Ex. 10(3)

EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT (this “Agreement”), is entered into as of June 27,
2005, by and between American International Group, Inc., a Delaware corporation
(the “Company”), and Steven J. Bensinger (“Executive”).

     WHEREAS, Executive is currently employed by the Company as its Executive
Vice President and Chief Financial Officer pursuant to that certain employment
letter dated as of March 16, 2005 (the “Employment Letter”); and

     WHEREAS, as of the date of this Agreement, the Company wishes to continue
Executive’s employment as Executive Vice President and Chief Financial Officer
under the terms of a new employment agreement on the terms set forth herein,
which shall supersede the Employment Letter; and

     WHEREAS, Executive desires to enter into such agreement; and

     WHEREAS, Executive’s employment as the Company’s Executive Vice President
and Chief Financial Officer is a promotion from his position with the Company
prior to March 14, 2005, and the Board of Directors of the Company (the “Board”)
has acknowledged that Executive has been performing his duties as Executive Vice
President and Chief Financial Officer under conditions at the Company that are
demanding both in terms of the time commitment required and the unique
circumstances facing the Company as of the date of this Agreement.

     NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties hereby agree
as follows:

     1. Term of Employment. Subject to the provisions of Section 9 of this
Agreement, this Agreement shall be effective for a term commencing as of
March 14, 2005 (the “Effective Date”) and ending on the day immediately
preceding the third anniversary of the Effective Date (the “Employment Term”).

     2. Position.

          (a) Executive shall serve as Executive Vice President and Chief
Financial Officer of the Company. In such position, Executive shall have such
duties and authority as are consistent therewith. Executive shall report to the
Company’s Chief Executive Officer and to the Audit Committee of the Board.

          (b) During the Employment Term, Executive will devote his full
business time and best efforts to the performance of his duties hereunder and
will not engage in any other business, profession or occupation for compensation
or otherwise which would conflict or interfere with the rendition of such
services, either directly or indirectly, without the prior written consent of
the Board; provided, that nothing herein shall preclude Executive, subject to
the prior approval of the Board, from accepting appointment to or continuing to
serve on any

 

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board of directors or trustees of any business corporation or any charitable or
not-for-profit organization or from managing his personal, financial and legal
affairs; provided, in each case, and in the aggregate, that such activities do
not conflict or interfere with the performance of Executive’s duties hereunder
or conflict with Section 11 of this Agreement in any material respect.

     3. Base Salary and Non-Variable Compensation.

          (a) Base Salary. During the Employment Term, the Company shall pay
Executive a base salary (the “Base Salary”) at the annual rate of $750,000,
payable in regular installments in accordance with the Company’s usual payroll
practices. The Base Salary shall be retroactive to the Effective Date. During
the Employment Term, the Compensation Committee of the Board (the “Compensation
Committee”) shall review the Base Salary annually and may increase the Base
Salary, and the term “Base Salary” shall refer to such increased amount.

          (b) Non-Variable Compensation. Executive shall receive an additional
cash payment with respect to each of fiscal years 2005, 2006 and 2007, in
addition to any other amounts described in this Agreement, in an amount equal to
the excess, if any, of (i) $750,000 over (ii) the aggregate of all
(A) supplemental quarterly interim cash bonuses in respect of the Company’s
long-term compensation arrangements or otherwise paid in respect of the
applicable fiscal year, which shall be paid consistent with past practice, and
(B) cash dividends received in respect of the fiscal year, or with respect to
the prior fiscal year to the extent not previously taken into account in respect
of this clause (B), on common and preferred stock of C.V. Starr & Co., Inc.
(“Starr”) held by Executive, which compensation shall be paid no later than
March 31 of the fiscal year following each of fiscal years 2005, 2006 and 2007.
This amount shall be payable in respect of fiscal year 2007 irrespective of the
expiration of the Employment Term on the day immediately preceding the third
anniversary of the Effective Date, if such amount has not been paid by such
time.

     4. Bonuses.

          (a) Transition Bonus. The Company shall pay Executive a transition
bonus, in cash, in an amount equal to $1,000,000 (the “Transition Bonus”), which
shall be paid in four equal installments on, or as soon as reasonably
practicable following, each of the following dates, whether or not Executive is
employed by the Company on such dates, unless Executive’s employment has been
terminated by the Company for “Cause” or by Executive without “Good Reason” (as
such terms are defined below): (i) the date Executive and the Company sign this
Agreement, and (ii) the last day of each of the second, third and fourth fiscal
quarters of the Company in 2005. If Executive’s employment is terminated for any
reason other than by the Company for Cause or by Executive without Good Reason
before any payment date set forth in the preceding sentence, then, if necessary
to avoid the application of Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code”), to any such unpaid portion of the Transition Bonus,
Executive shall not receive any such amounts until the first scheduled payroll
date that occurs more than six months following the date of termination of
employment (the “First Payment Date”) and, on the First Payment Date, the
Company will pay Executive an amount equal to the sum of all amounts that would
have been payable following termination of

 

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employment in respect of the period preceding the First Payment Date but for the
delay imposed on account of the aforementioned Section 409A.

          (b) Annual Bonus. Executive may receive an additional annual cash
bonus in respect of each full or partial fiscal year of the Company during the
Employment Term, as determined in the sole discretion of the Compensation
Committee based on its assessment of Company and individual performance in
relation to performance targets, a subjective evaluation of Executive’s
performance and/or such other criteria as may be established by it (the “Annual
Bonus”). Notwithstanding the foregoing, during the Employment Term, Executive
shall be eligible, with respect to each of fiscal years 2006 and 2007, for an
annual cash bonus based on the attainment of targets established by the
Compensation Committee, which, together with the target value of any long-term
or equity-based award in respect of such year (as described in Section 5), shall
have a total target value of $5,000,000.

