the junior subordinated debentures without the consent of the
holders of the capital securities that would be required if the holders of the
capital securities held the junior subordinated debentures. For a discussion of
the actions the property trustee may take with respect to the junior
subordinated debentures, see "Description of Capital Securities the AIG Capital
Trusts May Offer -- Special Situations -- Voting Rights; Amendment of the Trust
Agreements -- Details Concerning Voting and the Junior Subordinated Debentures."
As a result, all references to "holder" should be understood to refer to the
"holders" of capital securities.
There are four types of changes we can make to the junior debt indenture
and the junior subordinated debentures issued under that indenture.
Changes Requiring Approval of All Holders. First, there are changes that
cannot be made to the junior subordinated debentures without specific approval
of each holder of a junior subordinated debenture affected by the change under
junior subordinated debenture. Following is a list of those types of changes:
- change the stated maturity of the principal or interest on a junior
subordinated debenture;
- reduce any amounts due on a junior subordinated debenture;
- reduce the amount of principal payable upon acceleration of the maturity
of a junior subordinated debenture (including the amount payable on an
original issue discount security) following a default;
- change the currency of payment on a junior subordinated debenture;
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- impair a holder's right to sue for payment;
- reduce the percentage of holders of junior subordinated debentures whose
consent is needed to modify or amend the junior debt indenture;
- reduce the percentage of holders of junior subordinated debentures whose
consent is needed to waive compliance with certain provisions of the
junior debt indenture or to waive certain defaults;
- modify any other aspect of the provisions dealing with modification and
waiver of the junior debt indenture;
and provided that, in the case of junior subordinated debentures, so long
as any of the applicable capital securities remain outstanding,
- no modification may be made that adversely affects the holders of such
capital securities in any material respect, and no termination of the
junior debt indenture may occur, and no waiver of any event of default or
compliance with any covenant under the junior debt indenture may be
effective, without the prior consent of the holders of at least a
majority of the aggregate liquidation amount of all outstanding capital
securities affected unless and until the principal of the junior
subordinated debentures and all accrued and unpaid interest have been
paid in full and certain other conditions have been satisfied; and
- where a consent under the junior debt indenture would require the consent
of each holder of junior subordinated debentures, no such consent will be
given by the property trustee without the prior consent of each holder of
capital securities.
We may, with the indenture trustee's consent, execute, without the consent
of any holder of junior subordinated debentures or trust securities, any
supplemental indenture for the purpose of creating any new series of junior
subordinated debentures.
Changes Requiring a Majority Vote. The second type of change to the junior
debt indenture and the junior subordinated debentures is the kind that requires
a vote in favor by holders of junior subordinated debentures owning a majority
of the principal amount of the particular series affected. Most changes fall
into this category, except for clarifying changes and certain other changes that
would not adversely affect in any material respect holders of the junior
subordinated debentures. We may also obtain a waiver of a past default from the
holders of junior subordinated debentures owning a majority of the principal
amount of the particular series affected. However, we cannot obtain a waiver of
a payment default or any other aspect of the junior debt indenture or the junior
subordinated debentures listed in the first category described above under
"--Changes Requiring Approval of All Holders" unless we obtain the individual
consent of each holder to the waiver.
Changes Not Requiring Approval. The third type of change does not require
any vote by holders of junior subordinated debentures or trust securities. This
type is limited to clarifications and certain other changes that would not
adversely affect in any material respect holders of the junior subordinated
debentures.
We may also make changes or obtain waivers that do not adversely affect in
any material respect a particular junior subordinated debenture, even if they
affect other junior subordinated debentures. In those cases, we do not need to
obtain the approval of the holder of that junior subordinated debenture; we need
only obtain any required approvals from the holders of the affected junior
subordinated debentures or trust securities.
Modification of Subordination Provisions. We may not modify the
subordination provisions of the junior debt indenture in a manner that would
adversely affect in any material respect the outstanding junior debt indentures
of any one or more series, without the consent of the holders of a majority in
principal amount of all affected series, voting together as one class.
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SUBORDINATION PROVISIONS
Holders of junior subordinated debentures should recognize that contractual
provisions in the junior subordinated debenture may prohibit us from making
payments on those debentures. Junior subordinated debentures are subordinate and
junior in right of payment, to the extent and in the manner stated in the junior
debt indenture, to all of our senior indebtedness, as defined in the junior debt
indenture.
The junior debt indenture defines "senior indebtedness" as all indebtedness
and obligations of, or guaranteed or assumed by, us for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments, whether
existing now or in the future, and all amendments, renewals, extensions,
modifications and refundings of any indebtedness or obligations of that kind.
Senior debt excludes the junior subordinated debentures and any other
indebtedness or obligations that would otherwise constitute indebtedness if it
is specifically designated as being subordinate, or not superior, in right of
payment to the subordinated junior subordinated debentures.
The junior debt indenture provides that, unless all principal of and any
premium or interest on the senior indebtedness has been paid in full, no payment
or other distribution may be made with respect to any junior subordinated
debentures in the following circumstances:
- in the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization, assignment for creditors or
other similar proceedings or events involving us or our assets;
- (a) in the event and during the continuation of any default in the
payment of principal, premium or interest on any senior indebtedness
beyond any applicable grace period or (b) in the event that any event of
default with respect to any senior indebtedness has occurred and is
continuing, permitting the holders of that senior indebtedness (or a
trustee) to accelerate the maturity of that senior indebtedness, whether
or not the maturity is in fact accelerated (unless, in the case of (a) or
(b), the payment default or event of default has been cured or waived or
ceased to exist and any related acceleration has been rescinded) or (c)
in the event that any judicial proceeding is pending with respect to a
payment default or event of default described in (a) or (b); or
- in the event that any junior subordinated debentures have been declared
due and payable before their stated maturity.
If the indenture trustee under the junior debt indenture or any holders of
the junior subordinated debentures receive any payment or distribution that is
prohibited under the subordination provisions, then the indenture trustee or the
holders will have to repay that money to the holders of the senior indebtedness.
Even if the subordination provisions prevent us from making any payment
when due on the junior subordinated debentures of any series, we will be in
default on our obligations under that series if we do not make the payment when
due. This means that the indenture trustee under the junior subordinated
debenture and the holders of that series can take action against us, but they
will not receive any money until the claims of the holders of senior
indebtedness have been fully satisfied.
The junior debt indenture allows the holders of senior indebtedness to
obtain a court order requiring us and any holder of junior subordinated
debentures to comply with the subordination provisions.
DEFEASANCE
The following discussion of full defeasance and covenant defeasance will be
applicable to each series of junior subordinated debentures that is denominated
in U.S. dollars and has a fixed rate of interest and will apply to other series
of junior subordinated debentures if we so specify in the prospectus supplement.
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FULL DEFEASANCE
If there is a change in U.S. federal tax law, as described below, we can
legally release ourselves from any payment or other obligations on the junior
subordinated debentures, called full defeasance, if we put in place the
following other arrangements for holders to be repaid:
- We must deposit in trust for the benefit of all holders of the junior
subordinated debentures a combination of money and notes or bonds of the
U.S. government or a U.S. government agency or U.S. government-sponsored
entity (the obligations of which are backed by the full faith and credit
of the U.S. government) that will generate enough cash to make interest,
principal and any other payments on the junior subordinated debentures on
their various due dates.
- There must be a change in current U.S. federal tax law or an IRS ruling
that lets us make the above deposit without causing the holders to be
taxed on the junior subordinated debentures any differently than if we
did not make the deposit and just repaid the junior subordinated
debentures ourselves. Under current federal tax law, the deposit and our
legal release from the obligations pursuant to the junior subordinated
debentures would be treated as though we took back your junior
subordinated debentures and gave you your share of the cash and notes or
bonds deposited in trust. In that event, you could recognize gain or loss
on the junior subordinated debentures you give back to us.
- We must deliver to the indenture trustee a legal opinion of our counsel
confirming the tax law change described above.
