Document:

Exhibit 10(86)

 

February 11, 2011

 

American International Group, Inc.

180 Maiden Lane

New York, NY 10038

Attention: General Counsel

 

Ladies and Gentlemen:

 

Reference is made to the Guarantee, Pledge and Proceeds Application Agreement, dated as of January 14, 2011 (as amended, the “GPPA”), among American International Group, Inc. (“AIG”), the Guarantors party thereto and AIA Aurora LLC and ALICO Holdings LLC, as the Secured Parties. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the GPPA.

 

The Rights Holder, on behalf of the Secured Parties, AIG and the Secured Parties hereby agree that, notwithstanding Section 4(b) of the GPPA, the amount of the Net Proceeds received in respect of the transactions contemplated by the Star-Edison Purchase Agreement (the “Star-Edison Proceeds”) that was not retained by AIG pursuant to the letter agreement, dated February 8, 2011, among the Rights Holder, AIG and the Secured Parties, shall be applied by AIG no later than the close of business on February 14, 2011, in the following order of priorities:

 

(i)                                    first, to the ALICO SPV as a repayment of the ALICO SPV Intercompany Loan in an amount sufficient to repay in full all amounts outstanding under the ALICO SPV Intercompany Loan Agreement, including accrued and unpaid interest thereon;

 

(ii)                                 second, to the ALICO SPV as a capital contribution in the amount of 1.25 billion dollars ($1,250,000,000); and

 

(iii)                              third, to the AIA SPV as a partial repayment of amounts outstanding under the AIA SPV Intercompany Loan Agreement, including accrued and unpaid interest thereon.

 

For the avoidance of doubt, (x) the amounts received by each SPV pursuant to the foregoing clauses (i) through (iii) shall be applied by such SPV in accordance with the Master Transaction Agreement and the applicable SPV LLC Agreement to reduce the ALICO Junior Liquidation Preference and the preferred return thereon and the AIA Liquidation Preference and the preferred return thereon, (y) all Net Proceeds other than the Star-Edison Proceeds and any other amounts paid on account of the Secured Obligations

 

 

shall continue to be applied in accordance with Section 4 of the GPPA unless otherwise agreed by the Rights Holder on behalf of the Secured Parties and (z) the provisions of this letter shall not affect any other amounts payable to the Secured Parties or the holder of the AIA/ALICO Preferred Units.

 

Sections 18 (Notices), 21 (Amendments and Waivers), 22 (Choice of Law), 23 (Waiver of Jury Trial), 26 (Counterparts) and 28 (Jurisdiction, Consent to Service of Process) of the GPPA are incorporated herein by reference as if fully set forth herein.

 

Please confirm your agreement to the foregoing by signing and returning an executed counterpart of this letter.

 

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Yours sincerely,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
UNITED STATES DEPARTMENT OF THE TREASURY, as the Rights Holder, on   behalf of the Secured Parties
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Timothy G. Massad
    
	
 
    	
 
    	
 
    	
Name:
    	
Timothy G. Massad
    
	
 
    	
 
    	
 
    	
Title:
    	
Acting Assistant Secretary   for Financial Stability
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Acknowledged and agreed:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
AMERICAN INTERNATIONAL   GROUP, INC., as Pledgor
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Brian T. Schreiber
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Brian T. Schreiber
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
Executive Vice President,   Treasury and Capital Markets
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
AIA AURORA LLC, as Secured   Party
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Brian T. Schreiber
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Brian T. Schreiber
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
Manager
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
ALICO HOLDINGS LLC, as   Secured Party
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Brian T. Schreiber
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Brian T. Schreiber
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
Manager
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
cc:
    	
Robert W. Reeder III,   Sullivan & Cromwell LLP
    	
 
    	
 
    	
 
    
	
 
    	
Michael M. Wiseman,   Sullivan & Cromwell LLP
    	
 
    	
 
    	
 
    
	
 
    	
Gary Israel, Sullivan   & Cromwell LLP
    	
 
    	
 
    	
 
    

 

[SIGNATURE PAGE TO STAR/EDISON PROCEEDS LETTER]Exhibit 10(103)

 

	

    	
DEPARTMENT OF THE   TREASURY
    WASHINGTON, D.C. 20220
    	
 
    

 

August 3, 2010

 

Jeffrey J. Hurd, Esq.

Senior Vice President —

Human Resources and Communications 

American International Group, Inc.