     5. Long-Term and Equity-Based Incentives. During the Employment Term,
Executive shall be eligible to participate in any long-term incentive
compensation plans or equity-based compensation plans maintained by the Company
on such basis as may be determined by the Compensation Committee; provided that,
as of a date that is not later than March 31, 2006, Executive shall be granted
awards in respect of fiscal year 2005 having a value, determined at the date of
grant, as reasonably determined by the Compensation Committee, of no less than
the excess of (A) $4,000,000 over (B) the sum of (i) the grant date value (as
reasonably determined by the Compensation Committee in the same manner) of
Company stock options and other equity awards granted to Executive no later than
December 31, 2005, in respect of fiscal year 2005, (ii) the annualized fiscal
year 2005 grant value (as reasonably determined by the Compensation Committee)
of any award made to Executive pursuant to a Company arrangement intended to be
in lieu of Executive’s participation in the Starr International Company, Inc.
Deferred Compensation Profit Participation Plan and (iii) the value (as
reasonably determined by the Compensation Committee) of any additional shares of
preferred stock awarded to Executive with respect to fiscal year 2005 by Starr
and any growth in book value in respect of 2005 attributable to any common stock
of Starr held by Executive. In the event that any shares pursuant to clause
(iii) of the preceding sentence have not been awarded, or increase in book value
determined, by Starr by March 31, 2006, the Company shall grant Executive a
long-term or equity-based award having a value, as reasonably determined by the
Compensation Committee, equal to the excess of (X) $4,000,000 over (Y) the value
of the awards described in clauses (i) and (ii) of the preceding sentence.
Notwithstanding anything to the contrary in this Section 5, during the
Employment Term, Executive shall be eligible, with respect to each of fiscal
years 2006 and 2007, for a long-term or equity-based award, which, together with
any annual cash bonus target in respect of such year (as described in
Section 4(b)), shall have a total target value (as reasonably determined by the
Compensation Committee) of $5,000,000. The amount actually awarded in respect of
2006 and 2007 shall be offset by the value of (I) awards described in clause
(B) of the first sentence of this Section 5, but substituting 2006 or 2007, as
applicable, for 2005 in such clause and (II) any shares awarded, or increase in
book value determined, in accordance with such clause (B) in respect of the
applicable year but later than March 31 of the subsequent year.

     6. Employee Benefits. During the Employment Term, Executive shall be

 

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entitled to participate in the Company’s employee benefit plans (other than any
severance or change-in-control plan) as in effect from time to time on the same
basis as those benefits are generally made available to other senior executives
of the Company. In addition, Executive and the Company will negotiate in good
faith to determine, prior to January 1, 2006, the nature of Executive’s
participation in the Company’s Supplemental Executive Retirement Plan.

     7. Vacation. Executive shall be entitled to four (4) weeks annual paid
vacation in accordance with the vacation policy of the Company.

     8. Business Expenses and Perquisites.

          (a) Expenses. During the Employment Term, reasonable business expenses
incurred by Executive in the performance of his duties hereunder shall be
reimbursed by the Company in accordance with Company policies.

          (b) Perquisites. During the Employment Term, Executive shall be
entitled to participate in all of the Company’s perquisite plans, programs and
arrangements that are generally provided by the Company to other senior
executives from time to time, including, without limitation, the provision of
financial and tax planning assistance.

     9. Termination. Notwithstanding any other provision of the Agreement:

          (a) For Cause by the Company. The Employment Term, and Executive’s
employment hereunder, may be terminated at any time by the Company for Cause
upon delivery of a “Notice of Termination” (as defined in Section 9(f)) by the
Company to Executive. For purposes of this Agreement, “Cause” shall mean,
whether occurring prior to, or on or after the Effective Date, (i) Executive’s
willful and continued failure to perform substantially his duties with the
Company (other than any such failure resulting from Executive’s incapacity due
to physical or mental illness) for a period of 10 days after a written demand
for substantial performance is delivered to Executive by the Board, which
specifically identifies the manner in which the Board believes that Executive
has not substantially performed Executive’s duties, (ii) Executive’s willful
malfeasance or willful misconduct that results in substantial damage to the
Company, (iii) Executive’s willful and material violation of a material
provision of the Company’s Code of Conduct or the Director, Executive Officer
and Senior Financial Officer Code of Business Conduct and Ethics, as such codes
of conduct may be in effect from time to time, or other policies regarding
behavior of employees, (iv) conviction of, or entry of a plea of guilty or no
contest by Executive with respect to, a felony or any lesser crime of which
fraud or dishonesty is a material element, (v) any willful failure by Executive
to comply with a material provision of Section 11 of this Agreement, or
(vi) Executive’s breach of Section 14 of this Agreement.

          For purposes of this provision, no act or failure to act on the part
of Executive, shall be considered “willful” unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that Executive’s
action or omission was in the best interests of the Company. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Board or the Chief Executive

 

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Officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. The cessation of employment of
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of a simple majority of the members of the Board (other than
Executive, if he is a member of the Board) at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to Executive, and
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, Executive is
guilty of the conduct described in clauses (i), (ii), (iii), (v) or (vi) above,
and specifying the particulars thereof in detail; provided, that, no such
resolution shall be required for any termination for Cause due to the conduct
described in clause (iv) above.

          If Executive is terminated for Cause pursuant to this Section 9(a), he
shall be entitled to receive only his Base Salary through the date of
termination and reimbursement for any unreimbursed business expenses properly
incurred by Executive in accordance with Company policy through the date of
Executive’s termination, and he shall have no further rights to any compensation
(including any Base Salary, Transition Bonus, Annual Bonus (including any Annual
Bonus that has been declared but not yet paid), payments from the Company
pursuant to Section 3(b) of this Agreement or any long-term or equity-based
compensation awards) or any other benefits under this Agreement. All other
benefits, if any, due Executive following Executive’s termination of employment
for Cause pursuant to this Section 9(a) shall be determined in accordance with
the plans, policies and practices of the Company; provided, however, that
Executive shall not participate in any severance plan, policy or program of the
Company.

          (b) Disability or Death. The Employment Term, and Executive’s
employment hereunder, shall terminate immediately upon Executive’s death or
following delivery of a Notice of Termination by the Company to Executive if
Executive becomes physically or mentally incapacitated and is therefore unable
for a period of ninety (90) consecutive days or one-hundred twenty (120) days
during any consecutive six (6) month period to perform his duties with
substantially the same level of quality as immediately prior to such incapacity
(such incapacity is hereinafter referred to as “Disability”). Upon termination
of Executive’s employment hereunder for either Disability or death, Executive or
Executive’s estate (as the case may be) shall be entitled to receive (i) his
Base Salary through the last day of the payroll period during which such
termination occurs; (ii) any declared but unpaid Annual Bonus for any fiscal
year preceding the year in which the termination occurs; (iii) reimbursement for
any unreimbursed business expenses properly incurred by Executive in accordance
with Company policy through the date of Executive’s termination (the sum of (i),
(ii) plus (iii), the “Accrued Obligations”); (iv) a pro rata portion of any
Annual Bonus that Executive would have been entitled to receive pursuant to
Section 4(b) of this Agreement with respect to the fiscal year of termination
based upon the percentage of the fiscal year that shall have elapsed through the
date of Executive’s termination of employment, and determined by using (X) the
Transition Bonus, if such termination occurs during fiscal year 2005, and
reducing the pro rata portion of the Transition Bonus by the aggregate amount of
all installments of the Transition Bonus that have been paid through the date of
termination, or (Y) Executive’s target Annual Bonus for the fiscal year of such
termination, if such termination occurs following the end of fiscal year 2005
(the

