Exhibit 10.66

 

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DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220

 

May 9, 2012

 

Jeffrey J. Hurd, Esq.

Senior Vice President –

Human Resources and Communications

American International Group, Inc.

180 Maiden Lane

22nd Floor

New York, NY 10038-4925

 

 

Re:                             Proposed Compensation Structures for Certain
Executive Officers and Most Highly Compensated Employees (“Covered Employees 26
– 100”)

 

Dear Mr. Hurd:

 

Pursuant to the Department of the Treasury’s Interim Final Rule on TARP
Standards for Compensation and Corporate Governance (the “Rule”),(1) the Office
of the Special Master has completed its review of the 2012 compensation
submission by American International Group, Inc. (“AIG” or the “Company”), on
behalf of employees who are either executive officers of AIG or one of AIG’s 100
most highly compensated employees, excluding those employees subject to
Section 30.10 of the Rule (“Covered Employees 26 – 100” or “Covered Employees”).

 

The Office of the Special Master’s compensation reviews for Covered Employees 26
– 100 differ from the reviews of AIG’s “top 25” employees, which addressed
individual “amounts payable” to those employees, 31 C.F.R. § 30.16(a)(3)(i). For
Covered Employees 26 – 100, the Rule does not require individual payment
determinations; instead, the Office of the Special Master must determine only
whether the proposed compensation structures “will or may result in payments
that are inconsistent with the purposes of Section 111 of EESA or TARP, or are
otherwise contrary to the public interest” (as applied to Covered Employees 26 –
100 of AIG, the “public interest standard”). Id. § 30.16(a)(3)(ii).

 

On December 11, 2009, April 16, 2010, and April 8, 2011, the Office of the
Special Master issued determinations relating to compensation structures for
AIG’s 2009, 2010, and 2011 Covered Employees 26 – 100, respectively (the “Prior
Determinations”). The Prior Determinations were informed by a number of
considerations, including each of the six principles (the “principles”)
articulated in the Rule: avoid incentives to take excessive risk, maximize the
company’s ability to repay the taxpayer, appropriately allocate the components
of compensation, use performance-based compensation, employ pay structures and
amounts that are consistent with those at comparable entities, and base pay on
the employee’s contribution to the value of the TARP recipient enterprise. Id. §
30.16(b)(1). The Office of the Special Master has concluded that these
principles must continue to apply in 2012.

 

In order to apply the principles and ensure that the compensation structures for
AIG’s Covered Employees 26-100 satisfy the public interest standard, the Office
of the Special Master has developed

 

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(1) The Interim Final Rule and all determination letters issued by the Office of
the Special Master are available at www.financialstability.gov (click on
“Executive Compensation”).

 

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certain terms and conditions relating to the components and the allocation of
compensation for Covered Employees that must be satisfied. These terms and
conditions emphasize allocating significant portions of compensation to
long-term structures tied to AIG’s overall value, using structures that are
performance-based and easily understood by shareholders, and protecting the
Company’s ability to remain a competitive enterprise and ultimately repay the
taxpayers.

 

The Office of the Special Master has determined that compensation structures
that satisfy the terms and conditions described in Annex A are consistent with
the public interest standard. AIG’s proposed compensation structures, with minor
modifications, are consistent with these terms and conditions, which generally
require that:

 

·                  Compensation may be provided in three primary components:
cash salary, stock salary, and incentive compensation. The amounts and
conditions of the components for each Covered Employee will be determined by
AIG’s compensation committee.

 

·                  A significant portion of compensation must be
performance-based. Fixed compensation must be limited to 40% of total direct
compensation payable and consist only of cash salaries and stock salaries at
levels sufficient to attract and retain employees and provide a reasonable level
of liquidity. Cash salaries should not exceed $500,000 per year, except in
exceptional cases for good cause shown, as certified by the Company’s
independent compensation committee.

 

·                  Compensation must emphasize long-term results. Payment and
transferability of at least 50% of any incentive payment to a Covered Employee
must be deferred for at least three years. In addition, at least 50% of all
incentives must be in the form of equity in the Company. Finally, at least 50%
of all cash incentive awards must be deferred for a minimum period of one year.

 

·                  Incentive payments may be made if–and only if–the payments
are appropriate in light of AIG’s overall circumstances and the particular
Covered Employee achieves objective performance metrics. The total value of all
incentive compensation payments cannot exceed a specified percentage of the
company’s eligible earnings, to be determined by the compensation committee.
Incentive payments must be subject to “clawback” if the performance assessment
resulting in the compensation is later discovered to be inaccurate. (For a
further discussion of incentive compensation, see the third bullet in Item 1 of
Annex A.)

 

In addition, compensation structures for Covered Employees 26 – 100 continue to
be subject to the additional limitations on perquisites, severance benefits,
hedging transactions, tax “gross-ups” and supplemental executive retirement
plans described in Annex A.

