<PAGE>
 
                         AMERICAN  GENERAL  CORPORATION

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN



                                Effective as of
                                February 1, 1998
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                               TABLE OF CONTENTS
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ARTICLE I.   GENERAL                                                      1
     Section 1.1   Effective Date.......................................  1
     Section 1.2   Defined Terms........................................  1
     Section 1.3   Eligibility..........................................  2

ARTICLE II.  RETIREMENT BENEFITS........................................  2
     Section 2.1   Normal Retirement Benefit............................  2
     Section 2.2   Early Retirement Benefit.............................  2
     Section 2.3   Termination of Employment Prior to Early Retirement
                   Date and Normal Retirement Date......................  3
     Section 2.4   Disability...........................................  3
     Section 2.5   Termination by Reason of Death.......................  3
     Section 2.6   Change in Control Terminations.......................  3
     Section 2.7   Vesting of Retirement Benefit........................  4
     Section 2.8   Time and Form of Payment.............................  5

ARTICLE III. ADMINISTRATION.............................................  6
     Section 3.1   General..............................................  6
     Section 3.2   Administrative Rules.................................  6
     Section 3.3   Duties...............................................  7
     Section 3.4   Fees.................................................  7

ARTICLE IV.  CLAIMS PROCEDURE...........................................  8
     Section 4.1   General..............................................  8
     Section 4.2   Denials..............................................  8
     Section 4.3   Notice...............................................  8
     Section 4.4   Appeals Procedure....................................  8
     Section 4.5   Review...............................................  8
     Section 4.6   Arbitration..........................................  9

ARTICLE V.   MISCELLANEOUS PROVISIONS................................... 10
     Section 5.1   Amendment and Termination............................ 10
     Section 5.2   No Assignment........................................ 10
     Section 5.3   Successors and Assigns............................... 11
     Section 5.4   Governing Law........................................ 11
     Section 5.5   No Guarantee of Employment........................... 11
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     Section 5.6   Severability........................................  11
     Section 5.7   Notification of Addresses...........................  11
     Section 5.8   Bonding.............................................  11
     Section 5.9   Taxes...............................................  11
     Section 5.10  No Funding..........................................  12

ARTICLE VI.  DEFINITIONS AND USAGE.....................................  12
     Section 6.1   Definitions.........................................  12
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                                      -ii-
<PAGE>
 
                          AMERICAN GENERAL CORPORATION

                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

                                    PREAMBLE
                                    --------

     WHEREAS, American General Corporation, a Texas corporation (the "Company"),
has established (and may establish in the future) one or more qualified
retirement plans to provide defined benefit retirement benefits to the employees
of the Company and its subsidiaries (the "Group") under such plan or plans; and

     WHEREAS, the Company recognizes the unique qualifications of certain key
management or highly compensated employees and the valuable services they
provide, and desires to provide such employees with an appropriate level of
retirement income payable from the Company by supplement  ing, through an
unfunded, nonqualified plan, such defined benefit retirement benefits; and

     WHEREAS, the Company has determined that the implementation of such a plan
will best serve its interest in attracting and retaining key employees for the
Group;

     NOW, THEREFORE, the Company hereby establishes the American General
Corporation Supplemental Executive Retirement Plan as hereinafter provided:



                                  ARTICLE I.

                                   GENERAL


        Section 1.1 Effective Date. This Plan shall be effective as of February
1, 1998 (the "Effective Date").

        Section 1.2 Defined Terms. The definitions of capitalized terms used in
this Plan (if not provided where a capitalized term initially appears) are
provided in the last Article hereof.

                                      -1-
<PAGE>
 
        Section 1.3 Eligibility. Each employee designated to participate in the
Plan in a written statement by the Chief Executive Officer of the Company (with
notification to the Personnel Committee) shall automatically become a
participant (an "Executive") as of the date designated in such resolution or
statement. The name of each Executive, the date the Executive was first employed
by the Company, and the date of the Executive's initial participation hereunder
shall be listed on Schedule A attached hereto, which shall be kept current and
amended from time to time.