 

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“Pro-Rata Bonus”), payable as soon as reasonably practicable following the date
of Executive’s termination of employment, and (v) in the case of a termination
due to Disability, continuation of the Base Salary in effect on the date of
termination until the earlier of (A) the second anniversary of the date of
termination, and (B) the date Executive is eligible to commence receiving
payments under the Company’s long-term disability policy. Notwithstanding the
foregoing, in the event of Executive’s termination of employment due to
Disability, if necessary to avoid the application of Section 409A of the Code to
the amounts payable pursuant to clauses (iv) and (v) of the preceding sentence,
Executive shall not receive any such amounts until the First Payment Date and,
on the First Payment Date, the Company will pay Executive an amount equal to the
sum of all amounts that would have been payable in respect of the period
preceding the First Payment Date but for the delay imposed on account of the
aforementioned Section 409A. Executive or Executive’s estate (as the case may
be) shall have no further rights to any compensation (including any Base Salary,
Annual Bonus, payments under Section 3(b) of this Agreement or any long-term or
equity-based compensation awards) or any other benefits under this Agreement.
All other benefits, if any, due Executive following Executive’s termination for
Disability or death shall be determined in accordance with the plans, policies
and practices of the Company; provided, however, that Executive (or his estate,
as the case may be) shall not participate in any severance plan, policy or
program of the Company.

          (c) Without Cause by the Company or for Good Reason by Executive. The
Employment Term, and Executive’s employment hereunder, may be terminated by the
Company without Cause (other than by reason of Executive’s Disability) following
the delivery by the Company of a Notice of Termination to Executive or by
Executive for Good Reason following the delivery by Executive of a Notice of
Termination to the Company. The expiration of the Employment Term on the date
immediately preceding the third anniversary of the Effective Date shall not be
considered a termination without Cause under this Agreement or otherwise result
in the payment of severance or post-employment benefits pursuant to Section 9(c)
of this Agreement if Executive is not otherwise terminated pursuant to Section
9(c) of this Agreement prior to such date. If Executive’s employment is
terminated by the Company without Cause (other than by reason of Disability) or
by Executive for Good Reason, Executive shall be entitled to receive:

               (i) within five (5) business days following termination, a lump
sum payment in an amount equal to the Accrued Obligations;

               (ii) the Pro-Rata Bonus, payable as soon as reasonably
practicable following the date of Executive’s termination of employment;
provided, that, if necessary to avoid the application of Section 409A of the
Code to the Pro Rata Bonus, Executive shall not receive any such Pro Rata Bonus
installment until the First Payment Date;

               (iii) subject to Executive’s continued compliance with Section 11
of this Agreement, an amount equal to the greater of (A) $7,500,000, and (B) an
amount equal to the sum of (I) three times the Base Salary (at the rate in
effect immediately prior to termination) and (II) three times the actual Annual
Bonus paid with respect to the preceding fiscal year (any such amount shall be
referred to in this Agreement as the “Severance”); provided that, for purposes
of this sentence, an Annual Bonus shall be deemed to be “paid” at the time that

 

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Executive receives an amount in respect thereof at the time that Annual Bonuses
are paid to other senior executives of the Company. The Severance shall be
payable in equal installments (each, a “Severance Installment”) over the twelve
(12) month period (eighteen (18) month period in the event of a termination by
Executive for Good Reason based on the circumstances described in clause (iv) or
clause (v) under the definition of Good Reason in this Section 9(c)) commencing
with the second of the Company’s standard payroll dates falling after such
termination; provided, however, that, if necessary to avoid the application of
Section 409A of the Code to the Severance, Executive shall not receive any
installment payment until the First Payment Date, and, on the First Payment
Date, the Company will pay Executive an amount equal to the sum of all Severance
Installments that would have been payable in respect of the period preceding the
First Payment Date but for the delay imposed on account of the aforementioned
Section 409A;

               (iv) continued health and life insurance benefits for Executive
and his spouse and dependents, if any, for a thirty six (36) month period
following the date of Executive’s termination of employment, on the same basis
as such benefits are provided from time to time to actively employed senior
executives of the Company; provided, that the Company’s obligation to provide
such health and life insurance benefits shall cease with respect to such
benefits at the time Executive becomes eligible for such benefits from another
employer;

               (v) three years of additional service credit and credit for three
years of additional age under the Company’s employee pension plans, except for
under any plan that is qualified or intended to be qualified under the
provisions of Section 401 of the Code, for purposes of benefit accrual, matching
contributions, vesting and eligibility for retirement. For the avoidance of
doubt, no amounts provided in Section 9(c)(ii) or (iii) of this Agreement shall
be included in such calculation, and Executive shall not be entitled to receive
any payments pursuant to any non-qualified pension plan of the Company until
expiration of the thirty six (36) month period following the Executive’s
termination of employment under this Section 9(c); and

               (vi) if, as of the date of such termination, (a) Executive is not
eligible to participate in any retiree medical or life insurance program of the
Company and (b) Executive would have at least 10 years of service with the
Company and reached at least age 55 if credited with three years of additional
age and service, then the Company shall purchase for Executive a medical and/or
life insurance policy, as applicable, that provides coverage that is as
comparable as is commercially available to the coverage under the retiree
medical and/or retiree life insurance program of the Company, as applicable, as
in effect as of the date of Executive’s termination of employment. For the
avoidance of doubt, nothing in this Section 9(c)(vi) shall provide Executive
with any extra age or service credit for purposes of eligibility or for any
other purpose under any retiree medical or life insurance program of the
Company.

     Notwithstanding anything to the contrary in this Agreement, no further
payments or benefits shall be due under this Section 9(c) if, at any time after
Executive’s employment is terminated pursuant to this Section 9(c) and prior to
the time when any payment is made or benefit provided pursuant to this
Section 9(c), the Board determines, in accordance with the procedures set forth
in Section 9(a) of this Agreement, that grounds existed, on or prior to the date
of termination of Executive’s employment with the Company, including prior to
the Effective Date, for the Company to terminate Executive’s employment for
Cause; provided,

 

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however, that, Executive shall in all events be entitled to receive his Base
Salary through the date of termination and reimbursement for any unreimbursed
business expenses properly incurred by Executive in accordance with Company
policy through the date of Executive’s termination.