- No event or condition may exist that, under the provisions described
above under "--Subordination Provisions" above, would prevent us from
making payments of principal, premium or interest on those junior
subordinated debentures on the date of the deposit referred to above or
during the 90 days after that date.
If we ever did accomplish full defeasance, as described above, you would
have to rely solely on the trust deposit for repayment on the junior
subordinated debentures. You could not look to us for repayment in the unlikely
event of any shortfall.
COVENANT DEFEASANCE
Under current U.S. federal tax law, we can make the same type of deposit as
described above and we will be released from some of the restrictive covenants
under the junior subordinated debentures that may be described in the prospectus
supplement. This is called covenant defeasance. In that event, you would lose
the protection of these covenants but would gain the protection of having money
and U.S. government or U.S. government agency notes or bonds set aside in trust
to repay the junior subordinated debentures. In order to achieve covenant
defeasance, we must do the following:
- We must deposit in trust for the benefit of all holders of the junior
subordinated debentures a combination of money and notes or bonds of the
U.S. government or a U.S. government agency or U.S. government-sponsored
entity (the obligations of which are backed by the full faith and credit
of the U.S. government) that will generate enough cash to make interest,
principal and any other payments on the junior subordinated debentures on
their various due dates.
- We must deliver to the indenture trustee a legal opinion of our counsel
confirming that under current U.S. federal income tax law we may make the
above deposit without causing the holders to be taxed on the junior
subordinated debentures any differently than if we did not make the
deposit and just repaid the junior subordinated debentures ourselves.
If we accomplish covenant defeasance, the following provisions of the
junior debt indenture and the junior subordinated debentures would no longer
apply:
- Covenants applicable to the series of junior subordinated debentures and
described in the prospectus supplement.
- Events of default described in the prospectus supplement.
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If we accomplish covenant defeasance, you can still look to us for
repayment of the junior subordinated debentures if there were a shortfall in the
trust deposit. In fact, if one of the remaining events of default occurred (such
as a bankruptcy) and the junior subordinated debentures become immediately due
and payable, there may be such a shortfall.
EVENTS OF DEFAULT
Unless and until the junior subordinated debentures are distributed to the
holders of the trust securities, the property trustee of an AIG Capital Trust
has agreed, without the consent of the holders of a majority in liquidation
amount of the capital securities, not to:
- direct the time, method or place of conducting any proceeding for any
remedy available to the indenture trustee;
- waive any past default under the junior debt indenture unless all
defaults have been cured and all payment obligations have been made
current;
- exercise any right to rescind or annul a declaration of acceleration of
the principal amount of the junior subordinated debentures unless all
defaults have been cured and a sum sufficient to pay all amounts then
owing has been deposited with the indenture trustee; or
- consent to any amendment, modification or termination of the junior debt
indenture or junior subordinated debentures, where the consent is
required.
For a discussion of the restrictions on the property trustee's ability to
exercise its rights, see "Description of Capital Securities the AIG Capital
Trusts May Offer -- Special Situations -- Voting Rights; Amendment of the Trust
Agreements -- Details Concerning Voting and the Junior Subordinated Debentures."
As a result, the references to "holder" below should be understood to refer to
"holders" of the capital securities.
Holders will have special rights if an event of default occurs and is not
cured, as described later in this subsection.
What Is An Event of Default? The term "Event of Default" means any of the
following:
- We do not pay the principal of or any premium on a junior subordinated
debenture within 5 days of its due date.
- We do not pay interest on a junior subordinated debenture within 30 days
of its due date.
- We remain in breach of any other covenant or warranty of the junior debt
indenture for 60 days after we receive a notice of default stating we are
in breach. The notice must be sent by either the indenture trustee or
holders of 25% of the principal amount of junior subordinated debentures
of the affected series.
- We file for bankruptcy or certain other events of bankruptcy, insolvency
or reorganization occur with respect to us.
- Any other event of default described in the prospectus supplement occurs.
Remedies If an Event of Default Occurs. If you are the holder of a junior
subordinated debenture, all remedies available upon the occurrence of an event
of default under the junior debt indenture will be subject to the restrictions
on the junior subordinated debentures described above under "-- Subordination
Provisions." If an event of default occurs, the indenture trustee will have
special duties. In that situation, the indenture trustee will be obligated to
use its rights and powers under the junior debt indenture, and to use the same
degree of care and skill in doing so, that a prudent person would use in that
situation in conducting his or her own affairs. If an event of default has
occurred and has not been cured, the indenture trustee or the holders of at
least 25% in principal amount of the junior subordinated debentures of the
affected series may declare the entire principal amount of all the junior
subordinated debentures of that series to be due and immediately payable. This
is called a declaration of acceleration of maturity. In the case of junior
subordinated debentures
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held by an AIG Capital Trust, should the indenture trustee or the property
trustee fail to make this declaration, the holders of at least 25% in aggregate
liquidation amount of the capital securities will have the right to make this
declaration. The property trustee may annul the declaration and waive the
default, provided all defaults have been cured and all payment obligations have
been made current. In the case of junior subordinated debentures held by an AIG
Capital Trust, should the property trustee fail to annul the declaration and
waive the default, the holders of a majority in aggregate liquidation amount of
the capital securities will have the right to do so. In the event of our
bankruptcy, insolvency or reorganization, junior subordinated debentures
holders' claims would fall under the broad equity power of a federal bankruptcy
court, and to that court's determination of the nature of those holders' rights.
The holders of a majority in aggregate outstanding principal amount of each
series of junior subordinated debentures affected may, on behalf of the holders
of all the junior subordinated debentures of that series, waive any default,
except a default in the payment of principal or interest, including any
additional interest (unless the default has been cured and a sum sufficient to
pay all matured installments of interest, including any additional interest, and
principal due otherwise than by acceleration has been deposited with the
indenture trustee) or a default with respect to a covenant or provision which
under the junior debt indenture cannot be modified or amended without the
consent of the holder of each outstanding junior subordinated debenture of that
series. In the case of junior subordinated debentures held by an AIG Capital
Trust, should the property trustee fail to waive the default, the holders of a
majority in aggregate liquidation amount of the capital securities will have the
right to do so.
If an event of default with respect to the junior subordinated debentures
owned by the AIG Capital Trust has occurred and is continuing as to a series of
junior subordinated debentures, the property trustee will have the right to
declare the principal of and the interest on the junior subordinated debentures,
and any other amounts payable under the junior debt indenture, to be immediately
due and payable and to enforce its other rights as a creditor with respect to
the junior subordinated debentures.
Except in cases of default, where the indenture trustee has the special
duties described above, the indenture trustee is not required to take any action
under the junior debt indenture at the request of any holders unless the holders
offer the indenture trustee reasonable protection from expenses and liability
called an indemnity. If reasonable indemnity is provided, the holders of a
majority in principal amount of the outstanding junior subordinated debentures
of the relevant series may direct the time, method and place of conducting any
lawsuit or other formal legal action seeking any remedy available to the
indenture trustee. These majority holders may also direct the indenture trustee
in performing any other action under the junior debt indenture with respect to
the junior subordinated debentures of that series.
Before you bypass the indenture trustee and bring your own lawsuit or other
formal legal action or take other steps to enforce your rights or protect your
interests relating to the junior subordinated debentures the following must
occur:
- The holder of the junior subordinated debenture must give the indenture
trustee written notice that an event of default has occurred and remains
uncured;
- The holders of 25% in principal amount of all junior subordinated
debentures of the relevant series must make a written request that the
indenture trustee take action because of the default, and must offer
reasonable indemnity to the indenture trustee against the cost and other
liabilities of taking that action; and
- The indenture trustee must have not taken action for 60 days after
receipt of the above notice and offer of indemnity.
We will give to the indenture trustee every year a written statement of
certain of our officers certifying that to their knowledge we are in compliance
with the applicable indenture and the junior subordinated debentures issued
under it, or else specifying any default.