                                  ARTICLE II.
                              RETIREMENT BENEFITS

        Section 2.1 Normal Retirement Benefit. If an Executive retires on or
after the Executive's Normal Retirement Date, the Retirement Benefit shall be an
annual retirement benefit payable to the Executive for the Executive's lifetime,
with a ten-year term certain (the "Normal Retirement Benefit"), in an annual
amount equal to (X) minus (Y), calculated as follows:

        (A)  The amount of (X) equals (a) multiplied by (b):

          (a) sixty percent (60.0%) of the Executive's Final Average
              Compensation; and

          (b) the fraction equal to the Executive's Years of Service (not in
              excess of thirty (30) years) divided by thirty (30); and

        (B)  The amount of (Y) equals (e) plus (f) plus (g):

          (e) the Social Security Benefit;

          (f) the Qualified Plan Benefit; and

          (g) the Restoration Plan Benefit.

       Section 2.2 Early Retirement Benefit. If an Executive retires on or after
the Executive's Early Retirement Date (but before the Executive's Normal
Retirement Date), the Retirement Benefit shall be the annual Retirement Benefit
computed under Section 2.1, reduced by five percent (5%) per year for each
complete year between such commencement and the Executive's Normal Retirement
Date; the reduction per year shall be pro-rated for incomplete years.

                                      -2-
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        Section 2.3 Termination of Employment Prior to Early Retirement Date and
Normal Retirement Date. If an Executive incurs a termination of employment with
the Company after satisfying the vesting requirement under Section 2.7, but
before attaining either an Early Retirement Date or a Normal Retirement Date,
the Executive shall receive a Retirement Benefit determined under Section 2.1,
but, unless such termination is described in Section 2.6 hereof, such benefit
shall be calculated by using the Executive's actual Years of Service and Final
Average Compensation at the time of the Executive's termination and the actual
Social Security Benefit that the Executive is entitled to receive at the
Executive's Normal Retirement Date. Unless such termination is described in
Section 2.6 hereof, payment of such benefit shall commence after, but not more
than sixty (60) days after, the Executive's Normal Retirement Date.

        Section 2.4 Disability. If an Executive is receiving either short-term
or long-term disability benefits under any Company plan, then, during the period
of payment of such disability benefits, the Executive shall be treated as
employed for all purposes of the Plan, including, without limitation, attainment
of the age, service and vesting requirements under the Plan. The parties hereto
agree that such disability benefits will cease and the Executive will no longer
be considered employed by the Company on the date on which the Executive attains
the Executive's Normal Retirement Age. Payment of the Executive's Retirement
Benefit shall commence after, but not more than sixty (60) days after, the
Executive's Normal Retirement Date.

        Section 2.5 Termination by Reason of Death. If an Executive dies (i)
while in the employment of the Company, (ii) after the attainment of age fifty-
five (55), (iii) having been credited with ten (10) Years of Service, and (iv)
prior to the commencement of the payment of the Retirement Benefit hereunder,
the Executive's surviving spouse, if any, shall receive for the lifetime of such
spouse an annual benefit equal to the fifty percent (50%) survivor annuity the
Executive 's spouse would have received had the Executive retired on the day
before the Executive's death, deeming the Executive, for purposes of this
Section 2.5 only, to have elected a joint and survivor annuity payable
immediately at a reduced amount with a fifty percent (50%) survivor annuity. The
payment of the spouse's benefit shall commence not later than sixty (60) days
after the Executive's death.

        Section 2.6 Change in Control Terminations. Notwithstanding any other
provision of this Plan, if an Executive has a Change in Control Severance
Agreement with the Company (as it may be amended from time to time, the
"Executive's Severance Agreement") in effect immediately prior to the occurrence
of a Change in 