     Executive shall have no rights to any further compensation (including any
Base Salary, Annual Bonus, payments under Section 3(b) of this Agreement or any
long-term or equity-based compensation awards) or any other benefits under this
Agreement. All other benefits, if any, due Executive following a termination
pursuant to this Section 9(c) shall be determined in accordance with the plans,
policies and practices of the Company; provided, however, that Executive shall
not participate in any severance plan, policy or program of the Company.
Executive and the Company acknowledge that any payments and benefits provided to
Executive under clauses (ii) through (vi) of this Section 9(c) relate solely to
services rendered by Executive to the Company on and after the Effective Date.

For purposes of this Agreement, “Good Reason” means:

               (i) any change in the duties or responsibilities (including
reporting responsibilities) of Executive that is inconsistent in any material
and adverse respect with Executive’s current position(s), duties,
responsibilities or status with the Company (including any material and adverse
diminution of such duties or responsibilities); provided, however, that Good
Reason shall not be deemed to occur pursuant to this clause (i) solely on
account of the Company no longer being a publicly traded entity or on account of
any change to Executive’s duties as a result of his physical or mental
incapacity;

               (ii) a material and adverse change in Executive’s titles or
offices (including his position as Executive Vice President and Chief Financial
Officer) with the Company; provided, however, that Good Reason shall not be
deemed to occur pursuant to this clause (ii) on account of any change to
Executive’s titles or offices as a result of his physical or mental incapacity;

               (iii) any material breach of this Agreement by the Company;

               (iv) the failure of the Compensation Committee to adopt, by
December 31, 2005 (or such later date mutually agreed by Executive and the
Compensation Committee), an incentive compensation program in respect of each of
the 2006 and 2007 fiscal years setting forth target awards that are, in the
aggregate, no less than $5,000,000 and, as and if appropriate to the award type,
performance metrics and payout schedules for earning target, above-target, or
below-target award amounts;

               (v) within 30 days following notice by the Compensation Committee
to Executive of adoption of an incentive compensation program in respect of each
of the 2006 and 2007 fiscal years, Executive’s written notification to the
Compensation Committee that such program is not acceptable to Executive; or

               (vi) the relocation of Executive’s primary office to a location
that is more than thirty five (35) miles from both of (A) the Company’s
headquarters in New

 

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York, New York, unless such office is moved closer to Executive’s primary
residence at the time of such relocation, and (B) Executive’s residence at the
time of such relocation;

provided that, a termination by Executive with Good Reason shall be effective
only if, within thirty (30) days following Executive’s first becoming aware of
the circumstances giving rise to Good Reason, Executive delivers a Notice of
Termination for Good Reason by Executive to the Company, and the Company within
thirty (30) days following its receipt of such notification has failed to cure
the circumstances giving rise to Good Reason.

          (d) Termination by Executive without Good Reason. The Employment Term,
and Executive’s employment hereunder, may be terminated by Executive without
Good Reason following the delivery of a Notice of Termination to the Company.
Upon a termination by Executive pursuant to this Section 9(d), Executive shall
be entitled to his Base Salary through the date of such termination and
reimbursement for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy through the date of Executive’s
termination, and he shall have no rights to any further compensation (including
any Base Salary, Transition Bonus, Annual Bonus, payments under Section 3(b) of
this Agreement or any long-term or equity-based compensation awards) or any
other benefits under this Agreement. All other benefits, if any, due Executive
following termination pursuant to this Section 9(d) shall be determined in
accordance with the plans, policies and practices of the Company; provided,
however, that Executive shall not participate in any severance plan, policy or
program of the Company.

          (e) Release. Notwithstanding any other provision of this Agreement to
the contrary, Executive acknowledges and agrees that any and all payments and
benefits to which Executive is entitled under Section 9(b) or Section 9(c) of
this Agreement are conditional upon and subject to Executive’s execution of a
general release and waiver, substantially in the form attached as Exhibit A
hereto, of all claims Executive may have against the Company and its directors,
officers and affiliates, except as to matters covered by provisions of this
Agreement that expressly survive the termination of this Agreement.

          (f) Notice of Termination. Any purported termination of employment by
the Company or Executive, other than any termination due to Executive’s death,
shall be communicated by a written Notice of Termination to Executive or the
Company, respectively, delivered in accordance with Section 15(i) hereof. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice which
shall indicate the specific termination provision in the Agreement relied upon,
the date of termination, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under the
provision so indicated. The date of termination of Executive’s employment shall
be the date so stated in the Notice of Termination, which date, in the event of
a termination by Executive pursuant to Section 9(d), shall be no less than sixty
(60) days following the delivery of a Notice of Termination; provided, however,
that in the case of a termination for Cause by the Company, the date of
termination shall be the date the Notice of Termination is delivered in
accordance with Section 15(i).

 

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          (g) Continuation of Employment; Termination On or After Expiration of
Employment Term. Unless the parties otherwise agree in writing, continuation of
Executive’s employment with the Company beyond the expiration of the Employment
Term shall be deemed an employment at will and shall not be deemed to extend any
of the provisions of this Agreement, and Executive’s employment may thereafter
be terminated at will by Executive or the Company. The expiration of the
Employment Term on the date immediately preceding the third anniversary of the
Effective Date shall not be cause for the payment of severance or
post-employment benefits pursuant to this Agreement if Executive is not
otherwise terminated pursuant to Section 9 of this Agreement prior to such date.

     10. Certain Additional Payments by the Company.

          (a) If it is determined (as hereafter provided) that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement of the Company, including, without limitation, any
restricted stock, stock option, stock appreciation right or similar right, or
the lapse or termination of any restriction on or the vesting or exercisability
of any of the foregoing (a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto), or to
any similar tax imposed by state or local law, or any interest or penalties with
respect to such excise tax (such tax or taxes, together with any such interest
and penalties, are hereafter collectively referred to as the “Excise Tax”), then
the Executive will be entitled to receive an additional payment or payments (a
“Gross-Up Payment”) in an amount such that, after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.

