EXHIBIT 10(zz)(iii)

AMERICAN INTERNATIONAL GROUP, INC.

70 PINE STREET, NEW YORK, N.Y. 10270
TELEPHONE: (212) 770-7000

August 28, 2001

Mr. Richard W. Scott
122 Paul Revere Drive
Houston, Texas 77024

Re:     Amendment to Employment Arrangements

Dear Mr. Scott:

This letter confirms the following understandings reached among you, American
International Group, Inc. (“Parent”), AIG Global Investment Corp., a
wholly-owned subsidiary of Parent (“AIGGIC”) and American General Corporation
(“Company”) with respect to (a) the Change in Control Severance Agreement dated
as of April 1, 2000 (the “Change in Control Agreement”) and (b) the Employment
Agreement dated as of May 1, 2000 (the “Agreement”) and constitutes an amendment
to such Change in Control Agreement and the Agreement:

1.  As of the Effective Date (for purposes of the Agreement, Effective Date
shall mean the date on which the merger between the Company and Washington
Acquisition Corporation, a wholly-owned subsidiary of Parent (“Washington”),
becomes effective in accordance with the Merger Agreement dated as of May 11,
2001 among Parent, the Company and Washington (the “Merger Agreement”)) (a) the
parties agree that the Change in Control Agreement shall be null and void and of
no further effect, and all rights and obligations of the Executive with respect
to employment by the Company shall be governed by the Agreement as amended by
this letter; (b) the Company’s rights and obligations under the Agreement will
be assigned to AIGGIC without further action required, (c) AIGGIC will assume
all rights and obligations of the Company under the Agreement, provided,
however, that the parties agree that Employee will remain on the payroll of
American General Corporation through December 31, 2002 and be transferred to the
payroll of AIGGIC as of January 1,

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2003, and (d) all references in the Agreement to the Company (other than
references to specifically identified employee benefits or any benefit or other
plans of the Company which remain in effect in accordance with the Merger
Agreement subsequent to the Effective Date (which references will remain
references to such continuing plans of American General Corporation so long as
such plans remain in effect in accordance with the Merger Agreement) and
references to the Company in Section 22 of the Agreement as amended by this
letter (which references will remain references to American General
Corporation)) will be deemed to be references to AIGGIC.

2. Section 3(a) of the Agreement is amended to read in its entirety as follows:

  “(a) Duration of Term. Unless earlier terminated as provided in Section 3(b)
hereof, the Executive’s employment with the Company under this Agreement shall
commence at the Effective Date and shall end on the date that is the day before
the third anniversary thereof. For purposes of this Agreement, “Term” shall mean
such three-year period. The Term shall not be extended other than by the written
agreement of the parties. Nothing in this Section shall limit the right of the
Company or the Executive to terminate the Executive’s employment hereunder on
the terms and conditions set forth in Section 7 hereof. The Company and the
Executive agree that any such notice by the Company shall not constitute Good
Reason for the Executive to terminate the Executive’s employment.”

3. Section 4 of the Agreement is amended to read in its entirety as follows:

  “4. Position and Duties. On and after the Effective Date, the Executive shall
serve as Senior Managing Director of the Company and shall be responsible for
managing the combined U.S. fixed income assets of the Parent held through
SunAmerica Investments, American General Investment Management and AIG Global
Investment Group, Inc. The Executive shall also serve as the Chief Investment
Officer of the U.S.-based insurance company subsidiaries of the Parent and shall
have such additional duties and responsibilities as may be assigned to the
Executive by the Chief Executive Officers of Parent and the Company. The
Executive agrees to devote substantially all of the Executive’s full

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  working time, attention and energies during normal business hours to the
performance of the Executive’s duties for the Company, provided that the
Executive may serve as a director on the boards of such companies and
organizations as the Chief Executive Officer of the Company may specifically
approve in writing.”

4. Section 5 of the Agreement is amended to read in its entirety as follows:

  “5. Place of Performance.    The principal place of employment and office of
the Executive shall be in Houston, Texas; provided, however, that after June 30,
2002 Executive agrees that such place of performance may, at Company’s election,
be changed to in New York, New York, or such other location in the United States
as may be designated by the Chief Executive Officer of the Company. In the event
that Company elects to change such place of performance from Houston, Texas to
any other location Company shall pay or reimburse Executive for all reasonable
costs associated with such relocation.”