                                      -3-
<PAGE>
 
Control (as defined therein), then, upon any termination of an Executive's
employment which occurs upon the Change in Control or within the three-year
period immediately following the Change in Control (or is deemed to occur within
such period pursuant to the Executive's Severance Agreement), which termination
is by the Company without Cause or by the Executive with Good Reason (as such
terms are defined in the Executive's Severance Agreement), the Company shall pay
the Executive within the five (5) business days immediately following such
termination a lump sum amount, in cash, equal to the actuarial equivalent of the
Normal Retirement Benefit which the Executive would have accrued, if the
Executive had accumulated (after the Executive's termination of employment)
thirty-six (36) additional months of service and age credit (but in no event
shall the Executive be deemed to have accumulated additional service and age
credit after the Executive's sixty-fifth birthday). For purposes of this Section
2.6, an "actuarial equivalent" shall be determined using the same assumptions
utilized under the American General Retirement Plan (or any successor plan
thereto) immediately prior to the Executive's termination of employment, or, if
earlier and more favorable to the Executive, immediately prior to the Change in
Control. The Retirement Benefit so calculated shall be based on a projected
Social Security Benefit that is determined under the provisions of the Social
Security Act as in effect on the date of such termination, using the estimated
"primary insurance amount" the Executive would be entitled to under such Act at
the Executive's Normal Retirement Date, assuming (i) the amount of income the
Executive is receiving on the date such termination becomes effective which
would be treated as wages for purposes of such Act would remain constant through
the Executive's Normal Retirement Date, and (ii) an annual cost-of-living
adjustment equal to four percent (4%).

        Section 2.7 Vesting of Retirement Benefit. An Executive shall have a
vested right to the Executive's Retirement Benefit upon the occurrence of any of
the following while the Executive is employed by the Company:

              (i)   the Executive's completion of ten (10) Years of Service;

              (ii)  the attainment of the Executive's Normal Retirement
                    Age;

              (iii) the occurrence of a Change in Control at any time.

                                      -4-
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        Section 2.8 Time and Form of Payment.

          (A)  Time of Payment.  Except where specifically otherwise provided
herein, the payment of any Retirement Benefit to which an Executive has become
entitled shall commence after, but no more than sixty (60) days after, the
Executive's date of retirement.  The Executive shall give the Company reasonable
advance notice in writing of the Executive's intention to retire (which shall be
given at least one month before the Executive's intended retirement date).

          (B)  Normal Form of Payment.  A life annuity with a ten-year term
certain is the normal form of payment of the Retirement Benefit for each
Executive and any actuarial equivalents to be calculated pursuant to this Plan
will be based on the normal form of payment.  If an Executive dies after payment
of the Retirement Benefit in the normal form has commenced, payments shall
continue for the remainder of the ten-year term certain to the beneficiary or
beneficiaries designated by the Executive by written instruction delivered to
the Administrator during the Executive's lifetime.  The Executive may designate
one or more primary and contingent beneficiaries to receive the remaining
payments of the Retirement Benefit, and may designate the proportions in which
such beneficiaries are to receive such payments.  The Executive may change such
designations from time to time, and the last written designation filed with the
Administrator prior to the Executive's death shall control.  If the Executive
fails to specifically designate a beneficiary, or if no designated beneficiary
survives the Executive, payment shall be made by the Administrator in the
following order of priority:

              (i)   to the Executive's surviving spouse, or, if none,

              (ii)  to the Executive's children, or, if none,

              (iii) to the Executive's estate.

          (C)  Election of Alternative Forms of Payment.  Subject to Section 2.6
hereof, an Executive can elect that the Executive's Retirement Benefit be paid
in any of the following forms by an irrevocable election in writing which is
delivered to the Company within sixty (60) days after the Executive commences
participation in the Plan, or, with the permission of the Committee, by an
irrevocable election in writing which is delivered to the Company at any time
before the Executive's retirement becomes effective:

                                      -5-
<PAGE>
 
              (i)   a joint and survivor annuity payable at a reduced amount for
                    the life of the Executive with a survivor annuity for the
                    life of the Executive's surviving spouse which shall be one
                    hundred percent (100%) of the annuity payable during the
                    joint lives of the Executive and the surviving spouse;

              (ii)  a joint and survivor annuity payable at a reduced amount for
                    the life of the Executive with a survivor annuity for the
                    life of the Executive's surviving spouse which shall be
                    seventy-five percent (75%) of the annuity payable during the
                    joint lives of the Executive and the surviving spouse;

              (iii) a joint and survivor annuity payable at a reduced amount for
                    the life of the Executive with a survivor annuity for the
                    life of the Executive's surviving spouse which shall be
                    fifty percent (50%) of the annuity payable during the joint
                    lives of the Executive and the surviving spouse; or

              (iv)  a lump-sum payment of the actuarial present value of the
                    normal form of payment of the Retirement Benefit.