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ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If an event of default with respect to the junior subordinated debentures
owned by the AIG Capital Trust has occurred and is continuing and the event is
attributable to our failure to pay interest or principal on the junior
subordinated debentures on the date the interest or principal is due and
payable, a holder of the applicable capital securities may institute a legal
proceeding directly against us for enforcement of payment to that holder of the
principal of or interest, including any additional interest, on junior
subordinated debentures having a principal amount equal to the aggregate
liquidation amount of the capital securities of that holder called a "direct
action." We may not amend the junior debt indenture to remove this right to
bring a direct action without the prior written consent of the holders of all of
the capital securities outstanding. We will have the right under the junior debt
indenture to set-off any payment made to the holder of the capital securities by
us in connection with a direct action.
The holders of capital securities will not be able to exercise directly any
remedies other than those set forth in the preceding paragraph available to the
holders of the junior subordinated debentures unless there has occurred an event
of default under the trust agreement. See "Description of Capital Securities the
AIG Capital Trusts May Offer -- Events of Default."
CONVERSION OR EXCHANGE
If indicated in your prospectus supplement, a series of junior subordinated
debentures may be convertible or exchangeable into junior subordinated
debentures of another series or into capital securities of another series. The
specific terms on which series may be converted or exchanged will be described
in the applicable prospectus supplement. These terms may include provisions for
conversion or exchange, whether mandatory, at the holder's option, or at our
option, in which case the number of shares of capital securities or other
securities the junior subordinated debenture holder would receive would be
calculated at the time and manner described in the applicable prospectus
supplement.
AGREEMENTS CONTAINED IN THE JUNIOR DEBT INDENTURE
We have agreed in the junior debt indenture, as to each series of junior
subordinated debentures held by an AIG Capital Trust, that if and so long as:
- the AIG Capital Trust of the series of trust securities is the holder of
all the junior subordinated debentures;
- a tax event with respect to such AIG Capital Trust has occurred and is
continuing; and
- we elect, and do not revoke that election, to pay additional sums with
respect to the trust securities,
we will pay to the AIG Capital Trust these additional sums, which are described
under "Description of Capital Securities the AIG Capital Trusts May
Offer -- Rights of Holders of Capital Securities -- Redemption or Exchange." We
also have agreed, as to each series of such junior subordinated debentures:
- to maintain directly or indirectly 100% ownership of the trust securities
of the AIG Capital Trust to which the junior subordinated debentures have
been issued, provided that certain successors which are permitted under
the junior debt indenture may succeed to our ownership of the trust
securities; or
- not to voluntarily terminate, wind-up or liquidate any AIG Capital Trust,
except:
-- in connection with a distribution of junior subordinated debentures to
the holders of the capital securities in exchange for their capital
securities upon liquidation of the AIG Capital Trust;
-- in connection with certain mergers, consolidations or amalgamations
permitted by the applicable trust agreement; and
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-- to use its reasonable efforts, consistent with the terms and provisions
of the applicable trust agreement, to cause the AIG Capital Trust to be
classified as a grantor trust and not as an association taxable as a
corporation for U.S. federal income tax purposes.
OUR RELATIONSHIP WITH THE INDENTURE TRUSTEE
Please see "Description of Capital Securities the AIG Capital Trusts May
Offer -- Trustees and Administrators of the AIG Capital Trusts -- Our
Relationship with the Property Trustee" above for more information about our
relationship with The Bank of New York.
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LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE
In this section, we describe special considerations that will apply to
capital securities issued in global -- i.e., book-entry -- form. First we
describe the difference between legal ownership and indirect ownership of
capital securities. Then we describe special provisions that apply to capital
securities.
If the junior subordinated debentures are distributed to holders of capital
securities, we anticipate that they would be issued in global form as well and
the following discussion will apply to the junior subordinated debentures. Until
such a distribution, an AIG Capital Trust will be the sole holder and beneficial
owner of the junior subordinated debentures and the property trustee may
exercise all rights with respect to the junior subordinated debentures and the
junior debt indenture, except as described under "Description of Capital
Securities the AIG Capital Trusts May Offer -- Special Situations -- Voting
Rights; Amendment of the Trust Agreements -- Details Concerning Voting and the
Junior Subordinated Debentures."
WHO IS THE LEGAL OWNER OF A REGISTERED SECURITY?
Each capital security will be represented either by a certificate issued in
definitive form to a particular investor or by one or more global securities
representing the capital securities. We refer to those who have securities
registered in their own names, on the books that we or the property trustee
maintain for this purpose, as the "holders" of those capital securities. These
persons are the legal holders of the capital securities. We refer to those who,
indirectly through others, own beneficial interests in capital securities that
are not registered in their own names as indirect owners of those securities. As
we discuss below, indirect owners are not legal holders, and investors in
capital securities issued in book-entry form or in street name will be indirect
owners.
BOOK-ENTRY OWNERS
Unless otherwise noted in your prospectus supplement, we will issue each
capital security in book-entry form only. This means capital securities will be
represented by one or more global securities registered in the name of a
financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositary's book-entry system. These
participating institutions, in turn, hold beneficial interests in the capital
securities on behalf of themselves or their customers.
Under the trust agreement, only the person in whose name a capital security
is registered is recognized as the holder of that capital security.
Consequently, for capital securities issued in global form, we will recognize
only the depositary as the holder of the securities and we will make all
payments on the securities, including deliveries of any property other than
cash, to the depositary. The depositary passes along the payments it receives to
its participants, which in turn pass the payments along to their customers who
are the beneficial owners. The depositary and its participants do so under
agreements they have made with one another or with their customers; they are not
obligated to do so under the terms of the capital securities.
As a result, investors will not own securities directly. Instead, they will
own beneficial interests in a global security, through a bank, broker or other
financial institution that participates in the depositary's book-entry system or
holds an interest through a participant. As long as the capital securities are
issued in global form, investors will be indirect owners, and not holders, of
the capital securities.
STREET NAME OWNERS
We may terminate an existing global security or issue capital securities
initially in non-global form. In these cases, investors may choose to hold their
securities in their own names or in street name. Securities held by an investor
in street name would be registered in the name of a bank, broker or other
financial institution that the investor chooses, and the investor would hold
only a beneficial interest in those securities through an account he or she
maintains at that institution.
For capital securities held in street name, we will recognize only the
intermediary banks, brokers and other financial institutions in whose names the
capital securities are registered as the holders of those
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securities and we will make all payments on those securities, including
deliveries of any property, to them. These institutions pass along the payments
they receive to their customers who are the beneficial owners, but only because
they agree to do so in their customer agreements or because they are legally
required to do so. Investors who hold capital securities in street name will be
indirect owners, not holders, of those securities.
LEGAL HOLDERS
Our obligations, as well as the obligations of the property trustee under
the trust agreement and the obligations, if any, of any third parties employed
by us or any agents of theirs, run only to the holders of the capital
securities. We do not have obligations to investors who hold beneficial
interests in global securities, in street name or by any other indirect means.
This will be the case whether an investor chooses to be an indirect owner of a
capital security or has no choice because we are issuing the capital securities
only in global form.
For example, once we make a payment or give a notice to the holder, we have
no further responsibility for that payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect owners but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose -- for example, to
amend the trust agreement or to relieve us of the consequences of a default or
of our obligation to comply with a particular provision of the junior debt
indenture -- we would seek the approval only from the holders, and not the
indirect owners, of the relevant capital securities. Whether and how the holders
contact the indirect owners is up to the holders.
When we refer to "you" in this prospectus, we mean all purchasers of the
capital securities being offered by this prospectus, whether they are the
holders or only indirect owners of those securities. When we refer to "your
capital securities" in this prospectus, we mean the capital securities in which
you will hold a direct or indirect interest.
SPECIAL CONSIDERATIONS FOR INDIRECT OWNERS
If you hold capital securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:
- how it handles capital securities payments and notices;
- whether it imposes fees or charges;
- how it would handle a request for the holders' consent, if ever required;
- how it would exercise rights under the capital securities if there were a
default or other event triggering the need for holders to act to protect
their interests; and
- if the capital securities are in book-entry form, how the depositary's
rules and procedures will affect these matters.
WHAT IS A GLOBAL SECURITY?