5. Section 6(a) of the Agreement is amended to read in its entirety as follows:

  “(a) Base Salary.    As compensation for the performance by the Executive of
the Executive’s duties hereunder, during the Employment Period the Company shall
pay the Executive an annual base salary of $500,000 (such amount, as it may be
increased from time to time, is hereinafter referred to as “Base Salary”). Base
Salary shall be payable in accordance with the Company’s normal payroll
practices, shall be reviewed at least annually by the Board and may be increased
(but not decreased) upon review.”

6. Section 6(b) of the Agreement is amended to read in its entirety as follows:

  “(b) Bonus.    For each calendar year ending during the Employment Period, the
Executive shall participate, on comparable terms, in the AIG Global Investment
Corp. performance-based annual incentive plan in which similarly situated
executives of the Company participate, with a Target Bonus Potential (as defined
in such plan) of 100% of Base Salary and a Range (as defined in such plan) of 0%
to 200%. The cash amount received in accordance with such participation (the
“Annual Bonus”) for each calendar year ending during the Employment Period shall
be not less than $600,000. The Annual Bonus hereunder shall be in lieu of

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  any bonus amount (or portion thereof) payable to the Executive under any
agreement or bonus plan of the Company, Parent or any subsidiary of Parent
(other than the Supplementary Bonus as hereinafter described), including without
limitation, the Company Performance-Based Plan for Executive Officers with
respect to the calendar year in which the Effective Date occurs, and the
Executive hereby waives all rights under such agreements or plans. The Annual
Bonus payable hereunder with respect to any calendar year shall be paid at the
time Company’s bonuses are paid, but no later than March 31 of the ensuing
calendar year.     For each calendar year ending during the Employment Period,
the Executive will receive a minimum of $90,000 of bonus compensation (the
“Supplementary Bonus”) payable in equal quarterly amounts with regard to
services performed in that year provided the Executive is employed by Parent or
a subsidiary of Parent at the time of the respective quarterly payment when such
payment becomes due.     At the time equity grants are made to executive
officers of the Parent in respect of services performed in the calendar year
ending December 31, 2001, the Executive will be granted equity-based awards with
respect to the common stock of Parent (the “2001 Service Awards”), pursuant to
the terms of the applicable Parent plans or the applicable plans of Starr
International Company, Inc. (“SICO”), as follows:

  •  stock options with an exercise price equal to the fair market value of
Parent common stock on the date of grant, vesting (subject to your continued
employment with Parent or its subsidiaries on the vesting dates) in four equal
installments on each of the first, second, third and fourth anniversaries of the
date of anniversary of the date of grant), having an aggregate Black- Scholes
valuation of $700,000 using a Black- Scholes factor of 0.4059;     •  Five year
cliff vesting stock options, vesting (subject to your continued employment with
Parent or its subsidiaries on the vesting date) in full on the fifth anniversary
of the date of grant with an exercise price

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     equal to the fair market value of Parent common stock on the date of grant
having an aggregate Black-Scholes valuation of $800,000 using a Black-Scholes
factor of 0.40;

  •  performance share units having a maximum aggregate value of $2,250,000
based on the fair market value on date of grant which shall vest (subject to
your continued employment with Parent or its subsidiaries on the vesting date)
from 0 to 100 percent as soon as administratively feasible after December 31,
2004 (provided that, the receipt of shares of Parent common stock pursuant to
such units may be deferred, at the election of the Executive, pursuant to an
applicable deferral program of the Parent, if any) subject to achievement of
mutually agreed performance standards to be established by you and Parent:    
Maximum [Performance Standard]
Target [Performance Standard]
Threshold [Performance Standard]
Below [Performance Standard]
Maximum Shares Earned — 100%
Maximum Shares Earned — 50%
Maximum Shares Earned — 25%
Maximum Shares Earned — 0%

              and

  •  900 participation units in the then current SICO Deferred Compensation
Profit Participation Plan (“SICO Plan”).

In the event that the Executive receives any equity award grants (other than
reload options) from the Company after the date hereof prior to the Effective
Date, the 2001 Service Awards shall be reduced by the value of any such awards
(determined using a Black-Scholes value with respect to options, using
assumptions established on a basis consistent with those applied by the Company
in determining such Black-Scholes value in respect of the 2001 grants to the
Executive, and the fair market value on the date of grant with respect to
performance based unit awards).”

7.  (a) Section 7(c) of the Agreement is amended by substituting “Board” for
“Committee” in the first sentence thereof.     (b) Section 7(e) of the Agreement
is amended by deleting the phrase “or by the Executive Termination Review
Committee” from the final sentence thereof.