In calculating an alternative form of payment for the Retirement Benefit, the
Administrator shall use the same assumptions utilized under the American General
Retirement Plan (or any successor plan thereto) immediately prior to the
Executive's termination of employment, or, if a Change in Control shall have
occurred prior to the Executive's termination of employment, the assumptions so
utilized immediately prior to the Change in Control, if more favorable to the
Executive.

                                 ARTICLE III.
                                ADMINISTRATION

        Section 3.1 General. The Administrator shall be responsible for
administration of the Plan.

        Section 3.2 Administrative Rules. The Administrator may adopt such rules
of procedure as it deems desirable for the conduct of its affairs, except to the
extent that such rules conflict with the provisions of the Plan.

                                      -6-
<PAGE>
 
        Section 3.3 Duties. The Administrator shall have the following rights,
powers and duties:

     (A)  The decision of the Administrator in matters within its jurisdiction
          shall be final, binding and conclusive upon the Company and upon any
          person affected by such decision, subject to the claims procedure
          hereinafter set forth.

     (B)  The Administrator shall have the duty and authority to interpret and
          construe the provisions of the Plan, to determine eligibility for a
          Retirement Benefit and the appropriate amount of any Retirement
          Benefit, to decide any question which may arise regarding the rights
          of an Executive hereunder and to exercise such powers as the
          Administrator may deem necessary for the administration of the Plan.

     (C)  The Administrator shall maintain full and complete records of its
          decisions.  Its records shall contain all relevant data pertaining to
          each Executive and the Executive's rights and duties under the Plan.
          The Administrator shall maintain a bookkeeping account with respect to
          payment of any Retirement Benefit.

     (D)  Notwithstanding any other provision of this Plan, upon and after the
          occurrence of a Change in Control and within the six-month period
          immediately preceding a Change in Control, the Administrator's
          authority and powers shall not be used to interpret or construe the
          provisions hereof in any way (or to take any other action) which would
          adversely affect any vested right given an Executive by this Plan or
          any right given an Executive by this Plan which would become vested
          upon a Change in Control.

        Section 3.4 Fees. No fee or compensation shall be paid to any person for
services as the Administrator.

                                      -7-
<PAGE>
 
                                  ARTICLE IV.
                               CLAIMS PROCEDURE

        Section 4.1 General. Any claim for a Retirement Benefit under the Plan
shall be filed by an Executive or beneficiary (either of which is referred to in
this Article as the "claimant") in the manner prescribed by the Administrator.

        Section 4.2 Denials. If a claim for a Retirement Benefit under the Plan
is wholly or partially denied, notice of the decision shall be furnished to the
claimant by the Administrator within a reasonable period of time after receipt
of the claim by the Administrator.

        Section 4.3 Notice. Any claimant who is denied a claim for Retirement
Benefits shall be furnished written notice setting forth:

          (i)   the specific reason or reasons for the denial;

          (ii)  specific reference to the pertinent provision of the Plan upon
                which the denial is based;

          (iii) a description of any additional material or information
                necessary of the claimant to perfect the claim; and

          (iv)  an explanation of the claims review procedure under the Plan.

        Section 4.4 Appeals Procedure. In order that a claimant may appeal a
denial of a claim, the claimant or the claimant's duly authorized representative
may:

          (i)    request a review by written application to the Committee, no
                 later than sixty (60) days after receipt by the claimant of
                 written notification of denial of a claim;

          (ii)   review pertinent documents; and

          (iii)  submit issues and comments in writing.

        Section 4.5 Review. A decision on review of a denied claim shall be made
by the Committee not later than sixty (60) days after receipt of a request for
review, unless special circumstances require an extension of time for
processing, in which

                                      -8-
<PAGE>
 
case a decision shall be rendered within a reasonable period of time, but not
later than one-hundred-and-twenty (120) days after receipt of a request for a
review. The decision on review shall be in writing and shall include the
specific reason(s) for the decision and the specific references(s) to the
pertinent provisions of the Plan on which the decision is based.

        Section 4.6 Arbitration. Any further dispute or controversy arising
under or in connection with this Plan which is not resolved by agreement
pursuant to Sections 4.1 through 4.5 hereof shall be resolved by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Employment Dispute Resolution Rules then in effect with the American Arbitration
Association. The arbitration proceeding shall be conducted in Houston, Texas.
This agreement to arbitrate shall be enforceable in either federal or state
court.