Unless otherwise noted in your prospectus supplement, we will issue each
capital security in book-entry form only. Each capital security issued in
book-entry form will be represented by a global security that we deposit with
and register in the name of one or more financial institutions or clearing
systems, or their nominees, which we select. A financial institution or clearing
system that we select for any security for this purpose is called the
"depositary" for that security. A security will usually have only one depositary
but it may have more. Each series of capital securities will have one or more of
the following as the depositaries:
- The Depository Trust Company, New York, New York, which is known as
"DTC;"
- Euroclear System, which is known as "Euroclear;"
- Clearstream Banking, societe anonyme, Luxembourg, which is known as
"Clearstream;" and
- any other clearing system or financial institution named in the
prospectus supplement.
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The depositaries named above may also be participants in one another's
systems. Thus, for example, if DTC is the depositary for a global security,
investors may hold beneficial interests in that security through Euroclear or
Clearstream, as DTC participants. The depositary or depositaries for your
capital securities will be named in your prospectus supplement; if none is
named, the depositary will be DTC.
A global security may represent one or any other number of individual
capital securities. All capital securities represented by the same global
security will have the same terms.
A global security may not be transferred to or registered in the name of
anyone other than the depositary or its nominee, unless special termination
situations arise. We describe those situations below under "-- Holder's Option
to Obtain a Non-Global Security; Special Situations When a Global Security Will
Be Terminated." As a result of these arrangements, the depositary, or its
nominee, will be the sole registered owner and holder of all capital securities
represented by a global security, and investors will be permitted to own only
indirect interests in a global security. Indirect interests must be held by
means of an account with a broker, bank or other financial institution that in
turn has an account with the depositary or with another institution that does.
Thus, an investor whose capital security is represented by a global security
will not be a holder of the security, but only an indirect owner of an interest
in the global security.
If the capital securities are issued in global form only, then the capital
securities will be represented by a global security at all times unless and
until the global security is terminated. We describe the situations in which
this can occur below under "-- Holder's Option to Obtain a Non-Global Security;
Special Situations When a Global Security Will Be Terminated." If termination
occurs, we may issue the capital securities through another book-entry clearing
system or decide that the capital securities may no longer be held through any
book-entry clearing system.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES
As an indirect owner, an investor's rights relating to a global security
will be governed by the account rules of the depositary and those of the
investor's bank, broker, financial institution or other intermediary through
which it holds its interest (e.g., Euroclear or Clearstream, if DTC is the
depositary), as well as general laws relating to securities transfers. We do not
recognize this type of investor or any intermediary as a holder of capital
securities and instead deal only with the depositary that holds the global
security.
If capital securities are issued only in the form of a global security, an
investor should be aware of the following:
- An investor cannot cause the capital securities to be registered in his
or her own name, and cannot obtain non-global certificates for his or her
interest in the capital securities, except in the special situations we
describe below;
- An investor will be an indirect holder and must look to his or her own
bank, broker or other financial institutions for payments on the capital
securities and protection of his or her legal rights relating to the
capital securities, as we describe above under "-- Who Is the Legal Owner
of a Registered Security?";
- An investor may not be able to sell interests in the capital securities
to some insurance companies and other institutions that are required by
law to own their capital securities in non-book-entry form;
- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the capital
securities must be delivered to the lender or other beneficiary of the
pledge in order for the pledge to be effective;
- The depositary's policies will govern payments, deliveries, transfers,
exchanges, notices and other matters relating to an investor's interest
in a global security, and those policies may change from time to time. We
will have no responsibility for any aspect of the depositary's policies,
actions or records of ownership interests in a global security. We also
do not supervise the depositary in any way;
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- The depositary may require that those who purchase and sell interests in
a global security within its book-entry system use immediately available
funds and your bank, broker or other financial institutions may require
you to do so as well; and
- Financial institutions that participate in the depositary's book-entry
system and through which an investor holds its interest in the global
securities, directly or indirectly, may also have their own policies
affecting payments, deliveries, transfers, exchanges, notices and other
matters relating to the capital securities, and those policies may change
from time to time. For example, if you hold an interest in a global
security through Euroclear or Clearstream, when DTC is the depositary,
Euroclear or Clearstream, as applicable, may require those who purchase
and sell interests in that security through them to use immediately
available funds and comply with other policies and procedures, including
deadlines for giving instructions as to transactions that are to be
effected on a particular day. There may be more than one financial
intermediary in the chain of ownership for an investor. We do not monitor
and are not responsible for the policies or actions or records of
ownership interests of any of those intermediaries.
HOLDER'S OPTION TO OBTAIN A NON-GLOBAL SECURITY; SPECIAL SITUATIONS WHEN A
GLOBAL SECURITY WILL BE TERMINATED
If we issue capital securities in book-entry form but we choose to give the
beneficial owners the right to obtain non-global securities, any beneficial
owner entitled to obtain non-global capital securities may do so by following
the applicable procedures of the depositary, the property trustee and that
owner's bank, broker or other financial institutions through which that owner
holds its beneficial interest in the capital securities. If you are entitled to
request a non-global certificate and wish to do so, you will need to allow
sufficient lead time to enable us or our agent to prepare the requested
certificate.
In addition, in a few special situations described below, a global security
will be terminated and interests in it will be exchanged for certificates in
non-global form representing the capital securities it represented. After that
exchange, the choice of whether to hold the capital securities directly or in
street name will be up to the investor. Investors must consult their own banks,
brokers or other financial institutions, to find out how to have their interests
in a global security transferred on termination to their own names, so that they
will be holders. We have described the rights of holders and street name
investors above under "-- Who Is the Legal Owner of a Registered Security?"
The special situations for termination of a global security are as follows:
- if the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security and we do
not appoint another institution to act as depositary within 60 days;
- if we notify the applicable trustee that we wish to terminate that global
security; or
- if an event of default has occurred with regard to the capital securities
and has not been cured or waived.
If a global security is terminated, only the depositary, and not us, is
responsible for deciding the names of the institutions in whose names the
capital securities represented by the global security will be registered and,
therefore, who will be the holders of those capital securities.
CONSIDERATIONS RELATING TO DTC
DTC has informed us that it is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities that DTC participants
deposit with DTC. DTC also facilitates the settlement among DTC participants of
securities transactions, such as transfers and pledges in deposited securities
through electronic computerized book-entry changes in DTC participants'
accounts, thereby eliminating the
33
need for physical movement of certificates. DTC participants include securities
brokers and dealers, banks, trust companies and clearing corporations, and may
include other organizations. DTC is owned by a number of its DTC direct
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, LLC and the National Association of Securities Dealers, Inc. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The rules
applicable to DTC and DTC participants are on file with the SEC.
Purchases of capital securities within the DTC system must be made by or
through DTC participants, which will receive a credit for the capital securities
on DTC's records. The ownership interest of each actual purchaser of each
capital security is in turn to be recorded on the direct and indirect
participants' records, including Euroclear and Clearstream. Transfers of
ownership interests in the capital securities are to be accomplished by entries
made on the books of participants acting on behalf of beneficial owners.
Redemption notices will be sent to DTC's nominee, Cede & Co., as the
registered holder of the capital securities. If less than all of the capital
securities are being redeemed, DTC will determine the amount of the interest of
each direct participant to be redeemed in accordance with its then current
procedures.
In instances in which a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to the capital securities. Under its usual
procedures, DTC would mail an omnibus proxy to the property trustee as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts such
capital securities are credited on the record date (identified in a listing
attached to the omnibus proxy).
Distribution payments on the capital securities will be made by the
property trustee to DTC. DTC's usual practice is to credit direct participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payments on such payment date. Payments by DTC participants to
beneficial owners will be governed by standing instructions and customary
practices and will be the responsibility of such participants and not of DTC,
the property trustee or us, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of distributions to DTC is the
responsibility of the property trustee, and disbursements of such payments to
the beneficial owners are the responsibility of direct and indirect
participants.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be accurate, but we assume no
responsibility for the accuracy thereof. We do not have any responsibility for
the performance by DTC or its participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
CONSIDERATIONS RELATING TO EUROCLEAR AND CLEARSTREAM
Euroclear and Clearstream are securities clearance systems in Europe. Both
systems clear and settle securities transactions between their participants
through electronic, book-entry delivery of securities against payment.