          (b) Subject to the provisions of Section 10(f) of this Agreement, all
determinations required to be made under this Section 10, including whether an
Excise Tax is payable by Executive and the amount of such Excise Tax and whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be
made by a nationally recognized firm of certified public accountants (the
“Accounting Firm”) chosen by the Company. The Company will direct the Accounting
Firm to submit its determination and detailed supporting calculations to both
the Company and Executive within fifteen (15) calendar days after the date of
the event giving rise to the Payment or the date of Executive’s termination of
employment, if applicable, and any other such time or times as may be requested
by the Company or Executive. If the Accounting Firm determines that any Excise
Tax is payable by Executive, the Company will pay the required Gross-Up Payment
to Executive within five (5) business days after receipt of such determination
and calculations. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it will, at the same time as it makes such determination,
furnish Executive with an opinion that he has substantial authority not to
report any Excise Tax on his federal, state, local income or other tax return.
Any determination by the Accounting Firm as to the amount of the Gross-Up
Payment will be binding upon the Company and Executive. As a result of the
uncertainty in the application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of

 

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 11

any determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
“Underpayment”), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Section 10(f) hereof and Executive thereafter is required to make a payment
of any Excise Tax, Executive will direct the Accounting Firm to determine the
amount of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and Executive as promptly
as possible. Any such Underpayment will be promptly paid by the Company to, or
for the benefit of, Executive within five (5) business days after receipt of
such determination and calculations.

          (c) The Company and Executive will each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determination contemplated by Section
10(b) of this Agreement.

          (d) The federal, state and local income or other tax returns filed by
Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
Executive. Executive will make proper payment of the amount of any Excise Tax,
and, at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the
Internal Revenue Service (the “IRS”) and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of Executive’s federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, Executive will, within five
(5) business days pay to the Company the amount of such reduction.

          (e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section
10(b) and Section 10(d) of this Agreement will be borne by the Company and paid
as incurred. If such fees and expenses are initially advanced by Executive, the
Company will reimburse Executive the full amount of such fees and expenses
within five (5) business days after receipt from Executive of a statement
therefor and reasonable evidence of his payment thereof.

          (f) Executive will notify the Company in writing of any claim by the
IRS that, if successful, would require the payment by the Company of a Gross-Up
Payment. Such notification will be given as promptly as practicable but no later
than ten (10) business days after Executive actually receives notice of such
claim and Executive will further apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid (in each case, to the
extent known by Executive). Executive will not pay such claim prior to the
earlier of (x) the expiration of the thirty (30) calendar-day period following
the date on which he gives such notice to the Company and (y) the date that any
payment of amount with respect to such claim is due. If the Company notifies
Executive in writing prior to the expiration of such period that it desires to
contest such claim, Executive will:

 

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 12

               (i) provide the Company with any written records or documents in
his possession relating to such claim reasonably requested by the Company;

               (ii) take such action in connection with contesting such claim as
the Company will reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such claim by
an attorney competent in respect of the subject matter and reasonably selected
by the Company;

               (iii) cooperate with the Company in good faith in order
effectively to contest such claim; and

               (iv) permit the Company to participate in any proceedings
relating to such claim;

     provided, however, that the Company will bear and pay directly all costs
and expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless Executive, on an after-tax basis,
for and against any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing provisions of this Section
10(f), the Company will control all proceedings taken in connection with the
contest of any claim contemplated by this Section 10(f) and, at its sole option,
may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim (provided
that Executive may participate therein at his own cost and expense) and may, at
its option, either direct Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company will determine; provided, that if the Company directs Executive to pay
the tax claimed and sue for a refund, the Company will advance the amount of
such payment to Executive on an interest-free basis and will indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with respect to
such advance; and provided further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which the contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company’s control of any such contested
claim will be limited to issues with respect to which a Gross-Up Payment would
be payable hereunder, and Executive will be entitled to settle or contest, as
the case may be, any other issue raised by the IRS or any other taxing
authority.

          (g) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 10 (f) hereof, Executive receives any refund with
respect to such claim, Executive will (subject to the Company’s complying with
the requirements of Section 10(f) hereof) promptly pay to the Company the amount
of such refund (together with any interest paid or credited thereon after any
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 10(f) hereof, a determination is
made that Executive will not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial or

 

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 13

refund prior to the expiration of thirty (30) calendar days after such
determination, then such advance will be forgiven and will not be required to be
repaid and the amount of such advance will offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid pursuant to this Section 10.

          (h) If it is ultimately determined (by IRS private letter ruling or
closing agreement, court decision or otherwise) that any Gross-Up Payments
and/or advances and/or Underpayments and/or any other amounts paid or made by
the Company pursuant to this Section 10 were not necessary to accomplish the
purpose of this Section 10, the Executive shall promptly cooperate with the
Company to correct such overpayments (by way of assigning any refund to the
Company as provided herein, by direct repayment or otherwise) in a manner
consistent with the purpose of this Section 10, which is to protect the
Executive by making him whole, but not more than whole, on an after-tax basis,
from the application of the Excise Tax.

     11. Restrictive Covenants.

          (a) Non-Competition/Non-Solicitation. Executive acknowledges and
recognizes the highly competitive nature of the businesses of the Company and
its subsidiaries and controlled affiliates and accordingly agrees as follows:

               (i) While employed by the Company and for a period of twelve
(12) months (eighteen (18) months in the event of a termination by Executive for
Good Reason based on the circumstances described in clause (iv) or clause
(v) under the definition of Good Reason in Section 9(c) of this Agreement)
following the date Executive ceases to be employed by the Company, if such
termination occurs during the Employment Term (the “Restricted Period”),
Executive will not directly or indirectly, (w) engage in any “Competitive
Business” (defined below) for Executive’s own account, (x) enter the employ of,
or render any services to, any person engaged in any Competitive Business,
(y) acquire a financial interest in, or otherwise become actively involved with,
any person engaged in any Competitive Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent, trustee
or consultant, or (z) interfere with business relationships (whether formed
before or after the Effective Date) between the Company and customers or
suppliers of, or consultants to, the Company.

               (ii) For purposes of this Section 11, a “Competitive Business”
means, as of any date, including during the Restricted Period, any person or
entity (including any joint venture, partnership, firm, corporation or limited
liability company) that engages in or proposes to engage in the following
activities in any geographical area in which the Company does business: (A) the
property and casualty insurance business, including commercial insurance,
business insurance, personal insurance and specialty insurance; (B) the life and
accident and health insurance business; (C) the underwriting, reinsurance,
marketing or sale of (but not brokerage of) (y) any form of insurance of any
kind that the Company as of such date does, or proposes to, underwrite,
reinsure, market or sell (any such form of insurance, a “Company Insurance
Product”), or (z) any other form of insurance that is marketed or sold in
competition with any Company Insurance Product; (D) retirement services and
mutual funds

 

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 14

services; or (E) any other business that as of such date is a direct and
material competitor of one of the Company’s principal businesses.

               (iii) For purposes of this Section 11, the Company shall be
construed to include the Company and its subsidiaries and controlled affiliates.