 

The Office of the Special Master’s determinations are limited to the
compensation structures described in Annex A, and shall not be relied upon with
respect to any other employee. The determinations have relied upon, and are
qualified in their entirety by, the accuracy of the materials submitted by AIG
to the Office of the Special Master, and the absence of any material
misstatement or omission in such materials. Pursuant to the Rule, AIG may,
within 30 days of the date hereof, request in

 

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writing that the Office of the Special Master reconsider the determinations set
forth in Annex A. If the Company does not request reconsideration within 30
days, these initial determinations will be treated as final determinations. Id.
§ 30.16(c)(1).

 

 

 

Very truly yours,

 

 

 

 

 

/s/ Patricia Geoghegan

 

Patricia Geoghegan

 

Office of the Special Master

 

for TARP Executive Compensation

Enclosures

 

cc:

Mitchell D. Schultz

 

 

Jacqueline Aguanno

 

 

Marc R. Trevino, Esq.

 

 

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ANNEX A

APPROVED 2012 COMPENSATION STRUCTURES

 

This Annex sets forth terms and conditions for the 2012 compensation structures
for AIG’s 2012 Covered Employees 26 – 100. For the avoidance of doubt, if the
compensation structure for a Covered Employee fits within the $500,000 “safe
harbor” exemption set forth in Section 30.16(a)(3)(ii) of the Rule, the Office
of the Special Master’s approval is not required for that employee’s
compensation structure and the terms and conditions specified below do not
apply. Capitalized terms used in this Annex have the meaning given to them in
the preceding letter. To the extent that AIG’s proposed structures do not
satisfy the principles and these terms and conditions, AIG must make such
modifications as are necessary to comply with such principles and terms and
conditions.

 

1.     Primary Components of Compensation

 

·                  Cash salary. Covered Employees should not receive cash
salaries in excess of $500,000, other than in exceptional circumstances for good
cause shown. Any such exceptions must be individually certified to the Office of
the Special Master by AIG’s compensation committee, which is composed solely of
independent directors.

 

·                Stock salary. Stock salary must be determined as a dollar
amount through the date salary is earned, be accrued at the same time or times
as the salary would otherwise be paid in cash, and vest immediately upon grant,
with the number of shares or units based on the fair market value on the date of
grant. Whether a grant or payment that is labeled stock salary is salary or a
bonus for purposes of the Rule is determined based on all the facts and
circumstances.

 

·                  Incentive compensation. Under any incentive compensation
structure, payments to a Covered Employee must be conditioned upon achievement
of objective performance criteria (other than continued service), with such
achievement to be assessed and certified by the compensation committee.
Performance criteria must be developed by the compensation committee and may be
reviewed by the Office of the Special Master. The aggregate amount of incentives
paid to Covered Employees for performance achieved only in 2012 may not exceed a
specified percentage of AIG’s eligible earnings. The amount and calculation of
such eligible earnings will be determined by the compensation committee and may
be reviewed by the Office of the Special Master.

 

2.     Allocation Rules

 

·                  Application of allocation rules. The allocation rules apply
to each Covered Employee’s 2012 “total direct compensation payable,” which is
equal to the sum of the amounts potentially payable to a Covered Employee (1) in
2012 cash salary, (2) in 2012 stock salary, or (3) under 2012 incentive plans.
For purposes of these determinations, 2012 incentive plans are plans for which
incentives are earned (a) solely with respect to 2012, and (b) under a
multi-year incentive plan established in 2012. Compliance with the allocation
rules is to be assessed based on a Covered Employee’s total direct compensation
payable as designed and established in 2012, assuming that the target level of
achievement under each incentive plan is reached.

 

·                  Cash Salary and Stock Salary allocation. Compensation payable
as cash salary and stock salary may constitute no more than 40% of the total
direct compensation payable to each Covered Employee in 2012.

 

·                  Incentive allocation. A minimum of 60% of the total direct
compensation payable to each Covered Employee in 2012 must be allocated to
performance-based incentive awards assuming

 

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that the target level of achievement is reached. No payment or equity award
under a 2012 incentive plan may be made prior to the conclusion of the
applicable performance period.

 

·                  Long-term allocation. Payment and transferability of least
50% of all performance-based incentive awards must be deferred for at least a
three-year period. Pro rata release of such amounts is permitted, allowing
two-thirds of such amount to become payable and transferable not earlier than
the second anniversary of the date of the award and the last third of such
amount to become payable and transferable on the third anniversary of the award.
In addition, at least 50% of all performance-based incentive awards payable in
the form of cash may not be paid prior to the first anniversary of grant.

 

·                  Equity allocation. At least 50% of all performance-based
incentive awards must be delivered in the form of equity in the Company.