        The enforcement of this arbitration provision and all procedural aspects
of this arbitration provision, including but not limited to, the construction
and interpretation of this arbitration provision, the issues subject to
arbitration (i.e., arbitrability), the scope of the arbitrable issues,
allegations of waiver, delay or defenses to arbitrability, and the rules
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the Federal Arbitration Act and shall be decided by the arbitrators.
In deciding the substance of any such claims, the arbitrators shall apply the
substantive laws of the State of Texas (excluding Texas choice-of-law principles
that might call for the application of some other state's law); provided,
however, the arbitrators shall have no authority to award treble, exemplary, or
punitive damages under any circumstances regardless of whether such damages may
be available under Texas law.

        The arbitration may be initiated by the Executive or the Company by
providing to the other a written notice of arbitration specifying the claims.
Within thirty (30) days of the notice of initiation of the arbitration
procedure, (1) the Executive shall denominate one arbitrator and (2) the Company
shall denominate one arbitrator.  The two arbitrators shall select a third
arbitrator failing agreement on which within sixty (60) days of the original
notice, either the Executive or the Company shall apply to the Senior Active
United States District Judge for the Southern District of Texas, who shall
appoint a third arbitrator.  While the third arbitrator shall be neutral, the
two party-appointed arbitrators are not required to be neutral and it shall not
be grounds for removal of either of the two party-appointed arbitrators or for
vacating the arbitrators' award that either of such arbitrators has past or
present minimal relationships with the party that appointed such arbitrator.
Evident partiality on the 

                                      -9-
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part of an arbitrator exists only where the circumstances are such that a
reasonable person would have to conclude there in fact existed actual bias and a
mere appearance or impression of bias will not constitute evident partiality or
otherwise disqualify an arbitrator.

        The three arbitrators shall by majority vote resolve all disputes
between the parties. There shall be no transcript of the hearing before the
arbitrators. The arbitrators' decision shall be in writing, but shall be as
brief as possible. The arbitrators shall not assign the reasons for their
decision. The arbitrators shall certify in their award that they have faithfully
applied the terms and conditions of this Agreement and that no part of their
award includes any amount for exemplary or punitive damages. All proceedings
conducted hereunder and the decision of the arbitrators shall be kept
confidential by the parties, e.g., the arbitrators' award shall not be released
to the press or published in any of the various arbitration reporters. Judgment
upon any award rendered in any such arbitration proceeding may be entered by any
federal or state court having jurisdiction.


                                  ARTICLE V.
                            MISCELLANEOUS PROVISIONS

        Section 5.1 Amendment and Termination. This Plan may be modified,
amended or terminated by the Board at any time, provided, however, that no such
modification, amendment or termination shall impair the vested rights of any
Executive participating in the Plan without the written consent of such
Executive and during the six-month period immediately preceding a Change in
Control, no such modification, amendment or termination shall impair the rights
of any Executive participating in the Plan which would become vested upon the
occurrence of a Change in Control without the written consent of such Executive.

        Section 5.2 No Assignment. An Executive shall not have the power to
pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose
of in advance any interest in amounts payable hereunder of any of the payments
provided for herein, nor shall any interest in amounts payable hereunder or in
any payments be subject to seizure for payments of any debts, judgments, alimony
or separate maintenance, or be reached or transferred by operation of law in the
event of bankruptcy, insolvency or otherwise.

                                      -10-
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        Section 5.3 Successors and Assigns. The provisions of the Plan are
binding upon and inure to the benefit of each Company, its successors and
assigns, and each Executive, and such Executive's beneficiaries, heirs and legal
representatives.

        Section 5.4 Governing Law. The Plan shall be subject to and construed in
accordance with the laws of the State of Texas to the extent not preempted by
the provisions of ERISA.

        Section 5.5 No Guarantee of Employment. Nothing contained in the Plan
shall be construed as a contract of employment or deemed to give an Executive
the right to be retained in the employ of an Company or any equity or other
interest in the assets, business or affairs of an Company.