               (iv) Notwithstanding anything to the contrary in the Agreement,
Executive may (A) directly or indirectly, own, solely as an investment,
securities of any person engaged in the business of the Company which are
publicly traded on a national or regional stock exchange or on the
over-the-counter market if Executive (x) is not a controlling person of, or a
member of a group which controls, such person and (y) does not, directly or
indirectly, own one percent (1%) or more of any class of securities of such
person, and (B) during the portion of the Restricted Period following
termination of Executive’s employment, be employed by or provide services to,
any private equity firm or hedge fund, so long as Executive has no participation
whatsoever in any fund invested in any business described in clauses (A) through
(C) of Section 11(a)(ii) of this Agreement.

               (v) During the Restricted Period, Executive will not, directly or
indirectly, without the Company’s written consent, solicit or encourage to cease
to work with the Company any person who holds a position that is designated as a
“senior partner” or “partner” for purposes of eligibility to participate in any
deferred compensation profit participation program of the Company (or any
similar designation in any successor or substitute plan or program (each, a
“DCPPP Senior Partner or Partner”), any employee holding the title of Vice
President or higher of the Company or any business unit of the Company, or any
employee designated by the Company as a “core employee” or a similar designation
(a “Key Employee”) or any consultant whose primary business activity consists of
providing services to the Company (“Key Consultant”) or who was a Key Employee
of or Key Consultant then under contract with the Company within the six
(6) month period preceding such activity. In addition, during the Restricted
Period, Executive will not, without the Company’s written consent, directly or
indirectly hire any person who is or who was, within the six (6) month period
preceding such activity, a DCPPP Senior Partner or Partner.

               (vi) Executive understands that the provisions of this Section
11(a) may limit his ability to earn a livelihood in a business similar to the
business of the Company but he nevertheless agrees and hereby acknowledges that
(A) such provisions do not impose a greater restraint than is necessary to
protect the goodwill or other business interests of the Company, (B) such
provisions contain reasonable limitations as to time and scope of activity to be
restrained, (C) such provisions are not harmful to the general public and
(D) such provisions are not unduly burdensome to Executive. In consideration of
the foregoing and in light of Executive’s education, skills and abilities,
Executive agrees that he shall not assert that, and it should not be considered
that, any provisions of Section 11(a) otherwise are void, voidable or
unenforceable or should be voided or held unenforceable.

               (vii) It is expressly understood and agreed that, although
Executive and the Company consider the restrictions contained in this Section
11(a) to be reasonable, if a judicial determination is made by a court of
competent jurisdiction that the time

 

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 15

or territory or any other restriction contained in this Section 11(a) or
elsewhere in this Agreement is an unenforceable restriction against Executive,
the provisions of the Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.

          (b) Nondisparagement. Executive agrees (whether during or after
Executive’s employment with the Company) not to issue, circulate, publish or
utter any false or disparaging statements, remarks or rumors about the Company
or the officers, directors or managers of the Company other than to the extent
reasonably necessary in order to (i) assert a bona fide claim against the
Company arising out of Executive’s employment with the Company, or (ii) respond
in a truthful and appropriate manner to any legal process or give truthful and
appropriate testimony in a legal or regulatory proceeding. The Company agrees to
instruct its directors and executives not to (whether during or after
Executive’s employment with the Company) issue, circulate, publish or utter any
false or disparaging statements, remarks or rumors about Executive other than to
the extent reasonably necessary in order to (i) assert a bona fide claim against
Executive arising out of Executive’s employment with the Company, or
(ii) respond in a truthful and appropriate manner to any legal process or give
truthful and appropriate testimony in a legal or regulatory proceeding.

          (c) Code of Conduct. Executive agrees to abide by the terms of the
Company’s Code of Conduct or The Director, Executive Officer and Senior
Financial Officer Code of Business Conduct and Ethics.

          (d) Confidentiality/Company Property. Executive shall not, without the
prior written consent of the Company, use, divulge, disclose or make accessible
to any other person, firm, partnership, corporation or other entity, any
“Confidential Information” (as defined below) except while employed by the
Company, in furtherance of the business of and for the benefit of the Company,
or any “Personal Information” (as defined below); provided that Executive may
disclose such information when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over the
business of the Company and/or its affiliates, as the case may be, or by any
administrative body or legislative body (including a committee thereof) with
jurisdiction to order Executive to divulge, disclose or make accessible such
information; provided, further, that in the event that Executive is ordered by a
court or other government agency to disclose any Confidential Information or
Personal Information, Executive shall (i) promptly notify the Company of such
order, (ii) at the written request of the Company, diligently contest such order
at the sole expense of the Company as expenses occur, and (iii) at the written
request of the Company, seek to obtain, at the sole expense of the Company, such
confidential treatment as may be available under applicable laws for any
information disclosed under such order. For purposes of this Section 11(d), (i)
“Confidential Information” shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information relating to the

 

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 16

business of the Company or its affiliates or customers, that, in any case, is
not otherwise available to the public (other than by Executive’s breach of the
terms hereof) and (ii) “Personal Information” shall mean any information
concerning the personal, social or business activities of the officers or
directors of the Company. Upon termination of Executive’s employment with the
Company, Executive shall return all Company property, including, without
limitation, files, records, disks and any media containing Confidential
Information or Personal Information.

          (e) Developments. All discoveries, inventions, ideas, technology,
formulas, designs, software, programs, algorithms, products, systems,
applications, processes, procedures, methods and improvements and enhancements
conceived, developed or otherwise made or created or produced by Executive alone
or with others, and in any way relating to the business or any proposed business
of the Company of which Executive has been made aware, or the products or
services of the Company of which Executive has been made aware, whether or not
subject to patent, copyright or other protection and whether or not reduced to
tangible form, at any time during the Employment Term (“Developments”), shall be
the sole and exclusive property of the Company. Executive agrees to, and hereby
does, assign to the Company, without any further consideration, all of
Executive’s right, title and interest throughout the world in and to all
Developments. Executive agrees that all such Developments that are copyrightable
may constitute works made for hire under the copyright laws of the United States
and, as such, acknowledges that the Company is the author of such Developments
and owns all of the rights comprised in the copyright of such Developments and
Executive hereby assigns to the Company without any further consideration all of
the rights comprised in the copyright and other proprietary rights Executive may
have in any such Development to the extent that it might not be considered a
work made for hire. Executive shall make and maintain adequate and current
written records of all Developments and shall disclose all Developments
promptly, fully and in writing to the Company promptly after development of the
same, and at any time upon request.