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8. Section 13 of the Agreement is amended to read in its entirety as follows:

       “13. Confidential Information and Nonsolicitation. You will hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its Affiliates,
and their respective businesses, which you obtain during your employment by the
Company or any of its Affiliates and which is not public knowledge (other than
by acts by you or your representatives in violation of this Agreement). After
the termination of your employment with the Company, you will not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by the Company or to an
attorney retained by you.          During the term of this Agreement and for one
year after the termination of your employment with the Company, you will not,
directly or indirectly, on behalf of yourself or any other person, (1) solicit
for employment by other than the Company any person employed by the Company or
its Affiliates on the Effective Date, nor will you, directly or indirectly, on
behalf of yourself or any other person, solicit for employment by other than the
Company any person known by you to be employed at the time by the Company or its
Affiliates or (2) make any public statement concerning the Company, any of its
Affiliates or subsidiaries, or your employment unless previously approved by the
Company, except as may be required by law or legal process.”

9. Section 17 of the Agreement is amended by deleting the phrase “(other than
the Severance Agreement)” from the third sentence thereof.

10. Section 20(a) of the Agreement is amended by substituting “Board” for
“Committee” in each sentence thereof.

11. Section 21 of the Agreement is amended by deleting Sections 21(f) and 21(p)
thereof in their entireties.

12.  Section 21(m) of the Agreement is amended to read in its entirety as
follows:

“(m) “Good Reason” for termination by the Executive of the Executive’s
employment shall mean the occurrence (without the Executive’s express written
consent) of any one of the following acts by the Company, or failures by the

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Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (IV) or (V) below, such act or failure to act is corrected prior
to the Date of Termination specified in the Notice of Termination given in
respect thereof:
 

  (I) a substantial adverse alteration in the nature or status of the
Executive’s responsibilities from those in effect as of the Effective Date;    
(II) a reduction by the Company in the Executive’s Base Salary;     (III) the
failure by the Company to pay to the Executive any portion of the Executive’s
current Base Salary, Annual Bonus or Supplementary Bonus, or to pay to the
Executive any installment under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;     (IV)
except for any changes required by applicable law, the failure by the Company to
continue to provide the executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company’s pension, savings, life
insurance, medical, health and accident, or disability plans in which the
Executive was participating as of the Effective Date, the taking of any other
action by the Company which would directly or indirectly materially reduce any
of such benefits or deprive the Executive of any material fringe benefit enjoyed
by the Executive as of the date hereof, or the failure by the Company to provide
the Executive with at least four weeks of annual paid vacation days;
notwithstanding the foregoing provisions of this subsection of Section 21, it
shall not constitute Good Reason that the Executive’s benefits under the
Company’s general medical, health and

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  accident plans are no longer substantially similar to the benefits enjoyed by
the Executive as of the Effective Date, unless the changes in such benefits
constitute a material adverse alteration thereof; or

 

  (V) the Company’s breach of a material term or condition of the Agreement.

      The Executive’s right to terminate the Executive’s employment for Good
Reason shall not be affected by the Executive’s incapacity due to
        physical or mental illness. The Executive’s continued employment shall
not constitute consent to, or waiver of rights with respect to, any
        act or failure to act constituting Good Reason hereunder.”

  13.  The Agreement is amended by adding a new Section 22 which shall read in
its entirety as follows:

        “22. Excise Tax Gross-Up. To the extent that any payments or benefits
received or to be received by the Executive (excluding payments to be made
pursuant to this Section 22) (the “Total Payments”) pursuant to this Agreement
or any other plan, arrangement or agreement with American General Corporation or
Parent shall be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”), or any
successor provision of the Code (any such excise tax is referred to in this
Section 22 as the “Excise Tax”), then the benefit or payment shall be increased
by an amount (referred to in this Section 22 as the “Additional Payment”) such
that the net amount received by the Executive, after paying any applicable
Excise Tax and any federal, state or local income or FICA taxes on such
Additional Payment, shall be equal to the amount that the Executive would have
received if such Excise Tax were not applicable to the Total Payments.