Euroclear and Clearstream may be depositaries for a global security. In
addition, if DTC is the depositary for a global security, Euroclear and
Clearstream may hold interests in the global security as participants in DTC.
As long as any global security is held by Euroclear or Clearstream, as
depositary, you may hold an interest in the global security only through an
organization that participates, directly or indirectly, in Euroclear or
Clearstream. If Euroclear or Clearstream is the depositary for a global security
and there is no depositary in the U.S., you will not be able to hold interests
in that global security through any securities clearance system in the U.S.
Payments, deliveries, transfers, exchanges, notices and other matters
relating to the capital securities made through Euroclear or Clearstream must
comply with the rules and procedures of those systems. Those systems could
change their rules and procedures at any time. We have no control over those
systems or their
34
participants and we take no responsibility for their activities. Transactions
between participants in Euroclear or Clearstream, on one hand, and participants
in DTC, on the other hand, when DTC is the depositary, would also be subject to
DTC's rules and procedures.
SPECIAL TIMING CONSIDERATIONS RELATING TO TRANSACTIONS IN EUROCLEAR AND
CLEARSTREAM
Investors will be able to make and receive through Euroclear and
Clearstream payments, deliveries, transfers, exchanges, notices and other
transactions involving any capital securities held through those systems only on
days when those systems are open for business. Those systems may not be open for
business on days when banks, brokers and other financial institutions are open
for business in the U.S.
In addition, because of time-zone differences, U.S. investors who hold
their interests in the capital securities through these systems and wish to
transfer their interests, or to receive or make a payment or delivery or
exercise any other right with respect to their interests, on a particular day
may find that the transaction will not be effected until the next business day
in Luxembourg or Brussels, as applicable. Thus, investors who wish to exercise
rights that expire on a particular day may need to act before the expiration
date. In addition, investors who hold their interests through both DTC and
Euroclear or Clearstream may need to make special arrangements to finance any
purchases or sales of their interests between the U.S. and European clearing
systems, and those transactions may settle later than would be the case for
transactions within one clearing system.
35
DESCRIPTION OF THE SUBORDINATED GUARANTEES
AIG will execute and deliver a subordinated guarantee concurrently with the
issuance by each AIG Capital Trust of its capital securities for the benefit of
the holders from time to time of those capital securities. The Bank of New York
will act as the guarantee trustee under each subordinated guarantee for the
purposes of compliance with the Trust Indenture Act and each subordinated
guarantee will be qualified as an indenture under the Trust Indenture Act. The
guarantee trustee will hold the subordinated guarantee for the benefit of the
holders of the applicable AIG Capital Trust's capital securities.
Because this section is only a summary, it does not describe every aspect
of the subordinated guarantees. This summary is subject to and qualified in its
entirety by reference to all the provisions of each subordinated guarantee,
including the definitions of terms, and those provisions made part of each
subordinated guarantee by the Trust Indenture Act. A form of subordinated
guarantee is filed as an exhibit to the registration statement that includes
this prospectus. A copy of the form of the subordinated guarantee is available
upon request from the guarantee trustee. If indicated in your prospectus
supplement, the terms of a particular subordinated guarantee may differ from the
terms discussed below.
GENERAL
AIG will unconditionally agree to pay in full on a subordinated basis the
guarantee payments to the holders of the capital securities covered by the
subordinated guarantee, as and when due, regardless of any defense, right of
set-off or counterclaim that the AIG Capital Trust that issued the capital
securities may have or assert other than the defense of payment.
The following payments constitute guarantee payments with respect to
capital securities that, to the extent not paid by or on behalf of the AIG
Capital Trust, will be subject to the applicable subordinated guarantee:
- any accumulated and unpaid distributions required to be paid on the
applicable capital securities, to the extent that the AIG Capital Trust
has funds on hand available for that purpose at that time;
- the applicable redemption price with respect to any capital securities
called for redemption, which will include all accumulated and unpaid
distributions to the date of redemption, to the extent that the AIG
Capital Trust has funds on hand available for that purpose at that time;
and
- upon a voluntary or involuntary dissolution, winding-up or liquidation of
an AIG Capital Trust, unless the junior subordinated debentures owned by
the AIG Capital Trust are distributed to holders of the capital
securities in accordance with the terms of the trust agreement, the
lesser of:
-- the aggregate of the liquidation amount and all accumulated and unpaid
distributions to the date of payment, and
-- the amount of assets of the AIG Capital Trust remaining available for
distribution to holders of capital securities on liquidation of the AIG
Capital Trust.
Our obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by us to the holders of the capital securities
or by causing the AIG Capital Trust to pay those amounts to the holders.
Each subordinated guarantee will be a guarantee of the AIG Capital Trust's
payment obligations described above under the capital securities covered by the
subordinated guarantee, but will apply only to the extent that the AIG Capital
Trust has funds sufficient to make such payments, and is not a guarantee of
collection. See " --Additional Information Relating to the Subordinated
Guarantees -- Status of the Subordinated Guarantees."
If we do not make payments on the junior subordinated debentures owned by
an AIG Capital Trust, the AIG Capital Trust will not be able to pay any amounts
payable with respect to its capital securities and will not have funds legally
available for that purpose. In that event, holders of the capital securities
would not be able to rely upon the subordinated guarantee for payment of those
amounts. Each subordinated guarantee will
36
have the same ranking as the junior subordinated debentures owned by the AIG
Capital Trust that issues the capital securities covered by the subordinated
guarantee. See "-- Additional Information Relating to the Subordinated
Guarantees -- Status of the Subordinated Guarantees." No subordinated guarantee
will limit the incurrence or issuance of other secured or unsecured debt of AIG.
We have, through the applicable subordinated guarantee, the trust
agreement, the junior subordinated debentures, the junior debt indenture and the
expense agreement, taken together, fully and unconditionally guaranteed all of
the applicable AIG Capital Trust's obligations under the capital securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes a full and unconditional subordinated
guarantee. It is only the combined operation of these documents that has the
effect of providing a full and unconditional subordinated guarantee of an AIG
Capital Trust's obligations under its capital securities.
ADDITIONAL INFORMATION RELATING TO THE SUBORDINATED GUARANTEES
STATUS OF THE SUBORDINATED GUARANTEES
Each subordinated guarantee will constitute an unsecured obligation of AIG
and will rank equal to the junior subordinated debentures owned by the AIG
Capital Trust that issues the capital securities covered by the subordinated
guarantee. See "Description of Junior Subordinated Debentures -- Subordination
Provisions" for a description of this subordination.
Each subordinated guarantee will constitute a guarantee of payment and not
of collection. Any holder of capital securities covered by the subordinated
guarantee may institute a legal proceeding directly against us to enforce its
rights under the subordinated guarantee without first instituting a legal
proceeding against any other person or entity. Each subordinated guarantee will
be held by the guarantee trustee for the benefit of the holders of the
applicable capital securities. Each subordinated guarantee will not be
discharged except by payment of the guarantee payments in full to the extent not
paid by or on behalf of the AIG Capital Trust or, if applicable, distribution to
the holders of the capital securities of the junior subordinated debentures
owned by the AIG Capital Trust.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the capital securities issued by the AIG Capital Trust,
in which case no approval will be required, the subordinated guarantee that
covers the capital securities may not be amended without the prior approval of
the holders of at least a majority of the aggregate liquidation amount of the
outstanding capital securities covered by the subordinated guarantee. The manner
of obtaining any such approval is as set forth under "Description of Capital
Securities the AIG Capital Trusts May Offer -- Special Situations -- Voting
Rights; Amendment of the Trust Agreements." All subordinated guarantees and
agreements contained in each subordinated guarantee will bind the successors,
assigns, receivers, trustees and representatives of AIG and will inure to the
benefit of the holders of the then outstanding capital securities covered by the
subordinated guarantee.