          (f) Cooperation. During the Employment Term and at any time
thereafter, Executive agrees to cooperate (i) with the Company in the defense of
any legal matter involving any matter that arose during Executive’s employment
with the Company and (ii) with all government authorities on matters pertaining
to any investigation, litigation or administrative proceeding pertaining to the
Company. The Company will reimburse Executive for any reasonable travel and out
of pocket expenses incurred by Executive in providing such cooperation. The
Company agrees to cooperate with the Executive in the same manner as described
above.

     12. Enforcement. Executive acknowledges and agrees that the Company’s
remedies at law for a breach or threatened breach of any of the provisions of
Sections 11(a), (b), (d) and (e) of this Agreement would be inadequate and, in
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction or any other equitable remedy which may then be available. In
addition, the Company shall be entitled to immediately cease paying any amounts
remaining due or providing any benefits to Executive pursuant to Section 9 of
this Agreement upon a determination by the Board that Executive has violated any
provision of Section 11 (a), (b), (d), (e) or (f) of this Agreement, subject to
payment

 

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 17

of all such amounts upon a final determination, in accordance with the dispute
resolution mechanism contained in Section 15 of this Agreement, that Executive
had not violated Section 11 (a), (b), (d), (e) or (f) of this Agreement.

     13. Indemnification. At all times during and after the Employment Term, the
Company shall indemnify Executive to the fullest extent permitted by the law of
the state of the Company’s incorporation for all actions or omissions taken or
made by Executive (whether before or after the date of this Agreement) in his
service to the Company or its affiliated entities for which Executive has
performed or does perform services at the request of the Company, including, to
the fullest extent allowed by law, the advancement to Executive of all
reasonable attorneys’ costs and expenses incurred by Executive in connection
with any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer or
employee of the Company, within twenty (20) calendar days after receipt by the
Company of a written request from Executive for such advance. Executive’s
request for advancement of attorneys’ costs and expenses pursuant to the
preceding sentence shall include an undertaking by Executive to repay the amount
of such advance if it shall ultimately be determined pursuant to Section 15(b)
of the Agreement that Executive is not entitled to be indemnified against such
costs and expenses. Executive shall have the benefit of continuing directors’
and officers’ insurance coverage at levels no less favorable than those in
effect from time to time for members of the Board and other members of the
Company’s senior management.

     14. Executive Representation and Warranty. Executive hereby represents and
warrants that, as of the date of this Agreement, during Executive’s period of
employment with the Company, Executive has not willfully or grossly negligently
breached Executive’s duties as an employee, officer or director of the Company,
has not committed fraud, embezzlement or any other similar dishonest conduct in
the course of his employment and has not willfully violated any material
provision of the Company’s Code of Conduct or the Director, Executive Officer
and Senior Financial Officer Code of Business Conduct and Ethics. As used in
this Section 14, the term “willfully” shall be subject to the same limitations
as the term “willful” in Section 9(a) of this Agreement.

     15. Miscellaneous.

          (a) No Mitigation or Offset. In the event of any termination of
Executive’s employment hereunder, Executive shall be under no obligation to seek
other employment or otherwise mitigate the obligations of the Company under this
Agreement, and there shall be no offset against any amounts due under this
Agreement on account of any remuneration attributable to any subsequent
employment that Executive may obtain.

          (b) Arbitration. Except as provided in Section 11 of this Agreement,
any dispute between the parties to this Agreement in connection with, arising
out of or asserting breach of this Agreement or any statutory or common law
claim by Executive relating to Executive’s employment under this Agreement or
rights under this Agreement (including any tort or discrimination claim), shall
be exclusively resolved by binding statutory arbitration. Such dispute shall be
submitted to arbitration in New York, New York, before a panel of three neutral

 

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 18

arbitrators in accordance with the Commercial Rules of the American Arbitration
Association then in effect, and the arbitration determination resulting from any
such submission shall be final and binding upon the parties hereto. Judgment
upon any arbitration award may be entered in any court of competent
jurisdiction.

          (c) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE WHOLLY PERFORMED WITHIN THAT STATE, WITHOUT REGARD TO ITS
CONFLICT OF LAWS PROVISIONS OR THE CONFLICT OF LAWS PROVISIONS OF ANY OTHER
JURISDICTION WHICH WOULD CAUSE THE APPLICATION OF ANY LAW OTHER THAN THAT OF THE
STATE OF NEW YORK.

          (d) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by the
Company, and, without limiting the effect of the foregoing, specifically
supersedes the Employment Letter. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with respect
to the subject matter herein other than those expressly set forth herein. This
Agreement may not be altered, modified or amended except by written instrument
signed by the parties hereto. Sections 3, 5, 9, 10, 11, 12, 13 and 15 of this
Agreement shall survive the termination of Executive’s employment with the
Company, to the extent specifically stated therein.

          (e) No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party’s rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.

          (f) Severability. In the event that any one or more of the provisions
of this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.

          (g) Successors.

               (i) This Agreement is personal to Executive and shall not be
assignable by Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
Executive’s legal representatives. This Agreement shall inure to the benefit of
and be binding upon the Company and its successors.

               (ii) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place, unless such assumption occurs by operation of law. As used

 

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 19

in this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.

          (h) Dispute Resolution Costs; Legal Fees. In the event of any contest
or dispute relating to this Agreement or the termination of Executive’s
employment hereunder, the Company shall reimburse 100% of Executive’s reasonable
legal fees if Executive substantially prevails in such contest or dispute. The
costs of any arbitration pursuant to Section 15(b) (including the fees and cost
of the arbitrators) shall be paid by the Company.

          (i) Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally, if delivered by
overnight courier service, if sent by facsimile transmission or if mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses or sent via facsimile to the respective
facsimile numbers, as the case may be, as set forth below, or to such other
address as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt; provided, however, that (i) notices sent by personal delivery or
overnight courier shall be deemed given when delivered; (ii) notices sent by
facsimile transmission shall be deemed given upon the sender’s receipt of
confirmation of complete transmission, and (iii) notices sent by United States
registered mail shall be deemed given two days after the date of deposit in the
United States mail.

              If to Executive, to the address as shall most currently appear on
the records of the Company
 
            With a copy to:
 
       
 
      Wachtell, Lipton, Rosen & Katz
 
      51 West 52nd Street
 
      New York, NY 10019
 
      Attn: Adam Chinn, Esq.
 
      Fax: 212-403-2000
 
            If to the Company, to:
 
       
 
      American International Group, Inc.
 
      70 Pine Street
 
      New York, NY 10270
 
      Fax: 212-770-1584
 
      Attn: General Counsel

 

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              With a copy to:
 
       
 
      Paul, Weiss, Rifkind, Wharton & Garrison LLP
 
      1285 Avenue of the Americas
 
      New York, New York 10019-6064
 
      Attn: Michael J. Segal, Esq.
 
