AIG 2010 Annual Report Download - page 52

American International Group, Inc., and Subsidiaries
Special Purpose Vehicle Intercompany Loans and Pledge of Designated Entities
We have pledged equity interests in certain of our businesses and other assets to secure intercompany loans made in
connection with the Recapitalization and granted other control rights with respect to certain businesses and assets. We
have pledged, as security for the repayment of the intercompany loans extended to AIG Parent by the special
purpose vehicles that held the proceeds of the AIA initial public offering and the ALICO sale (the SPVs, and
such loans, the SPV Intercompany Loans), our equity interests in Nan Shan and ILFC (the Designated Entities)
as well as the assets that continue to be held by the AIA SPV and the ALICO SPV, including the ordinary shares
of AIA held by the AIA SPV and the MetLife securities received from the sale of ALICO. If we are unable to
satisfy our obligations under the SPV Intercompany Loans, the secured parties may have the right to foreclose
upon and sell the assets that secure these loans, which could have a material adverse effect on the operations of
the Designated Entities and could adversely affect the value of the Designated Entities.
Furthermore, so long as the Department of the Treasury holds the preferred interests (the SPV Preferred
Interests) in the AIA SPV and the ALICO SPV, the Department of the Treasury will have the right, subject to
existing contractual restrictions, to require us to dispose of our ordinary shares of AIA and the MetLife securities
we received from the sale of ALICO. The consent of the Department of the Treasury will also be required for us
to take specified significant actions with respect to the Designated Entities, including initial public offerings, sales
of the businesses and significant acquisitions or dispositions and incurrence of indebtedness above specified levels.
If any SPV Preferred Interests are outstanding on May 1, 2013, the Department of the Treasury will have the right
to compel the sale of all or a portion of one or more of the Designated Entities on terms that it will determine.
These rights could have a material adverse effect on the operations of the Designated Entities and could adversely
affect the value of the Designated Entities.
Controlling Shareholder
As a result of the issuance of the shares of AIG Common Stock to the Department of the Treasury in connection
with the Recapitalization, the Department of the Treasury is AIG Parent’s controlling shareholder. The Department of
the Treasury is able, to the extent permitted by law, to control a vote of AIG shareholders on substantially all
matters, including:
• approval of mergers or other business combinations;
• a sale of all or substantially all of our assets;
• amendments to AIG Parent’s amended certificate of incorporation; and
• other matters that might be favorable to the Department of the Treasury, but not to our other shareholders.
Moreover, the Department of the Treasury’s ability to cause or prevent a change in control of AIG could also
have an adverse effect on the market price of AIG Common Stock. The Department of the Treasury may also,
subject to applicable securities laws, transfer all, or a portion of, the AIG Common Stock to another person or
entity and, in the event of such a transfer, that person or entity could become our controlling shareholder. The
Department of the Treasury’s rights under a registration rights agreement executed in connection with the
Recapitalization may be assigned to any person purchasing over $500 million of AIG Common Stock.
We granted the Department of the Treasury certain registration rights and, subject to certain exceptions, the ability to
control the terms, conditions and pricing of any offering in which it participates, including any primary offering by us.
We have granted the Department of the Treasury registration rights with respect to the shares of AIG Common
Stock issued in connection with the Recapitalization, including:
• the right to participate in any registered offering of AIG Common Stock by us;
• the right to demand no more than twice in any 12-month period that we effect a registered marketed
offering of our shares after the earlier of August 15, 2011 and the date of our completion of a primary
equity offering;
36 AIG 2010 Form 10-K