EVENTS OF DEFAULT
An event of default under a subordinated guarantee will occur upon the
failure of AIG to perform any of its payment obligations for five days under
that subordinated guarantee, or to perform any non-payment obligation if the
non-payment default remains unremedied for 30 days. If an event of default under
a subordinated guarantee occurs and is continuing, the guarantee trustee will
enforce the subordinated guarantee for the benefit of the holders of capital
securities covered by the subordinated guarantee. The holders of a majority in
aggregate liquidation amount of the outstanding capital securities covered by
the subordinated guarantee have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the guarantee trustee
with respect to the subordinated guarantee or to direct the exercise of any
right or power conferred upon the guarantee trustee under the subordinated
guarantee.
The holders of at least a majority in aggregate liquidation amount of the
capital securities have the right, by vote, to waive any past events of default
and its consequences under each subordinated guarantee. If such a
37
waiver occurs, any event of default will cease to exist and be deemed to have
been cured under the terms of the subordinated guarantee.
Any holder of capital securities covered by the subordinated guarantee may
institute a legal proceeding directly against AIG to enforce its rights under
the subordinated guarantee without first instituting a legal proceeding against
the AIG Capital Trust, the guarantee trustee or any other person or entity.
We, as guarantor, are required to file annually with the guarantee trustee
a certificate as to whether or not we are in compliance with all the conditions
and covenants under the subordinated guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, other than during the occurrence and continuance of
an event of default under the subordinated guarantee, undertakes to perform only
those duties as are specifically set forth in the subordinated guarantee and,
after the occurrence of an event of default with respect to the subordinated
guarantee that has not been cured or waived, must exercise the rights and powers
vested in it by the subordinated guarantee using the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the guarantee trustee is under no obligation
to exercise any of the rights or powers vested in it by the subordinated
guarantee at the request of any holder of the capital securities covered by the
subordinated guarantee unless it is offered reasonable indemnity, including
reasonable advances requested by it, against the costs, expenses and liabilities
that might be incurred in complying with the request or direction.
TERMINATION OF THE SUBORDINATED GUARANTEE
Each subordinated guarantee will terminate and be of no further effect
upon:
- full payment of the redemption price of all of the capital securities
covered by the subordinated guarantee;
- full payment of the amounts payable with respect to the capital
securities upon liquidation of the AIG Capital Trust; or
- distribution of the junior subordinated debentures owned by the AIG
Capital Trust to the holders of all the capital securities covered by the
subordinated guarantee.
Each subordinated guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the capital
securities covered by the subordinated guarantee must repay any sums with
respect to the capital securities or the subordinated guarantee.
GOVERNING LAW
Each subordinated guarantee will be governed by, and construed in
accordance with, the laws of the State of New York.
THE EXPENSE AGREEMENT
Pursuant to the expense agreement that will be entered into by us under
each trust agreement, we will unconditionally guarantee on a subordinated basis
to each person or entity to whom an AIG Capital Trust becomes indebted or
liable, the full payment of any costs, expenses or liabilities of such AIG
Capital Trust, other than obligations of such AIG Capital Trust to pay to the
holders of any capital securities or other similar interests in such AIG Capital
Trust of the amounts owed to holders pursuant to the terms of the capital
securities or other similar interests, as the case may be. The expense agreement
will be enforceable by third parties.
OUR RELATIONSHIP WITH THE GUARANTEE TRUSTEE
See "Description of Capital Securities the AIG Capital Trusts May
Offer -- Trustees and Administrators of the AIG Capital Trusts -- Our
Relationship with the Property Trustee" above for more information about our
relationship with The Bank of New York.
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RELATIONSHIP AMONG THE CAPITAL SECURITIES
AND THE RELATED INSTRUMENTS
Because this section is only a summary, the following description of the
relationship among the capital securities, the junior subordinated debentures,
the expense agreement and the subordinated guarantee is not complete and is
subject to, and is qualified in its entirety by reference to, each trust
agreement, the junior debt indenture and the form of subordinated guarantee,
each of which is incorporated as an exhibit to our registration statement, and
the Trust Indenture Act.
FULL AND UNCONDITIONAL GUARANTEE
Payments of distributions and other amounts due on the capital securities,
to the extent the applicable AIG Capital Trust has funds available for the
payment of such distributions, are guaranteed by us on a subordinated basis as
described under "Description of the Subordinated Guarantees." Taken together,
our obligations under the junior subordinated debentures, the junior debt
indenture, the trust agreement, the expense agreement, and the subordinated
guarantee provide, in the aggregate, a full and unconditional subordinated
guarantee of payments of distributions and other amounts due on the applicable
capital securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
subordinated guarantee. It is only the combined operation of these documents
that has the effect of providing a full and unconditional subordinated guarantee
of the AIG Capital Trust's obligations under the capital securities. If and to
the extent that we do not make payments on the junior subordinated debentures,
the AIG Capital Trust will not pay distributions or other amounts due on its
capital securities. The subordinated guarantee does not cover payment of
distributions when the AIG Capital Trust does not have sufficient funds to pay
such distributions. In such an event, the remedy of a holder of any capital
securities is to institute a legal proceeding directly against us pursuant to
the terms of the junior debt indenture for enforcement of payment of amounts of
such distributions to such holder. Our obligations under each guarantee are
subordinate and junior in right of payment to all of our senior debt to the same
extent as the junior subordinated debentures.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
junior subordinated debentures, such payments will be sufficient to cover
distributions and other payments due on the capital securities, primarily
because:
- the aggregate principal amount of the junior subordinated debentures will
be equal to the sum of the aggregate stated liquidation amount of the
capital securities and the common securities;
- the interest rate and interest and other payment dates on the junior
subordinated debentures will match the distribution rate and distribution
and other payment dates for the capital securities;
- we will pay, under the expense agreement, for all and any costs, expenses
and liabilities of an AIG Capital Trust except the AIG Capital Trust's
obligations to holders of its capital securities under the capital
securities; and
- the trust agreement provides that an AIG Capital Trust will not engage in
any activity that is inconsistent with the limited purposes of such AIG
Capital Trust.
We have the right to set-off any payment we are otherwise required to make
under the junior debt indenture with a payment we make under the subordinated
guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF CAPITAL SECURITIES
A holder of any capital security may, to the extent permissible under
applicable law, institute a legal proceeding directly against us to enforce its
rights under the applicable subordinated guarantee without first instituting a
legal proceeding against the guarantee trustee, the AIG Capital Trust or any
other person or entity.
39
In the event of payment defaults under, or acceleration of, our senior
debt, the subordination provisions of the junior debt indenture provide that no
payments may be made with respect to the junior subordinated debentures until
the senior debt has been paid in full or any payment default has been cured or
waived. Failure to make required payments on the junior subordinated debentures
would constitute an event of default under the junior debt indenture.
LIMITED PURPOSE OF AIG CAPITAL TRUSTS
Each AIG Capital Trust's capital securities evidence a preferred and
undivided beneficial interest in the AIG Capital Trust, and each AIG Capital
Trust exists for the sole purpose of issuing its capital securities and common
securities and investing the proceeds thereof in junior subordinated debentures
and engaging in only those other activities necessary or incidental thereto. A
principal difference between the rights of a holder of a capital security and a
holder of a junior subordinated debenture is that a holder of a junior
subordinated debenture is entitled to receive from us the principal amount of
and interest accrued on junior subordinated debentures held, while a holder of
capital securities is entitled to receive distributions from an AIG Capital
Trust, or from us under the applicable subordinated guarantee, if and to the
extent such AIG Capital Trust has funds available for the payment of such
distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
an AIG Capital Trust involving our liquidation, the holders of the capital
securities will be entitled to receive, out of the assets held by such AIG
Capital Trust, the liquidation distribution. Upon any voluntary or involuntary
liquidation or bankruptcy of ours, the property trustee, as holder of the junior
subordinated debentures, would be a subordinated creditor of ours, subordinated
in right of payment to all senior debt as set forth in the junior debt
indenture, but entitled to receive payment in full of principal and interest,
before any stockholders of ours receive payments or distributions. Since we are
the guarantor under each subordinated guarantee and have agreed, under the
expense agreement, to pay for all costs, expenses and liabilities of an AIG
Capital Trust, other than the AIG Capital Trust's obligations to the holders of
its capital securities, the positions of a holder of such capital securities and
a holder of such junior subordinated debentures relative to other creditors and
to our stockholders in the event of our liquidation or bankruptcy are expected
to be substantially the same.