70 Pine Street

New York, New York 10270

 

Re:                             Supplemental Determination Regarding

2010 Compensation Payments and Structures for 

Most Highly Compensated Employees

 

Dear Mr. Hurd:

 

This letter addresses requests submitted by you on behalf of American International Group, Inc. (“AIG”), for approval by the Special Master for TARP Executive Compensation (the “Special Master”) regarding (i) compensation potentially payable to a “Top 25” executive, and (ii) compensation structures of employees in the “Covered Employees 26–100” group. This letter also provides a clarification regarding compensation structures approved for the “Covered Employees 26–100” group.

 

Under the Department of the Treasury’s Interim Final Rule on TARP Standards for Compensation and Corporate Governance (the “Rule”), the Special Master must approve the compensation structures and amounts payable to “Top 25” executives of “exceptional assistance recipients” such as AIG. 31 C.F.R. § 30.16(a)(3)(i). The Special Master must also approve the compensation structures—but not individual amounts payable—to executive officers who are in an exceptional assistance recipient’s “Covered Employees 26–100” group. Id. §  30.16(a)(3)(ii).

 

1.  Top 25 and Covered Employees 26—100 Omissions

 

Pursuant to the Rule, on March 23, 2010, the Special Master issued an initial determination (the “Top 25 Determination”), which concluded that certain compensation structures and amounts payable to AIG’s Top 25 executives would not result in payments that are “inconsistent with the purposes of section 111 of EESA or TARP, or [are] otherwise contrary to the public interest.” Id. § 30.16(b)(1) (the “Public Interest Standard”). On April 16, 2010, the Special Master issued another initial determination (the “26–100 Determination”), which concluded that certain compensation structures for AIG’s Covered Employees 26–100 group are consistent with the Public Interest Standard.

 

 

Subsequent to the issuance of the determinations described above, AIG notified the Office of the Special Master that revised calculations revealed the misidentification of one member in each of the 2010 groups. As a result of this misidentification, no compensation structure or payments were proposed for an omitted Top 25 executive and no compensation structure was proposed for an omitted employee in the Covered Employees 26–100 group. On August 2, 2010, AIG submitted proposals for the omitted executives—its representatives having previously discussed the substance of the proposal with the Office of the Special Master—and requested a determination that any payments under the proposals would be consistent with the Public Interest Standard.

 

The proposed pay package for the omitted Top 25 executive conforms to the compensation structures that the Special Master approved in the Top 25 Determination. The amounts potentially payable to the Top 25 executive under the proposal have also been reviewed by the Office of the Special Master to assess whether such amounts are consistent with amounts payable to persons in similar positions or roles at similar entities that are similarly situated. See id. §  30.16(b)(1)(v). In light of this review, the Special Master has concluded that these amounts “appropriately, reflect [the executive’s] prospective contributions...to the value of the exceptional assistance recipient.” Id. §  30.16(b)(1)(vi). Accordingly, the Special Master has determined that the compensation structure proposed for this executive, as described in Exhibit I,  is consistent with the Public Interest Standard.

 

The proposed compensation structure for the omitted employee from the Covered Employees 26–100 group is consistent with the requirements of the 26–100 Determination. Accordingly, the Special Master has determined that AIG’s proposed 2010 compensation structure for this executive is consistent with the Public Interest Standard.

 

2.  New Executive Officer

 

Subsequent to the issuance of the 26–100 Determination, AIG also informed the Office of the Special Master that it had identified a potential candidate for an AIG executive officer position, serving as the Executive Chairman of American International Assurance Company Limited (the “AIA Executive”). On July 17, 2010, AIG submitted a proposed compensation structure and requested a determination that the proposed structure is consistent with the Public Interest Standard. Under the proposal, which is consistent with the requirements of the 26–100 Determination and compensation structures previously approved by the Special Master for incoming AIG executive officers, the AIA Executive would be eligible to receive cash salary, cash and stock incentives, and other benefits (including eligibility under AIG’s Executive Severance Plan) on the same terms and conditions as current executives of AIG in the Covered Employees 26-100 group. Accordingly, the Special Master has determined that AIG’s proposed 2010 compensation structure for the AIA Executive is consistent with the Public Interest Standard.

