Document:

Exhibit
10.1

HOSPIRA 2004 LONG-TERM
STOCK INCENTIVE PLAN

NQSO TERMS

The Participant specified below has been granted this
Option by Hospira, Inc. (the “Company”) under the terms of the Hospira 2004
Long-Term Stock Incentive Plan (the “Plan”). 
The Option shall be subject to the following terms and conditions (the “Option
Terms”):

1.             Terms of Award. 
The following words and phrases relating to the grant of the Option
shall have the following meanings:

(a)           The “Participant” is                                .

(b)           The “Grant Date” is                                   .

(c)           The number of “Covered Shares” shall
be                    
shares of Stock.

(d)           The “Exercise Price” is $                   
per share.

Except where the context
clearly implies to the contrary, any capitalized term in this award shall have
the meaning ascribed to that term under the Plan.

2.             Non-Qualified Stock Option.  The Option is not intended to constitute an “incentive
stock option” as that term is used in Code section 422.

3.             Date of Exercise. 
Subject to the limitations of the Option Terms, on the first anniversary
of the Grant Date one-third of the Covered Shares subject to These Options
(rounded up) may be purchased; on the second anniversary of the Grant Date
two-thirds of the Covered Shares subject to These Options (rounded up) may be
purchased; and on the third anniversary of the Grant Date these Options may be
exercised in full, provided the Expiration Date has not occurred prior to such
vesting dates.

(a)           Notwithstanding the foregoing
provisions of this paragraph 3, the Option shall become fully exercisable upon
a Change in Control that occurs on or before the Date of Termination.

(b)           The Option may be exercised (prior to
or following the Date of Termination) only as to that portion of the Covered
Shares which may be purchased under the foregoing schedule, as of the date of
exercise.

(c)           The Covered Shares shall continue to
become exercisable pursuant to this Section 3 until the Expiration Date (as
defined in Section 4).

(d)           Notwithstanding the foregoing
provisions of this paragraph 3, in the event of termination of employment for
reasons other than death, Disability or Retirement, the Option may only be
exercised on or after the Date of Termination only as to that portion 

 

 

of
the Covered Shares for which it was exercisable immediately prior to the Date
of Termination, or became exercisable on the Date of Termination.

4.             Expiration. 
The Option shall not be exercisable after the Company’s close of
business on the last business day that occurs prior to the Expiration
Date.  The “Expiration Date” shall be the
earliest to occur of:

(a)           the seven-year anniversary of
the Grant Date;

(b)           if the termination of employment
occurs for reasons other than death, Disability (as defined in Section 8) or
Retirement (as defined in Section 8), the three-month anniversary of the Date
of Termination (as defined in Section 8); provided, however, that if the
Participant dies during such three month period following the Date of
Termination, then the three-month anniversary of the date of death;

(c)           the date on which the Participant
engages in conduct which constitutes Cause; or

(d)           the date on which the Participant, at
any time prior to the one-year anniversary of the Date of Termination, engages,
directly or indirectly, for the benefit of the Participant or others, in any
activity, employment or business which, in the sole opinion and discretion of
the Committee, is competitive with the Company or any of its Subsidiaries.

5.             Method of Option Exercise.  Subject to the Option Terms and the Plan, the
Option may be exercised in whole or in part by filing a written notice with the
Secretary of the Company at its corporate headquarters prior to the Company’s
close of business on the last business day that occurs prior to the Expiration
Date.  Such notice shall specify the
number of shares of Stock which the Participant elects to purchase, and shall
be accompanied by payment of the Exercise Price for such shares of Stock indicated
by the Participant’s election. Payment may be by cash or by check payable to
the Company, or except as otherwise provided by the Committee before the Option
is exercised: (i) all or a portion of the Exercise Price may be paid by the
Participant by delivery of shares of Stock (by actual delivery or by
attestation) owned by the Participant and acceptable to the Committee having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal
to the amount of cash that would otherwise be required; and (ii) the
Participant may pay the Exercise Price by authorizing a third party to sell
shares of Stock (or a sufficient portion of the shares) acquired upon exercise
of the Option and remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting
from such exercise.  Except as otherwise
provided by the Committee prior to exercise, payments made with shares of Stock
in accordance with clause (i) above shall be limited to shares held by the
Participant for not less than six months prior to the payment date.  The Option shall not be exercisable if and to
the extent the Company determines that such exercise would violate applicable
state or Federal securities laws or the rules and regulations of any securities
exchange on which the Stock is traded and shall not be exercisable during any
blackout period established by the Company from time to time.