 

·                  Satisfying incentive allocations. The aggregate 2012
performance-based incentives actually paid or awarded to each Covered Employee
must satisfy the above long-term and equity allocation requirements. If several
incentive plans are in existence, this can be achieved either (1) by ensuring
that the aggregate cash paid and equity awarded to a Covered Employee pursuant
to each incentive plan separately satisfies the long-term and equity allocation
requirements, or (2) by having one incentive compensation target package that
complies with the allocation requirements and giving each Covered Employee a
“scorecard” consisting of multiple goals; achievement against those goals would
be evaluated resulting in an overall score, which would determine the percentage
of the target that the Covered Employee had earned.

 

3.     Additional Terms and Conditions

 

·                  Stock compensation generally. For purposes of these
determinations, “stock” compensation includes AIG common stock or common stock
units.(2) Notwithstanding the transferability restrictions otherwise applicable
to any stock compensation, (1) an amount of stock sufficient to cover an
employee’s tax withholding obligations may become immediately transferable to
the extent necessary to satisfy the employee’s obligations, and (2) to the
extent permitted by the Rule, stock may become immediately transferable upon an
employee’s death or separation from service resulting from disability, as
defined in the Company’s broad-based long-term disability plan.

 

·                  Clawbacks and hedging. Any incentive payment must be subject
to “clawback” if the payment or the amount thereof was based on materially
inaccurate financial statements (which term includes, but is not limited to,
statements of earnings, revenues, or gains) or any other materially inaccurate
performance metric criteria, or if the Covered Employee is terminated due to
misconduct that occurred during the period the incentive was earned. In
addition, the compensation structure for each Covered Employee must prohibit the
employee from engaging in any hedging, derivative or similar transaction with
respect to Company stock that would undermine the long-term performance
incentives created by the compensation structures set forth in this Annex.

 

·                  Employees entering the “top 25”. If AIG reasonably concludes
that a Covered Employee may become one of the “top 25” employees in 2013, the
compensation structure for that Covered Employee will be subject to the
following additional terms and conditions to assure compliance with pertinent
statutory and regulatory requirements. Any payment under a 2009, 2010, 2011, or

 

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(2) Consistent with 2011, AIG has proposed the use of AIG common stock or common
stock units for 2012 stock compensation, and the Office of the Special Master
has approved this request.

 

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2012 incentive plan that would be payable to the Covered Employee in cash in the
first quarter of 2013 consistent with the terms of this Annex, or any previous
Annex relating to 2009, 2010, or 2011, may be paid on or before December 31,
2012. In addition, notwithstanding the other requirements of the related Annex,
any incentive compensation for performance in 2009, 2010, 2011, or 2012 may be
paid to the Covered Employee in the form of AIG common stock (but not stock
units) that vests and is delivered on or before December 31, 2012, provided that
the transferability of such stock shall be consistent with the structural
principles of the related Annex. Finally, notwithstanding the other requirements
of this Annex, up to one-third of the Covered Employee’s “annual compensation”
for 2012 may be paid in the form of “long-term restricted stock,” as those terms
are defined in the Rule. For the avoidance of doubt, all such payments continue
to be subject to the applicable provisions in the related Annex regarding
clawbacks and hedging.

 

·                  Severance. No 2012 compensation structure may establish the
right to a “golden parachute” payment (as defined in the Rule) or permit an
increase in the amount of such a payment under an already-existing arrangement.

 

4.     Other Components of Compensation

 

·                  Tax gross-ups. AIG is prohibited from providing (formally or
informally) tax gross-ups to any of the Covered Employees, in the same manner as
the gross-up prohibition applies to “top 25” employees under the Rule.

 

·                  Other compensation and perquisites. No more than $25,000 in
total other compensation and perquisites, as defined by pertinent SEC
regulations, may be provided to any Covered Employee, absent exceptional
circumstances for good cause shown. Payments to Covered Employees under
expatriate arrangements, not to exceed $350,000 per employee (excluding “tax
equalization agreements” as defined in the Rule), are excluded from the
limitation in the foregoing sentence.

 

·                  Supplemental executive retirement plans and non-qualified
deferred compensation plans. No amounts may be accrued under supplemental
executive retirement plans, and no Company contributions may be made to other
“non-qualified deferred compensation” plans, as defined by pertinent SEC
regulations, for any Covered Employee for 2012. For the avoidance of doubt, the
foregoing limitation does not (1) apply to employee-funded elective deferral
arrangements, or (2) preclude continuing recognition of age and service credit
for Company employees for the purpose of vesting in previously accrued benefits
under any plans referred to in this paragraph.

 

·                  Qualified plans. For the avoidance of doubt, the Office of
the Special Master has determined that participation by the Covered Employees in
broad-based, tax-qualified retirement and health and welfare plans is consistent
with the public interest standard, and amounts contributed to or payable under
such plans are not counted against the $25,000 limit on other compensation and
perquisites.

 

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