        Section 5.6 Severability. If any provision of the Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan, but the Plan shall be construed and
enforced as if such illegal or invalid provision had never been included herein.

        Section 5.7 Notification of Addresses. Each Executive and each
beneficiary shall file with the Administrator, from time to time, in writing,
the post office address of the Executive, the post office address of each
beneficiary, and each change of post office address. Any communication,
statement or notice addressed to the last post office address filed with the
Administrator (or if no such address was filed with the Administrator, then to
the last post office address of the Executive or beneficiary as shown on the
Company's records) shall be binding on the Executive and each beneficiary for
all purposes of the Plan and neither the Administrator nor the Company shall be
obliged to search for or ascertain the whereabouts of any Executive or
beneficiary.

        Section 5.8 Bonding. The Administrator and all agents and advisors
employed by it shall not be required to be bonded, except as may otherwise be
required by ERISA.

        Section 5.9 Taxes. The Company shall have the right to withhold from any
cash or other amounts due or to become due from the Company to an Executive
(including by reducing the amount of any Retirement Benefit payable in the
future) the amount of any federal, state and local taxes required to be withheld
or otherwise deducted and paid by the Company with respect to the vesting or
payment of any Retirement Benefit hereunder.

                                      -11-
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      Section 5.10  No Funding.  There shall be no funding of the benefit
amounts to be paid pursuant to this Plan.  The Plan shall not confer upon an
Executive (or beneficiary or any other person) any security interest or any
other right, title or interest of any kind in or to any property of the Company.
The Plan shall constitute merely the unsecured promise of the Company to make
the benefit payments provided for herein.  Notwithstanding the foregoing
provisions of this Section 5.10, the Company, in its discretion, may establish a
trust to pay the benefit amounts hereunder, which trust shall be subject to the
claims of the Company's general creditors in the event of the Company's
bankruptcy or insolvency.  If such a trust is established, the Company shall
remain responsible for the payment of any benefit amounts provided hereunder
which are not paid in accordance with the provisions hereof by such trust.
 
                                  ARTICLE VI.
                             DEFINITIONS AND USAGE

        Section 6.1 Definitions. Wherever used in the Plan, the following words
and phrases shall have the meaning set forth below, unless the context plainly
requires a different meaning:

     "Administrator" means the Company, acting through the Personnel Committee
of the Board, or other person or persons designated by the Personnel Committee.

     "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.

     "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.

     "Board" means the Board of Directors of the Company.

     "Change in Control" means a change in the control of the Company, which
shall be deemed to have occurred if the event set forth in any one of the
following paragraphs shall have occurred:

                 (I) any Person is or becomes the Beneficial Owner, directly or
          indirectly, of securities of the Company (not including in the
          securities beneficially owned by such Person any securities acquired
          directly from the Company or its Affiliates) representing thirty

                                      -12-
<PAGE>
 
          percent (30%) or more of the combined voting power of the Company's
          then outstanding securities, excluding any Person who becomes such a
          Beneficial Owner in connection with a transaction described in clause
          (i) of paragraph (III) below; or

                 (II) the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
          individuals who, on February 1, 1998, constitute the Board and any new
          director (other than a director whose initial assumption of office is
          in connection with an actual or threatened election contest, including
          but not limited to a consent solicitation, relating to the election of
          directors of the Company) whose appointment or election by the Board
          or nomination for election by the Company's shareholders was approved
          or recommended by a vote of at least two-thirds (2/3) of the directors
          then still in office who either were directors on February 1, 1998 or
          whose appointment, election or nomination for election was previously
          so approved or recommended; or

                 (III)  there is consummated a merger or consolidation of the
          Company or any direct or indirect subsidiary of the Company with any
          other corporation (or a share exchange between shareholders of the
          Company or any direct or indirect subsidiary of the Company and
          another corporation or entity pursuant to Article 5.02 (or any
          successor provision thereto) of the Texas Business Corporation Act),
          other than (i) a merger or consolidation which would result in the
          voting securities of the Company outstanding immediately prior to such
          merger or consolidation continuing to represent (either by remaining
          outstanding or by being converted into voting securities of the
          surviving entity or any parent thereof), in combination with the
          ownership of any trustee or other fiduciary holding securities under
          an employee benefit plan of the Company or any subsidiary of the
          Company, at least fifty-one percent (51%) of the combined voting power
          of the securities of the Company or such surviving entity or any
          parent thereof outstanding immediately after such merger or
          consolidation, or (ii) a merger or consolidation effected to implement
          a recapitalization of the Company (or similar transaction) in which no
          Person is or becomes the Beneficial Owner, directly or indirectly, of
          securities of the Company representing thirty percent (30%) or more of
          the combined voting power of the Company's then outstanding
          securities; or