      Fax: 212-757-3990

          (j) Withholding Taxes. The Company may withhold from any amounts
payable under this Agreement such Federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.

          (k) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

 

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

                  EXECUTIVE    
 
                /s/ Steven J. Bensinger              
 
  Steven   J. Bensinger    
 
                AMERICAN INTERNATIONAL GROUP, INC.    
 
           
 
  By:   /s/ Kathleen E. Shannon    
 
                Name: Kathleen E. Shannon         Title: Senior Vice President,
Secretary and Deputy         General Counsel    

 

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EXHIBIT A

RELEASE OF CLAIMS

1. Release of Claims

     In partial consideration of the payments and benefits described in
Section 9 of the employment agreement (the “Employment Agreement”), effective
March 14, 2005, by and between Steven J.Bensinger (“Executive”) and American
International Group, Inc. (the “Company”), to which Executive agrees Executive
is not entitled until and unless he executes this Release, Executive, for and on
behalf of himself and his heirs and assigns, subject to the following two
sentences hereof, hereby waives and releases any employment, compensation or
benefit-related common law, statutory or other complaints, claims, charges or
causes of action of any kind whatsoever, both known and unknown, in law or in
equity, which Executive ever had, now has or may have against the Company and
its shareholders (other than C.V. Starr & Co., Inc. and Starr International
Company, Inc.), subsidiaries, successors, assigns, directors, officers,
partners, members, employees or agents (collectively, the “Releasees”) by reason
of facts or omissions which have occurred on or prior to the date that Executive
signs this Release, including, without limitation, any complaint, charge or
cause of action arising under federal, state or local laws pertaining to
employment, including the Age Discrimination in Employment Act of 1967 (“ADEA,”
a law which prohibits discrimination on the basis of age), the National Labor
Relations Act, the Civil Rights Act of 1991, the Americans With Disabilities Act
of 1990, Title VII of the Civil Rights Act of 1964, all as amended; and all
other federal, state and local laws and regulations. By signing this Release,
Executive acknowledges that he intends to waive and release any rights known or
unknown that he may have against the Releasees under these and any other laws;
provided, that Executive does not waive or release claims with respect to the
right to enforce the Employment Agreement (the “Unreleased Claims”).
Notwithstanding the foregoing, Executive does not release, discharge or waive
any rights to indemnification that he may have under the certificate of
incorporation, the by-laws or equivalent governing documents of the Company or
its subsidiaries or affiliates, the laws of the State of Delaware or any other
state of which such subsidiary or affiliate is a domiciliary, or any
indemnification agreement between Executive and the Company, or any rights to
insurance coverage under any directors’ and officers’ personal liability
insurance or fiduciary insurance policy.

2. Proceedings

     Executive acknowledges that he has not filed any complaint, charge, claim
or proceeding, except with respect to an Unreleased Claim, if any, against any
of the Releasees before any local, state or federal agency, court or other body
(each individually a “Proceeding”). Executive represents that he is not aware of
any basis on which such a Proceeding could reasonably be instituted. Executive
(i) acknowledges that he will not initiate or cause to be initiated on his
behalf any Proceeding and will not participate in any Proceeding, in each case,
except as required by law; and (ii) waives any right he may have to benefit in
any manner from any relief (whether monetary or otherwise) arising out of any
Proceeding, including any Proceeding conducted by the Equal Employment
Opportunity Commission (“EEOC”). Further, Executive understands that, by
executing

 

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this Release, he will be limiting the availability of certain remedies that he
may have against the Company and limiting also his ability to pursue certain
claims against the Releasees. Notwithstanding the above, nothing in Section 1 of
this Release shall prevent Executive from (i) initiating or causing to be
initiated on his behalf any complaint, charge, claim or proceeding against the
Company before any local, state or federal agency, court or other body
challenging the validity of the waiver of his claims under the ADEA contained in
Section 1 of this Release (but no other portion of such waiver); or
(ii) initiating or participating in an investigation or proceeding conducted by
the EEOC.

3. Time to Consider

     Executive acknowledges that he has been advised that he has twenty-one
(21) days from the date of receipt of this Release to consider all the
provisions of this Release and he does hereby knowingly and voluntarily waive
said given twenty-one (21) day period. EXECUTIVE FURTHER ACKNOWLEDGES THAT HE
HAS READ THIS RELEASE CAREFULLY, HAS BEEN ADVISED BY THE COMPANY TO, AND HAS IN
FACT, CONSULTED AN ATTORNEY, AND FULLY UNDERSTANDS THAT BY SIGNING BELOW HE IS
GIVING UP CERTAIN RIGHTS WHICH HE MAY HAVE TO SUE OR ASSERT A CLAIM AGAINST ANY
OF THE RELEASEES, AS DESCRIBED IN SECTION 1 OF THIS RELEASE AND THE OTHER
PROVISIONS HEREOF. EXECUTIVE ACKNOWLEDGES THAT HE HAS NOT BEEN FORCED OR
PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS RELEASE, AND EXECUTIVE AGREES TO
ALL OF ITS TERMS VOLUNTARILY.

4. Revocation

     Executive hereby acknowledges and understands that Executive shall have
seven (7) days from the date of his execution of this Release to revoke this
Release (including, without limitation, any and all claims arising under the
ADEA) and that neither the Company nor any other person is obligated to provide
any benefits to Executive pursuant to Section 9 of the Employment Agreement
until eight (8) days have passed since Executive’s signing of this Release
without Executive having revoked this Release, in which event the Company
immediately shall arrange and/or pay for any such benefits otherwise
attributable to said eight- (8) day period, consistent with the terms of the
Employment Agreement. If Executive revokes this Release, Executive will be
deemed not to have accepted the terms of this Release, and no action will be
required of the Company under any section of this Release.

5. No Admission

     This Release does not constitute an admission of liability or wrongdoing of
any kind by Executive or the Company.

 

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6. General Provisions

     A failure of any of the Releasees to insist on strict compliance with any
provision of this Release shall not be deemed a waiver of such provision or any
other provision hereof. If any provision of this Release is determined to be so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable, and in the event that any provision is determined to be
entirely unenforceable, such provision shall be deemed severable, such that all
other provisions of this Release shall remain valid and binding upon Executive
and the Releasees.

7. Governing Law

     The validity, interpretations, construction and performance of this Release
shall be governed by the laws of the State of New York without giving effect to
conflict of laws principles.

     IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand as of the
day and year set forth opposite his signature below.

         
 
       
 
DATE
 
 
Steven J. Bensinger