8-KMaterial Agreements

AMERICAN INTERNATIONAL GROUP, INC. 8-K Report, Material Agreement (Jul 16, 2010)

Filed July 16, 2010For Securities:AIG

Summary

On July 14, 2010, American International Group, Inc. (AIG) announced the terms of a settlement agreement for securities fraud class actions filed in October 2004. The proposed settlement requires AIG to pay a total of $725 million, with an initial $175 million to be placed in escrow upon preliminary court approval. The remaining $550 million is contingent upon AIG successfully completing one or more common stock offerings that raise at least $550 million in net proceeds, or AIG deciding to fund this amount from other sources. This settlement represents a significant step in resolving past litigation for AIG. However, investors should note that the funding of the remaining settlement amount is subject to AIG's discretion regarding market conditions and corporate transactions. AIG is obligated to use its best efforts to effect the necessary stock offering, but the final decision rests with the company. Failure to secure the necessary funds could lead to termination of the agreement by plaintiffs, or alternative resolutions.

Key Highlights

  • 1AIG has reached an agreement in principle to settle securities fraud class actions filed in 2004.
  • 2The total settlement amount is $725 million.
  • 3$175 million of the settlement will be paid into escrow upon preliminary court approval.
  • 4The remaining $550 million is contingent on AIG completing a common stock offering with net proceeds of at least $550 million, or AIG funding it from other sources.
  • 5AIG is committed to using best efforts to effect the stock offering, but the decision to proceed is at its unilateral discretion based on market conditions and corporate transactions.
  • 6If the $550 million is not funded before final court approval, plaintiffs have options including terminating the agreement or acquiring AIG common stock.

Frequently Asked Questions

This 8-K filing announces that AIG has approved the terms of a settlement agreement to resolve securities fraud class actions that were initiated in October 2004.

The total amount AIG is obligated to pay under the settlement is $725 million. An initial $175 million is due within ten days of preliminary court approval, with the remaining $550 million contingent on specific funding events.

The payment of the remaining $550 million is conditional on AIG consummating one or more common stock offerings that raise at least $550 million in net proceeds prior to final court approval. Alternatively, AIG can fund this amount from other sources at its sole discretion. The company will use best efforts to effect the stock offering, but its commercial reasonableness assessment will guide the decision.

If AIG fails to fund the $550 million, the plaintiffs have the option to terminate the settlement agreement, or elect to acquire AIG common stock valued at $550 million (subject to necessary approvals), or AIG may be granted an extension to complete the funding.