 

AIG’s submission for the AIA Executive also proposes compensation structures for 2011 and 2012, and contemplates that the AIA Executive may become a Top 25 executive for 2012. The proposed 2011 and 2012 compensation structures generally conform with the compensation structures the Special Master has approved for executives in the Covered Employees 26–100 group and Top 25 executives, respectively. Accordingly, the Special Master has concluded in

 

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principle that the proposed 2011 and 2012 compensation structures and amounts potentially payable under them would be consistent with the Public Interest Standard. Notwithstanding the foregoing, however, the Special Master’s final determination under the Rule regarding the AIA Executive’s compensation structures and payments in any year after 2010 will not be made prior to the regular review of AIG’s compensation proposals for that year, and will be based on the totality of the facts and circumstances at that time.

 

3.  Compensation Structure for a Covered Employee

 

On August 2, 2010, AIG also submitted a proposal regarding the compensation structure of a certain employee in the Covered Employees 26–100 group (the “Covered Employee”). At the time of the 26–100 Determination, it was anticipated that the Covered Employee would fall within the Rule’s “safe harbor” provision, which provides automatic approval for compensation structures resulting in $500,000 or less in “annual compensation” (excluding long-term restricted stock). See id. § 30.16(a)(3)(ii). According to AIG, it is now anticipated that the Covered Employee’s “annual compensation” may exceed $500,000, due to his performance under sales commission plans. Notwithstanding the stock and long-term allocation requirements of the 26–100 Determination, AIG has requested approval to continue paying the Covered Employee under these programs (along with a minimal cash base salary ). AIG has noted the long-established and predominant use of commission programs to compensate sales employees in positions similar to the Covered Employee’s, and confirmed that payments under the program would qualify as “commission compensation” under the Rule.

 

The Special Master considered the proposal in light of the Rule’s exclusion of reasonable “commission compensation” from the restrictions applicable to bonus and incentive compensation, see id. §  30.1, and the principle that compensation structures should be consistent with those provided to “persons in similar positions or roles at similar entities...competing in the same markets” as a covered employee. Accordingly, the Special Master has determined that the payment of qualified “commission compensation” to the Covered Employee under the programs (in addition to a minimal base salary) is not inconsistent with the Public Interest Standard, provided that any other compensation structure of the Covered Employee comply with the requirements of the 26–100 Determination.

 

4.  Guidance Regarding the 26–100 Determination

 

The 26–100 Determination requires that employees in the Covered Employees 26–100 group be paid no more than $25,000 in perquisites and “other” compensation, absent exceptional circumstances for good cause shown. With respect to an individual employee in the Covered Employees 26–100 group, a relocation undertaken at the request of the company constitutes exceptional circumstances, and such circumstances constitute good cause for the company to pay such employee’s reasonable relocation expenses under a program that provides such benefits on the same basis to similarly situated employees; provided, however, that a tax gross-up is not a reasonable relocation expense.

 

The approvals in this letter apply only to the proposals in respect of the executives addressed in sections 1, 2 and 3. Such conclusions are limited to the authority vested in the Special Master by Section 30.16(a)(3) of the Rule, and shall not constitute, or be construed to

 

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constitute, the judgment of the Office of the Special Master or the Department of the Treasury with respect to the compliance of the proposed compensation structure or any other compensation structure for the subject employee with any other provision of the Rule. Moreover, the Special Master’s evaluations and conclusions 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.

 

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
/s/ Kenneth R. Feinberg
    
	
 
    	
Kenneth R. Feinberg
    
	
 
    	
Office of the Special Master
    
	
 
    	
for TARP Executive Compensation
    
	
 
    	
 
    
	
cc: Robert H. Benmosche
    	
 
    
	
Marc Trevino, Esq.
    	
 
    

 

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EXHIBIT I
 SUPPLEMENTAL DETERMINATION

 

	
Top 25 Executive 2010 compensation structure:
    
	
 
    	
 
    	
 
    
	
Cash salary
    	
 
    	
$400,000 (prospective annual rate)
    
	
 
    	
 
    	
 
    
	
Stock salary
    	
 
    	
$800,000 (annual rate, payable on a nunc   pro tunc basis effective January 1, 2010).
    
	
 
    	
 
    	
 
    
	
Long-term restricted stock
    	
 
    	
$300,000 (2010 target amount; in addition, subject to the limitations   of the Rule, a long-term restricted stock grant of up to $850,000 may be   granted with respect to 2009 service in consideration of the cancellation of   incentive payments upon the identification of the executive as a member of   the Top 25.)
    

 

The terms and conditions of the Top 25 Determination regarding the compensation structures and amounts potentially payable thereunder to the non-AIGFP Covered Employees (as defined in the Top 25 Determination) shall apply to the Top 25 Executive.

 

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