PLAN OF DISTRIBUTION
INITIAL OFFERING AND SALE OF CAPITAL SECURITIES
AIG Capital Trust may sell capital securities:
- to or through underwriting syndicates represented by managing
underwriters;
- through one or more underwriters without a syndicate for them to offer
and sell to the public;
- through dealers or agents; and
- to investors directly in negotiated sales or in competitively bid
transactions.
Any underwriter or agent involved in the offer and sale of the capital
securities will be named in the prospectus supplement. One or more of our
subsidiaries may act as an underwriter or agent.
The prospectus supplement will describe:
- the terms of the offering, including the name of the agent or the name or
names of any underwriters;
- the public offering or purchase price;
- any discounts and commissions to be allowed or paid to the agent or
underwriters and all other items constituting underwriting compensation;
40
- any discounts and commissions to be allowed or paid to dealers; and
- other specific terms of the particular offering or sale.
Only the agents or underwriters named in a prospectus supplement are agents
or underwriters in connection with the capital securities being offered by that
prospectus supplement.
Underwriters, agents and dealers may be entitled, under agreements with us,
to indemnification against certain civil liabilities, including liabilities
under the Securities Act of 1933.
Underwriters to whom capital securities are sold by us for public offering
and sale are obliged to purchase all of those securities if any are purchased.
This obligation is subject to certain conditions and may be modified in the
prospectus supplement.
Any subsidiary of ours, such as AIG Financial Securities Corp., that
participates in a particular offering of capital securities will comply with the
applicable requirements of Rule 2720 of the National Association of Securities
Dealers, Inc. In compliance with guidelines of the NASD, the maximum commission
or discount to be received by any NASD member or independent broker dealer may
not exceed 8% of the aggregate liquidation amount of capital securities offered
pursuant to this prospectus. We anticipate, however, that the maximum commission
or discount to be received in any particular offering of capital securities will
be significantly less than this amount.
Underwriters, dealers or agents may engage in transactions with, or perform
services for, us or our subsidiaries in the ordinary course of business.
VALIDITY OF THE SECURITIES
Unless we state otherwise in any prospectus supplement, the validity of the
capital securities will be passed upon for the AIG Capital Trusts by Richards,
Layton & Finger, P.A. The validity of the junior subordinated debentures and the
subordinated guarantees will be passed upon for AIG by Sullivan & Cromwell LLP,
or by Kathleen E. Shannon, Senior Vice President, Secretary and Deputy General
Counsel of AIG. Partners of Sullivan & Cromwell LLP involved in the
representation of AIG beneficially own approximately 11,360 shares of AIG common
stock. Ms. Shannon is regularly employed by AIG, participates in various AIG
employee benefit plans under which she may receive shares of AIG common stock
and currently beneficially owns less than 1% of the outstanding shares of AIG
common stock.
EXPERTS
The consolidated financial statements and financial statement schedules of
AIG and subsidiaries incorporated in this prospectus by reference to AIG's
Annual Report on Form 10-K for the year ended December 31, 2002 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and current reports, proxy
statements and other information with the SEC. These reports, proxy statements
and other information can be inspected and copied at:
SEC Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information.
41
AIG's filings are also available to the public through:
- The SEC web site at http://www.sec.gov
- The New York Stock Exchange
20 Broad Street
New York, New York 10005
AIG's common stock is listed on the NYSE and trades under the symbol "AIG."
The SEC allows us to "incorporate by reference" the information AIG files
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference in
this prospectus is considered to be part of this prospectus, and later
information that AIG files with the SEC will automatically update and supersede
that information as well as the information included in this prospectus. AIG
incorporates by reference the documents below, any filings that we make after
the date of the filing of the initial registration statement and prior to the
effectiveness of that registration statement and any future filings made with
the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934 until all the securities are sold. This prospectus is part of a
registration statement AIG filed with the SEC.
- Annual Report on Form 10-K for the year ended December 31, 2002.
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
We will provide without charge a copy of these filings, other than any
exhibits unless the exhibits are specifically incorporated by reference into
this prospectus.
Requests for such documents should be directed to AIG's Director of
Investor Relations, 70 Pine Street, New York, New York 10270, telephone (212)
770-6293.
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
We have included or incorporated by reference in this prospectus statements
that may constitute "forward-looking statements" within the meaning of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are not historical facts but instead represent only
AIG's belief regarding future events, many of which, by their nature, are
inherently uncertain and outside of AIG's control. It is possible that AIG's
actual results may differ, possibly materially, from the anticipated results
indicated in these forward-looking statements.
Information regarding important factors that could cause actual results to
differ, perhaps materially, from those in AIG's forward-looking statements is
contained under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Cautionary Statement Regarding Forward-
Looking Information" in AIG's Annual Report on Form 10-K for the year ended
December 31, 2002, which is incorporated into this prospectus by reference. See
"Where You Can Find More Information" above for information about how to obtain
a copy of this annual report.
42
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL ONLY THE SECURITIES IT DESCRIBES, BUT ONLY UNDER CIRCUMSTANCES
AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
---------------------
$5,139,770,000
AMERICAN INTERNATIONAL GROUP, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN A PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the expenses (all of which are estimated
other than the SEC registration fee) to be incurred by the Registrants in
connection with the distribution of the securities registered under this
registration statement:
AMOUNT
TO BE PAID
----------
SEC registration fee........................................ $415,808
NASD fees................................................... 30,500
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Rating agency fees.......................................... *
Printing fees............................................... *
Trustee fees and expenses................................... *
Listing..................................................... *
Miscellaneous............................................... *
--------
Total............................................. $
========
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The amended and restated certificate of incorporation of AIG provides that
AIG shall indemnify to the full extent permitted by law any person made, or
threatened to be made, a party to an action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she,
his or her testator or intestate is or was a director, officer or employee of
AIG or serves or served any other enterprise at the request of AIG. Section 6.4
of AIG's by-laws contains a similar provision.
The amended and restated certificate of incorporation also provides that a
director will not be personally liable to AIG or its shareholders for monetary
damages for breach of fiduciary duty as a director, except to the extent that
the exemption from liability or limitation thereof is not permitted by the
Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law permits indemnification
against expenses, fines, judgments and settlements incurred by any director,
officer or employee of a company in the event of pending or threatened civil,
criminal, administrative or investigative proceedings, if such person was, or
was threatened to be made, a party by reason of the fact that he is or was a
director, officer or employee of the company. Section 145 also provides that the
indemnification provided for therein shall not be deemed exclusive of any other
rights to which those seeking indemnification may otherwise be entitled.
In addition, AIG and its subsidiaries maintain a directors' and officer's
liability insurance policy.
ITEM 16. EXHIBITS
See Exhibits Index which is incorporated herein by reference.
II-1
ITEM 17. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any fact or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of AIG's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted against a Registrant by such director, officer or controlling
person in connection with the securities being registered, such Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
American International Group, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 11th day of June, 2003.
AMERICAN INTERNATIONAL GROUP, INC.
(Registrant)
By: /s/ M.R. GREENBERG
--------------------------------------
Name: M. R. Greenberg
Title: Chairman and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: that each person whose signature appears
below constitutes and appoints M.R. Greenberg, Martin J. Sullivan and Howard I.