 

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6.             Withholding. 
The exercise of the Option is subject to withholding of all applicable
taxes.  At the election of the Participant,
and subject to such rules and limitations as may be established by the
Committee from time to time, such withholding obligations may be satisfied (i)
through cash payment by the Participant; (ii) through the surrender of shares
of Stock by (actual delivery or by attestation) which the Participant already
owns (provided, however, that to the extent shares described in this clause
(ii) are used to satisfy more than the minimum statutory withholding
obligation, as described below, then, except as otherwise provided by the
Committee, payments made with shares of Stock in accordance with this clause
(ii) shall be limited to shares held by the Participant for not less than six
months prior to the payment date); or (iii) through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan; provided,
however, that such shares under this clause (iii) may be used to satisfy not
more than the Company’s minimum statutory withholding obligation (based on
minimum statutory withholding rates for Federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
income).

7.             Transferability. 
The Option is not transferable by the Participant other than by will or
by the laws of descent and distribution, and during the Participant’s life, may
be exercised only by the Participant.  It
may not be assigned, transferred (except as aforesaid), pledged or hypothecated
by the Participant in any way whether by operation of law or otherwise, and
shall not be subject to execution, attachment or similar process.  Any attempt at assignment, transfer, pledge
or hypothecation, or other disposition of this Option contrary to the
provisions hereof, and the levy of any attachment or similar process upon this
option, shall be null and void and without effect.

8.             Definitions.  For purposes of the Option Terms, words and
phrases shall be defined as follows:

(a)           Cause.  The term “Cause” shall mean, in the sole
opinion and discretion of the Committee, the Participant has (i) engaged in a
material breach of the Company’s code of business conduct, (ii) committed an
act of fraud, embezzlement or theft in connection with the Participant’s duties
or in the course of employment, or (iii) wrongfully disclosed secret processes
or confidential information of the Company or its subsidiaries.

(b)           Date of Termination.  The term “Date of Termination” means the
first day occurring on or after the Grant Date on which the Participant is not
employed by the Company or any Subsidiary, regardless of the reason for the
termination of employment; provided that a termination of employment shall not
be deemed to occur by reason of a transfer of the Participant between the
Company and a Subsidiary or between two Subsidiaries; and further provided that
the Participant’s employment shall not be considered terminated while the
Participant is on a leave of absence from the Company or a Subsidiary approved
by the Participant’s employer.  If, as a
result of a sale or other transaction, the Participant’s employer ceases to be
a Subsidiary (and the Participant’s employer is or becomes an entity that is
separate from the Company), and the Participant is not, at the end of the 30-day
period following the transaction, employed by the Company or an entity that is
then a Subsidiary, then  the
occurrence of such transaction 

 

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shall
be treated as the Participant’s Date of Termination caused by the Participant
being discharged by the employer.

(c)           Disability.  The Term “Disability” shall mean the
Participant’s disability as defined in the Hospira Extended Disability Plan,
whether or not such Participant is a participant in such disability plan, for a
period of twelve (12) consecutive months.

(d)           Retirement.  “Retirement” of the Participant means, the
occurrence of the Participant’s Date of Termination on or after the date that
the Participant reaches the age of 55 and has 10 years of combined service with
the Company or its subsidiaries (or with Abbott Laboratories and its
affiliates, provided that the Participant transitioned employment from Abbott
to the Company in conjunction with the distribution of the Company’s common
stock to the Abbott shareholders) (as determined by the Committee).

9.             Heirs and Successors.  The Option Terms shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon
any person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.