          For purposes of determining whether any of the Total Payments shall be
subject to the Excise Tax and the amount of such Excise Tax, (1) all of the
Total Payments will be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code unless, in the opinion of tax counsel (“Tax
Counsel”)

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reasonably acceptable to the Executive and selected by
PricewaterhouseCoopers LLP (the “Auditor”), such payments or benefits (in whole
or in part) do not constitute parachute payments, including by reason of
Section 280G(b)(4)(A) of the Code; (2) all “excess parachute payments” within
the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of
the base amount (as the term “base amount” is defined in Section 280G(b)(3) of
the Code) allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax; and (3) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Additional Payment, the Executive shall be deemed
to pay federal income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Additional Payment is to be made and
state and local income taxes at the highest marginal rate of taxation in the
state and locality of the residence of the Executive on the date on which the
Additional Payment is paid for purposes of this Section 22, net of the maximum
reduction in federal income taxes which could be obtained from the deduction of
such state and local taxes by such Executive. Payment shall be in the form of
additional W-2 withholding if Executive is an employee of the Company at the
time of payment.

In the event that the Excise Tax is finally determined to be less than the
amount taken into account hereunder in calculating the Additional Payment, the
Executive shall repay to the Company, within ten (10) business days immediately
following the date that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Additional Payment attributable to the
amount of such reduction (including the Excise Tax component and the federal,
state and local income and employment tax components of the Additional Payment)
to the extent that such repayment results in a reduction in the Excise Tax and a
dollar-for-dollar

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reduction in the taxable income and wages of the Executive for purposes of
federal, state and local income and employment taxes, plus interest on the
amount of such repayment at 120 percent of the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating the
Additional Payment (including by reason of any payment the existence or amount
of which cannot be determined at the time of the Additional Payment), the
Company shall make another Additional Payment in respect of such excess (plus
any interest, penalties or additions payable by the Executive with respect to
such excess) within ten (10) business days immediately following the date that
the amount of such excess if finally determined.

The Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability of Excise Tax with respect to the Total
Payments. For any taxable year in which any payment constituting a part of Total
Payments is made or is treated as made or in which any payment is made pursuant
to this Section 22, the obligation of the Company and the Executive hereunder
shall continue until the later of (i) 30 days after the date on which the
authority of the Internal Revenue Service to assess additional tax with respect
to the Federal Income Tax return of the Executive for that year expires, or
(ii) 30 days after the date on which any Internal Revenue Service audit,
examination or other proceeding or any claim for refund with respect to such
return is finally resolved or settled. The Executive shall have the right to
compromise or settle any dispute concerning the tax treatment of any payment
constituting or that is alleged by the Internal Revenue Service to constitute a
part of the Total Payments or any payment required pursuant to this Section 22,
and the Company agrees to be bound by any such compromise or settlement, and to
treat any payment made by Executive as a result of such compromise or settlement
as a payment subject to the first paragraph of this Section 22 for which
Executive is entitled to full reimbursement and gross-up treatment as provided
therein; provided, however,

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  that the Company may, at its cost and expense, assume responsibility for the
handling and resolution of any such dispute by written notice to the Executive
of its intent to do so, provided further that the Company shall reimburse the
Executive for any additional taxes payable as a result of such resolution or as
a result of any cost or expense incurred by the Company being or being deemed to
be income for tax purposes to the Executive, such payment to be grossed-up to
the same extent and in the same manner as any payments made pursuant to the
first paragraph of this Section 22.     The obligations of the Company under
this Section 22 shall be absolute and unconditional and shall survive the
termination of this Agreement irrespective of the reason for such termination,
and shall survive the termination of the Executive’s employment with the Company
for any reason. The Company’s obligations under this Section 22, shall not be
affected by or subject to the limitations of the Company’s obligations set forth
in Section 8(a), 8(b)(ii) or 8(c)(vi) of this Agreement. All amounts payable
under this Section 22 shall be deemed fully due and payable, without interest
thereon, as of the Effective Date.”

14. The Executive agrees that this letter agreement constitutes his written
consent to changes in his compensation arrangements and duties and
responsibilities and under no circumstances shall such changes constitute “Good
Reason” for termination by the Executive as defined in Section 21(m) of the
Agreement.

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15. From and after the date hereof, the Agreement is hereby amended by this
letter agreement, in accordance with Section 17 of the Agreement.

        Very truly yours,      
American International Group, Inc.
  American General Corporation   By: /s/ M.R. GREENBERG

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Name:    M.R. Greenberg
Title:   Chairman   By: /s/ GARY D. REDDICK

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Name:    Gary D. Reddick
Title:   Executive Vice President   AIG Global Investment Corp.       By: /s/
WIN J. NEUGER

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Name:    Win J. Neuger
Title:   Chairman       Accepted and Agreed as of August 28, 2001       /s/
RICHARD W. SCOTT

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Richard W. Scott    

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