<PAGE>   1
                                                                   EXHIBIT 10.18



           AMERICAN GENERAL CORPORATION RETIREMENT PLAN FOR DIRECTORS
            (AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 1, 1997)

1.     PURPOSE.  This plan shall be known as the American General Corporation
Retirement Plan for Directors (the "Plan").  The Plan shall be maintained by
American General Corporation, a Texas corporation (the "Company") solely for
the purpose of providing retirement benefits to persons who have served as
directors of the Company and who, since July 1, 1965, have not been officers or
employees of the Company or of any subsidiary of which the Company owns
directly or indirectly more than 50% of the outstanding capital stock
("Directors").

2.     PAYMENT OF BENEFITS.  The benefits payable under the Plan will be paid
from the Company's general revenues as payments become due under the Plan, will
not be funded in advance through an arrangement constituting a qualified trust
under the Internal Revenue Code or through insurance annuity contracts, and
will not be subject to the jurisdiction of nor be guaranteed by the Pension
Benefit Guaranty Corporation.  The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of benefits under the Plan.

3.     YEARS OF SERVICE.  For all purposes of the Plan, a Director's Years of
Service shall be equal to the number of Years of Service credited under the
terms of the Plan as in effect on February 28, 1997.  From and after March 1,
1997, no further Years of Service shall be credited to Directors for purposes
of benefits under the Plan.

4.     RETIREMENT BENEFITS.  (a) A Director who retired or otherwise terminated
service as a Director prior to March 1, 1997 shall be entitled to benefits and
payments under the Plan based upon the terms and provisions of the Plan as in
effect on the date such Director retired or terminated service as a Director
and none of the provisions of this March 1, 1997 restatement of the Plan shall
be applicable to such Director.

(b)  A Director who retires or otherwise terminates service as a Director on or
after  March 1, 1997 shall receive a deferred account benefit determined
pursuant to Section 5 and Appendix A.

5.       DEFERRED ACCOUNT.  The March 1, 1997 accrued benefit under the Plan of
each Director who is serving as a Director on March 1, 1997 shall be converted
to a present dollar amount, based upon actuarial assumptions satisfactory to
the Administrator (hereinafter defined), and such dollar amount shall be
converted into a number of full and fractional "Units" equal in the aggregate
to the value of such present value dollar amount.  For purposes of this Section
5, a Director's March 1, 1997 Plan accrued benefit shall be equal to annual
payments payable commencing as of the date such Director attains the age of 70
for a period of years equal to the Years of Service completed by the Director
as of February 28, 1997 but ending upon the Director's death if occurring prior
to the expiration of such period of years, with each such annual payment being
equal to the dollar amount of the annual retainer in effect for Directors on
February 28, 1997.  For all purposes of the Plan, a Unit shall be equal to the
mean between the high and low selling prices of the date as of which such value
is being determined of a share of Common Stock of the Company; provided,
however, that for purposes of effecting the conversion into Units of
Directors' March 1, 1997 Plan accrued benefits as described under this Section
5, the value of a Unit shall be equal to the average of the means between the
high and low selling prices during the period commencing April 28, 1997 and
ending May 2, 1997, inclusive, of a share of Common Stock of the Company.

6.     BENEFIT NOT ASSIGNABLE.  A Director's rights under the Plan shall not be
subject to assignment encumbrance, garnishment, attachment, or charge, whether
voluntary or involuntary.




                                 Page 1 of 3
<PAGE>   2
7.     AMENDMENT, AND TERMINATION OF PLAN.  The Company reserves the right to
amend or terminate the Plan at any time by action of its Board of Directors,
provided that any such action shall not, without a Director's consent,
adversely affect any Director's right to a benefit which accrued pursuant to
the provisions of the Plan prior to such action.

9.     ADMINISTRATION OF PLAN.  The Plan shall be administered by an
Administrator who shall be a person or committee appointed by the Chairman of
the Board.  All decisions that are made by the Administrator with respect to
interpretation of the terms of the Plan, with respect to the amount of benefits
payable under the Plan, and with respect to any questions or disputes arising
under the Plan shall be final and binding on the Company and the directors and
their heirs or beneficiaries.