10.           Administration.  The authority to manage and control the
operation and administration of the Option Terms shall be vested in the
Committee, and the Committee shall have all powers with respect to the Option
Terms as it has with respect to the Plan. Any interpretation of the Option
Terms by the Committee and any decision made by it with respect to the Option
Terms is final and binding on all persons.

11.           Plan Governs. Notwithstanding
anything in the Option Terms to the contrary, the Option Terms shall be subject
to the terms of the Plan, a copy of which may be obtained by the Participant
from the office of the Secretary of the Company; and the Option Terms is
subject to all interpretations, amendments, rules and regulations promulgated
by the Committee from time to time pursuant to the Plan.

12.           Not An Employment Contract.
The Option will not confer on the Participant any right with respect to
continuance of employment or other service with the Company or any Subsidiary,
nor will it interfere in any way with any right the Company or any Subsidiary
would otherwise have to terminate or modify the terms of such Participant’s
employment or other service at any time.

13.           Notices.  Any written notices provided for in the
Option Terms or the Plan shall be in writing and shall be deemed sufficiently
given if either hand delivered or if sent by fax or overnight courier, or by
postage paid first class mail. Notices sent by mail shall be deemed received
three business days after mailing but in no event later than the date of actual
receipt. Notices shall be directed, if to the Participant, at the Participant’s
address indicated by the Company’s records, or if to the Company, at the
Company’s principal executive office.

14.           Fractional Shares. In lieu of
issuing a fraction of a share upon any exercise of the Option, resulting from
an adjustment of the Option pursuant to paragraph 3.4 of the Plan or

 

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otherwise, the Company will be entitled to pay to the
Participant an amount equal to the fair market value of such fractional share.

15.           No Rights As Shareholder.  The Participant shall not have any rights of
a shareholder with respect to the shares subject to the Option, until a stock
certificate has been duly issued following exercise of the Option as provided
herein.

16.           Amendment.  The Option Terms may be amended in accordance
with the provisions of the Plan, and may otherwise be amended by written
agreement of the Participant and the Company without the consent of any other
person.

IN WITNESS WHEREOF, the
Company has caused these presents to be executed in its name and on its behalf,
all as of the Grant Date.

	
  

  	
  Hospira, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
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  Its: 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 5Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT
(this “Agreement”), is entered into as of May 14, 2007, by and between
21st Century Insurance Group, a Delaware
corporation (the “Company”), American International Group, Inc., a
Delaware corporation (“Parent”) and Bruce W. Marlow (“Executive”).

WHEREAS, Executive is
currently employed by the Company as its President and Chief Executive Officer,
and is party to a Retention Agreement with the Company dated as of September
14, 2005 (the “Retention Agreement”) and covered by the Company’s
Executive Severance Plan (the “ESP”); and

WHEREAS, the Company has
entered into an Agreement and Plan of Merger with Parent, dated as of the 15th
day of May, 2007, (the “Merger
Agreement”); and

WHEREAS, in connection
with the transactions contemplated by the Merger Agreement, Executive is
expected to dispose of Executive’s ownership interest in the Company; and

WHEREAS, as of the date
of this Agreement, the Company wishes to continue Executive’s employment as
President, AIG 21st Direct Auto (as defined in Section 4(a) of
this Agreement) under the terms of a new employment agreement on the terms set
forth herein, which shall supersede the Retention Agreement and the ESP; and

WHEREAS, Executive
is willing to enter into such agreement; and

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 the
Effective Time as defined in the Merger Agreement (the “Effective Date”)
and ending on December 31, 2009 (the “Employment Term”).  If a Closing (as defined in the Merger
Agreement) and the Effective Date have not occurred by the close of business on
December 31, 2007, this Agreement will be null and void and Executive will
retain full rights under the Retention Agreement and the ESP.