                                      -13-
<PAGE>
 
               (IV)  the shareholders of the Company approve a plan of complete
     liquidation or dissolution of the Company or there is consummated an
     agreement for the sale or disposition by the Company of all or
     substantially all of the Company's assets, other than a sale or disposition
     by the Company of all or substantially all of the Company's assets to an
     entity, at least fifty-one percent (51%) of the combined voting power of
     the voting securities of which are owned by shareholders of the Company in
     substantially the same proportions as their ownership of the Company
     immediately prior to such sale.

     Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
time.  Any reference to a particular Code section shall include any provision
which modifies, replaces or supersedes it.

     "Committee" shall mean the Personnel Committee of the Board until six
months prior to the occurrence of a Change in Control and thereafter shall mean
(i) the individuals (not fewer than three in number) who, on the date six months
before a Change in Control, constitute the Personnel Committee of the Board,
plus (ii) in the event that fewer than three individuals are available from the
group specified in clause (i) above for any reason, such individuals as may be
appointed by the individual or individuals so available (including for this
purpose any individual or individuals previously so appointed under this clause
(ii)); provided, however, that the maximum number of individuals constituting
the Committee shall not exceed five.

     "Company" means American General Corporation, a Texas corporation, and,
except in determining under the definition of Change in Control herein whether
or not any Change in Control of the Company has occurred, shall include any
successor to its business and/or assets which assumes and agrees to perform this
Plan by operation of law, or otherwise.

                                      -14-
<PAGE>
 
     "Early Retirement Date" means the first date on which an Executive (i) has
completed ten (10) Years of Service and (ii) has attained the age of fifty-five
(55).

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.  Any reference to a particular ERISA section shall
include any provision which modifies, replaces, or supersedes it.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.

     "Executive" means an employee who is designated to participate in the Plan
pursuant to Section 1.3 hereof.

     "Final Average Compensation" means the following sum divided by three (3):
the sum of the base salary received by an Executive from the Group during, and
the incentive payments received by the Executive pursuant to any annual bonus,
annual incentive compensation or similar annual plan maintained by the Group
(which does not include any payments or awards under any long-term incentive
plan maintained by the Group) with respect to, the three (3) calendar years
(whether or not consecutive) ending within the last sixty (60) months of the
Executive's employment with the Group which produce the highest total of such
base salary and incentive payments (for purposes of this sentence, any amount of
such base salary or incentive payment which is deferred by the Executive shall
be included in the calculation of amounts received).  Notwithstanding the
immediately preceding sentence, if the Executive shall have been employed by the
Group for fewer than three calendar years, the Executive's Final Average
Compensation shall be determined by adding the Executive's "Final Salary" and
"Final Bonus" calculated as follows:  Final Salary equals (i) the average base
salary received during the Executive's calendar years of such employment divided
by the number of those years, or (ii) if the Executive has been employed by the
Group for less than one calendar year, the Executive's annual base salary at the
date of the Executive's termination of employment; and Final Bonus equals (i)
the average annual bonus received by the Executive with respect to the
Executive's calendar years of such employment divided by the number of those
years, or (ii) if the Executive has been so recently hired by the Group that the
Executive has not earned any annual bonus which can be used to calculate a Final
Bonus pursuant to the foregoing provision, the Executive shall be deemed to have
earned a Final Bonus determined by multiplying the Executive's Final Salary by a
fraction, the numerator of which is the total of the annual bonuses paid to all
Executives with respect to the most recent calendar year ending immediately
prior to the 

                                      -15-
<PAGE>
 
Executive's date of termination and the denominator of which is the total of the
base salaries paid to all Executives during such calendar year. Notwithstanding
the immediately preceding two sentences, if the Executive's termination of
employment is described in Section 2.6 hereof and the Executive receives
(pursuant to any employment or severance agreement between the Executive and the
Company or an Affiliate, and in lieu of any further salary or bonus payments) a
lump sum amount (the "Severance Amount"), Final Average Compensation shall mean
the Severance Amount divided by three (3).