10.    WITHHOLDING.  The Company shall have the right to deduct from any and
all amounts paid to any Director under this Plan any taxes required by law to
be withheld therefrom.

11.    CONSTRUCTION.  The Plan shall be governed by, and interpreted and
enforced in accordance with, the laws of the State of Texas and of the United
States of America.

       IN WITNESS WHEREOF, the Company has adopted this amended and restated
Plan as evidenced by the signatures affixed hereto of its duly authorized
officers, as of the 1st day of March, 1997.


                                   AMERICAN GENERAL CORPORATION

ATTEST:

                                    By:    /S/ JON P. NEWTON
                                       ----------------------------------
                                        Jon P. Newton  
/S/ SUSAN A. JACOBS                     Vice Chairman and General Counsel
-------------------------
Susan A. Jacobs
Associate General Counsel





                                  Page 2 of 3
<PAGE>   3
                                                                Appendix A

SECTION A1.  DIRECTORS' ACCOUNT BALANCES.  The Company shall maintain an
individual book account under the Plan for each Director having a deferred
account.  Each Director shall initially have credited to his or her account the
number of Units calculated in respect of such Director pursuant to Section 5
hereof.  Any dividends paid on Common Stock shall be credited to a Director's
account in respect of each Unit and deemed to be reinvested in additional
Units. In addition, the number of Units allocated to a Director's account shall
be adjusted to reflect stock dividends, splits and reclassifications, and
similar transactions affecting the value of Common Stock.  At the time that the
Director's services as a Director cease, subject to Section 5 hereof, the
account balance will, until such time as it is paid to the Director in cash in
accordance with the Director's payment elections, be allocated among the
hypothetical investments permitted under A2(b)(ii) below, as may be elected by
the Director.

SECTION A2. PAYMENT ELECTIONS.  (a) General Provisions.  In connection with the
commencement of participation in this Plan, each Director shall make an
election (the "Payment Election") concerning the timing and form of
distribution of the amounts credited to his or her Plan account.  Any payment
from the Plan shall commence following termination of the Director's services
to the Company as a Director, but in no event prior to one year after receipt
by the Company of the Director's initial Payment Election.  The forms of
benefit available under the Plan shall be a lump sum payment or quarterly,
semi-annual or annual installments over a period not to exceed 15 years from
the earliest date the director may commence receiving payments hereunder.

       (b)    Special Rule.   (i)  Subsequent Payment Elections may be made by
a Director, which shall supersede the initial Payment Election, but any such
subsequent Payment Election shall not be valid unless it is made prior to May
of the calendar year preceding the calendar year in which payments to the
Director hereunder are otherwise due to commence.

       (ii) If a Director has elected to receive installment payments of the
amount in his or her account, the Director may, at  the Director's option,
elect to allocate the account, on or after the date on which he or she ceases
to perform services  as a Director, among hypothetical investments in the AGC
Stock Fund, International Fund, Small-Cap Fund, Mid-Cap Fund, Equity Index
Fund, Bond Fund or Cash Fund under the American General Employees' Thrift and
Incentive Plan and shall be credited with a rate of return which said account
would have earned had it been invested in the fund elected.  The Director may
allocate and reallocate his or her account among the funds in accordance with
rules established by the Administrator.

SECTION A3.  PAYMENTS TO A DECEASED DIRECTOR'S ESTATE.  (a)  In the event of  a
Director's death before the balance of his or her account is fully paid,
payment of the balance of the Director's account shall then be made to his or
her estate in accordance with the manner selected by the Director prior to
death, which manner shall provide that (i) payment shall be made to the
Director's estate in the same manner as provided with respect to the payments
to the Director or (ii) the balance of the Director's account shall be
determined as soon as practicable following his or her death and this amount
shall be paid in a single payment to the Director's estate as soon as
reasonably practicable thereafter.  In the event no election has been made,
payment shall be made in accordance with clause (ii) of the preceding sentence.

       (b)    In the event of a Director's death before the balance of his or
her account is fully paid to the estate in installments, the Administrator may,
upon consideration of the application of the duly appointed administrator or
executor of the Director's estate, direct that the balance of the Director's
account be paid to the estate in a single payment.  The payment shall be made
at the time specified by the Administrator.





                                  Page 3 of 3