2.             Position.

(a)           Executive
shall serve as President, AIG 21st Direct Auto. In such position, Executive’s
duties shall consist of (i) overseeing the integration of the Company and AIG
Direct into AIG 21st Direct Auto (both as defined below); (ii)
helping to design and implementing strategies designed to achieve AIG 21st Direct Auto’s short-term and long-term goals
consistent with current Company goals; (iii) managing AIG 21st Direct Auto’s staff, including marketing,
product management, actuarial, government affairs, sales and service, claims,
IT, internal control, legal, accounting, and ancillary personnel, the hiring
and firing of company personnel, all subject to reporting lines imposed
generally on subsidiaries of Parent (decisions involving senior positions would
include discussions with the Executive Vice President – Domestic Personal Lines
of Parent ); (iv) preparing AIG 21st Direct Auto’s annual budgets for approval by
Parent’s management (and managing to that budget and modifying the business
plan as necessary); (v) maintaining controls to assure the accuracy of AIG 21st Direct Auto’s reported financial results and
adherence to Parent’s protocols; and (vi) such other duties as the Board and
Executive may agree upon from time to time. 
Executive shall report to the Executive Vice President – Domestic
Personal Lines of Parent, or any successor to such position.

(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, or serve on any board of directors or trustees of any
business corporation or any charitable or not-for-profit organization, without
the prior written consent of the Board of Directors of the Company (the “Board”).  Notwithstanding the foregoing, nothing in
this Agreement shall preclude Executive (i) from managing his personal,
financial and legal affairs, or (ii) continuing to serve as a Director of
the Los Angeles Philharmonic.

(c)           The
Company may require Executive to undertake reasonable business travel as
necessary to implement the integration of the Company with Parent and manage
the combined entity.  The Company will
fully reimburse Executive for travel expenses (air travel, ground
transportation, hotel, meals, etc.) incurred in the performance of Executive’s
duties, in accordance with the Company’s policies.  Executive will be

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entitled to first class air
travel.

(d)           The
Company will: (i) reimburse Executive in accordance with the policies of the
Company for any reasonable relocation expenses of Executive, if the Company
requires him to relocate from his Southern California residence pursuant to his
duties, and (ii) pay and/or reimburse Executive for any reasonable security
expenses, consistent with past practices of the Company.

3.             Base
Salary.  During the Employment Term,
the Company shall pay Executive a base salary (the “Base Salary”) at the
annual rate of $950,000, payable in regular installments in accordance with the
Company’s usual payroll practices. During the Employment Term, the Company
shall review the Base Salary annually and may increase the Base Salary (but may
not decrease the Base Salary), and the term “Base Salary” shall refer to such
increased amount.

4.             Annual
and Incentive Bonus.

(a)           During
the Employment Term, Executive shall be eligible to receive an annual cash
bonus in respect of each full or partial fiscal year of the Company of between
0% to 200% of Base Salary (with a STI target percentage pursuant to the Company’s
Short Term Incentive Plan as in effect at the date of this Agreement (“Target
Bonus Percentage”) of 100% of Base Salary), as determined in the sole
discretion of the Company, subject to any applicable approval of the
Compensation and Management Resources Committee of the Board of Directors of
Parent (the “Compensation Committee”) (such annual cash bonus, the “Annual
Bonus”). Notwithstanding the foregoing, the Annual Bonus received for the 2007
fiscal year will be no less than $950,000, provided that Executive is employed
by the Company as of December 31, 2007. 
For the 2007 fiscal year, Executive’s bonus shall be based on the
performance criteria in the Company’s Short Term Incentive Plan, applied to the
results of the combined entity of the Company and the profit center of Parent’s
subsidiaries called “AIG Direct” (“AIG Direct”) that conducts the
business of direct-to-consumer automobile insurance and sale of other ancillary
personal lines insurance products (AIG Direct does not include Agency Auto or
Private Client Group) (the combined entity, “AIG 21st Direct Auto”).  The Company will pay the Annual Bonus for
2007 described above to Executive in cash no later than March 31, 2008.  For the 2008 and 2009 fiscal years, and
provided that Executive is employed by the Company at the time of payment

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of the Annual Bonus, Executive’s
Target Bonus Percentage will be no less than 100% of $950,000. For the 2008 and
2009 fiscal years, Executive’s bonus shall be based on the performance criteria
in the Company’s Short Term Incentive Plan as applicable at the date of this
Agreement, applied to the results of AIG 21st Direct Auto, unless the Company’s Short Term
Incentive Program is superseded by a bonus plan of Parent or as otherwise
agreed between the Company and Executive.