Smith, and each of them, as true and lawful attorneys-in-fact and agents with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement on Form
S-3, and to file the same, with the exhibits thereto, and other documents in
connection herewith, including any related registration statement filed pursuant
to Rule 462(b) of the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorneys-in-law and agents, and each of them,
full power and authority to do and perform each and every act and thing required
and necessary to be done in and about the foregoing as fully for all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ M. R. GREENBERG Chairman, Chief Executive Officer and June 11, 2003
--------------------------------------------- Director (Principal Executive Officer)
(M. R. Greenberg)
/s/ HOWARD I. SMITH Vice Chairman, Chief Administrative June 11, 2003
--------------------------------------------- Officer, Chief Financial Officer and
(Howard I. Smith) Director (Principal Financial Officer)
/s/ MICHAEL J. CASTELLI Vice President and Comptroller June 11, 2003
--------------------------------------------- (Principal Accounting Officer)
(Michael J. Castelli)
/s/ M. BERNARD AIDINOFF Director June 11, 2003
---------------------------------------------
(M. Bernard Aidinoff)
/s/ PEI-YUAN CHIA Director June 11, 2003
---------------------------------------------
(Pei-Yuan Chia)
II-3
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MARSHALL A. COHEN Director June 11, 2003
---------------------------------------------
(Marshall A. Cohen)
/s/ BARBER B. CONABLE, JR. Director June 11, 2003
---------------------------------------------
(Barber B. Conable, Jr.)
/s/ MARTIN S. FELDSTEIN Director June 11, 2003
---------------------------------------------
(Martin S. Feldstein)
/s/ ELLEN V. FUTTER Director June 11, 2003
---------------------------------------------
(Ellen V. Futter)
/s/ CARLA A. HILLS Director June 11, 2003
---------------------------------------------
(Carla A. Hills)
/s/ FRANK J. HOENEMEYER Director June 11, 2003
---------------------------------------------
(Frank J. Hoenemeyer)
/s/ RICHARD C. HOLBROOKE Director June 11, 2003
---------------------------------------------
(Richard C. Holbrooke)
/s/ MARTIN J. SULLIVAN Director June 11, 2003
---------------------------------------------
(Martin J. Sullivan)
/s/ EDWARD S.W. TSE Director June 11, 2003
---------------------------------------------
(Edward S.W. Tse)
Director June 11, 2003
---------------------------------------------
(Jay S. Wintrob)
/s/ FRANK G. WISNER Director June 11, 2003
---------------------------------------------
(Frank G. Wisner)
/s/ FRANK G. ZARB Director June 11, 2003
---------------------------------------------
(Frank G. Zarb)
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, AIG
Capital Trust I and AIG Capital Trust II each certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form S-3
and has duly caused this registration statement to be signed on its behalf by
each of the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 11th day of June, 2003.
AIG CAPITAL TRUST I
(Registrant)
By: American International Group,
Inc.,
as sponsor
By: /s/ HOWARD I. SMITH
------------------------------------
Name: Howard I. Smith
Title: Vice Chairman
AIG CAPITAL TRUST II
(Registrant)
By: American International Group,
Inc.,
as sponsor
By: /s/ HOWARD I. SMITH
------------------------------------
Name: Howard I. Smith
Title: Vice Chairman
II-5
EXHIBITS INDEX
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- ----------- --------
1.1 Form of Underwriting Agreement **
1.2 Form of Distribution Agreement for **
Medium-Term Notes
3(i)(a) Restated Certificate of Incorporation of Incorporated by reference to Exhibit
AIG 3(i) to AIG's Annual Report on Form 10-K
for the year ended December 31, 1996
(File No. 1-8787)
3(i)(b) Certificate of Amendment of Certificate Incorporated by reference to Exhibit
of Incorporation of AIG, filed June 3, 3(i) to AIG's Quarterly Report on Form
1998 10-Q for the quarter ended June 30, 1998
(File No. 1-8787)
3(i)(c) Certificate of Amendment to Certificate Incorporated by reference to Exhibit
of Incorporation of AIG, filed June 5, 3(i)(c) to AIG's Registration Statement
2000 on Form S-4 (File No. 333-45828)
3(ii) By-laws of AIG Incorporated by reference to Exhibit
3(ii) to AIG's Annual Report on Form
10-K for the year ended December 31,
2000 (File No. 1-8787)
4.1 Indenture between AIG and The Bank of *
New York, as Trustee, including the form
of debt security in Article Two thereof
4.2 Form of Subordinated Indenture between *
AIG and The Bank of New York, as
Trustee, including the form of
subordinated debt security in Article
Two thereof
4.3 Form of Warrant Indenture between AIG *
and The Bank of New York, as Trustee,
including the form of put warrant and
form of call warrant in Article Two
thereof
4.4 Form of Debt Warrant Agreement **
4.5 Form of Unit Agreement, including form **
of unit certificate
4.6 Form of Prepaid Purchase Contract **
4.7 Form of Non-Prepaid Purchase Contract (Included in Exhibit 4.5)
(Issuer Sale)
4.8 Form of Non-Prepaid Purchase Contract (Included in Exhibit 4.5)
(Issuer Purchase)
4.9 Form of Deposit Agreement including **
depositary receipt.
4.10 Specimen of certificate representing Incorporated by reference to the
AIG's common stock, par value $2.50 per Registration Statement on Form 8-A,
share filed September 20, 1984
4.11 Certificate of Trust of AIG Capital Filed Herewith
Trust I
4.12 Certificate of Trust of AIG Capital Filed Herewith
Trust II
4.13 Trust Agreement of AIG Capital Trust I Filed Herewith
4.14 Trust Agreement of AIG Capital Trust II Filed Herewith
4.15 Form of Amended and Restated Trust *
Agreement to be used in connection with
the issuance of Capital Securities
4.16 Form of Capital Security (Included in Exhibit 4.15)
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- ----------- --------
4.17 Form of Junior Subordinated Debenture **
4.18 Form of Capital Securities Guarantee *
5.1 Validity Opinion of Kathleen E. Shannon, *
Esq., Senior Vice President, Secretary
and Deputy General Counsel of AIG
5.2 Validity Opinion of Sullivan & Cromwell *
LLP
5.3 Opinion of Richards, Layton & Finger, *
P.A., with respect to AIG Capital Trust
I
5.4 Opinion of Richards, Layton & Finger, *
P.A., with respect to AIG Capital Trust
II
12 Statement regarding computation of Incorporated by reference to Exhibit 12
ratios of earnings to fixed charges to AIG's Annual Report on Form 10-K for
the year ended December 31, 2002 and
Exhibit 12 to AIG's Quarterly Report on
Form 10-Q for quarter ended March 31,
2003 (File No.1-8787)
23.1 Consent of PricewaterhouseCoopers LLP, Filed Herewith
independent accountants for AIG.
23.2 Consent of Kathleen E. Shannon, Esq., (Included in Exhibit 5.1)
Senior Vice President, Secretary and
Deputy General Counsel of AIG
23.3 Consent of Sullivan & Cromwell LLP (Included in Exhibit 5.2)
23.4 Consent of Richards, Layton & Finger, (Included in Exhibits 5.3 and 5.4)
P.A.
24.1 Powers of Attorney (Included in the signature pages of this
Registration Statement)
24.2 Powers of Attorney for AIG, as sponsor, (Included in Exhibits 4.13 and 4.14)
to sign the Registration Statement on
behalf of AIG Capital Trust I and AIG
Capital Trust II
25.1 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Indenture
25.2 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Subordinated Indenture
25.3 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Warrant Indenture
25.4 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Junior Subordinated Indenture
25.5 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Amended and Restated Trust Agreement of
AIG Capital Trust I
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- ----------- --------
25.6 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Amended and Restated Trust Agreement of
AIG Capital Trust II
25.7 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Capital Securities Guarantee of AIG with
respect to the Capital Securities of AIG
Capital Trust I
25.8 Form T-1 Statement of Eligibility under *
the Trust Indenture Act of 1939 of The
Bank of New York, Trustee under the
Capital Securities Guarantee of AIG with
respect to the Capital Securities of AIG
Capital Trust II
---------------
* To be filed by amendment.
** To be filed as an exhibit to a Current Report on Form 8-K and incorporated
herein by reference or as a post effective amendment pursuant to Rule 462(d).