     "Normal Retirement Age" means age sixty-two (62).

     "Normal Retirement Date" means the date on which the Executive attains the
Executive's Normal Retirement Age.

     "Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

     "Plan" means the American General Corporation Supplemental Executive
Retirement Plan.

     "Qualified Plan" means the American General Retirement Plan, together with
any other defined benefit retirement plan intended to be qualified under Section
401(a) of the Code which is adopted and maintained by the Company and under
which an Executive is entitled to a retirement benefit at the date of the
Executive's retirement or other termination of employment.

     "Qualified Plan Benefit" means the aggregate annual retirement benefit to
which an Executive (at the date of the Executive's retirement or other
termination of employment) is entitled under the plan or plans which comprise
the Qualified Plan (expressed in the form of a single life annuity with a ten-
year term certain commencing payment on the date payment of the Retirement
Benefit hereunder commences).

                                      -16-
<PAGE>
 
     "Restoration Plan Benefit" means the annual retirement benefit to which an
Executive (at the date of the Executive's retirement or other termination of
employment) is entitled under the American General Corporation Restoration of
Retirement Income Plan (expressed in the form of a single life annuity with a
ten-year term certain commencing payment on the date payment of the Retirement
Benefit hereunder commences).

     "Retirement Benefit" means the benefit payable under this Plan, as
determined under Article II.

     "Social Security Benefit" means one-half of the annual benefit payable
under the Social Security Act, relating to Old-Age and Disability benefits, as
of an Executive's Normal Retirement Date, or upon actual retirement, if later.

     "Years of Service" means the total number of years (measured in full and
partial years, in increments of one-twelfth years) of active employment with the
Company during which substantial services were rendered as an employee,
commencing on the date an Executive was first employed by the Company and ending
on the date the Executive ceases to perform services for the Company (including
employment before the Executive commenced to participate in the Plan), but in no
event shall more than thirty (30) years be credited to any Executive regardless
of the Executive's actual period of service with the Company.

                                      -17-
<PAGE>
 
                                   SCHEDULE A
                                        
EXECUTIVES WHOSE PARTICIPATION IN THE PLAN
BEGAN ON THE PLAN'S EFFECTIVE DATE, FEBRUARY 1,1998:


           NAME:                  DATE FIRST EMPLOYED:
----------------------------      --------------------

<TABLE>
<C>  <S>                                <C>
 1   ATNIP, MICHAEL G.                  02/03/75
 2   BERG, MARK S.                      04/21/97
 3   BICKLER, JAMES                     03/22/90
 4   BUCKLEY, MICHAEL J.                08/12/96
 5   DIETZ, DAVID J.                    09/15/97
 6   FRAVEL, DAVID A.                   11/18/96
 7   GEISSINGER, FREDERICK W.           02/02/94
 8   GRAF, JOHN A.                      11/02/87
 9   HENDRIX, BEN D.                    03/25/69
10   HOLLAR, RICHARD                    05/21/90
11   JACOBS, SUSAN A.                   08/11/86
12   KEELER, WILLIAM M.                 05/09/94
13   KELLEY, JOE                        05/02/94
14   LUTHER, BILLY B.                   05/30/60
15   MARTIN, RODNEY O.                  11/27/95
16   MASTERSON, ELLEN H.                08/18/97
17   MRLIK, ROBERT D.                   03/06/89
18   POLKINGHORN, PHILIP K.             12/09/96
19   RASMUSSEN, NICHOLAS R.             07/15/74
20   REDDICK, GARY D.                   09/22/86
21   RODBY, CRAIG R.                    02/15/97
22   SANTILLO, CARL J.                  08/26/96
23   SCOTT, RICHARD W.                  02/10/94
24   SIMPSON, WILLIAM A.                04/16/90
25   TUCKER, JULIA S.                   06/04/84
26   TUTERS, PETER V.                   11/09/92
27   WEST, THOMAS L.                    04/15/94
</TABLE>




                                      -18-