(b)           If
Executive remains employed by the Company on the first anniversary of the
Effective Date, then the Company shall pay to Executive in a lump sum within
ten (10) business days thereafter, an amount (the “Retention Bonus”)
equal to the greater of (I) $2,850,000 or (II) the sum of (x) 1.5 times
the Base Salary (at the rate in effect immediately prior to the first
anniversary of the Effective Date) and (y) 1.5 times the last annual cash
bonus paid by the Company during Executive’s employment.

5.             Long-Term
and Equity-Based Incentives.

(a)           On date of the first Compensation
Committee meeting following the Effective Date, the Company and Parent shall
recommend that Executive be granted options with respect to such number of
Parent’s shares of Parent’s common stock having a value as of the date of grant
of $1,165,000, as determined in the sole discretion of the Compensation
Committee (any grant of options pursuant to this Section 5(a), “Options”).  For the 2008 and 2009 fiscal years, the
Company and Parent shall recommend that Executive be granted options with
respect to such number of Parent’s shares of Parent’s common stock with a value
as of the date of grant of not less than $1,165,000, as determined in the sole
discretion of the Compensation Committee. Any such grant is subject to the
terms and conditions of the stock option plan and the agreement governing the
grant;

(b)           On
the date of the first Compensation Committee meeting following the Effective
Date, the Company and Parent shall recommend that Executive be granted 17,500
Performance Units with respect to Parent’s Partners Plan for the 2007-2008
performance period (any grant of Performance Units pursuant to this Section
5(b), “Partners Units”). The Company and Parent shall recommend that
Executive be granted at least 17,500 Performance Units with respect to Parent’s
Partners Plan for each of the 2008-2009 and 2009-2010 performance periods at
the time when grants are made for such performance periods. Any such grant is
subject to the terms and conditions of the

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applicable plan and agreement
governing such grant;

(c)           On
the date of the first Compensation Committee meeting following the Effective
Date, the Company and Parent shall recommend that Executive be granted 250
Senior Partner units with respect to Parent’s Senior Partners Plan for the
2005-2007 performance period (any grant of Senior Partner units pursuant to
this Section 5(c), “Senior Partners Units”). The Company and Parent
shall recommend that Executive be granted at least 250 Senior Partner units
with respect to Parent’s Senior Partners Plan for each of the 2006-2008 and
2007-2009 performance periods at the time when grants are made for such
performance periods. Any such grant is subject to the terms and conditions of
the applicable plan and agreement governing such grant; and

(d)           On
the date of the first Compensation Committee meeting following the Effective
Date, the Company and Parent shall recommend that Executive be granted an award
of Restricted Stock Units with respect to shares of Parent’s common
stock that is sufficient to replace the value (as determined by the
Company in its sole discretion) of Executive’s outstanding stock options and
awards of restricted stock from the Company that would, but for the Merger,
have vested beyond the first anniversary of the Effective Date. Such value will
be based on the fair market value of Parent’s common stock at the Effective
Date, will vest three years from the date of grant and will be otherwise
subject to the terms and conditions of the applicable plan and agreement
governing such grant.

6.             Employee
Benefits. During the Employment Term, Executive shall be entitled to
participate in the Company’s employee benefit plans (other than any severance
or change-in-control plan) pursuant to the terms and conditions of the
applicable plans.

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.  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 policy.

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

(a)           For
Cause by the Company. Executive’s employment may be

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terminated at any time prior to
the end of the Employment Term 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 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 ten (10) days after a
written demand for substantial performance of duties is delivered to Executive
by the Board, which specifically (x) identifies the manner in which the Board
believes that Executive has not substantially performed Executive’s duties and
(y) suggests corrective action, (ii) Executive’s intentional misconduct or
gross negligence in connection with Executive’s duties, or an act of fraud or
material act of dishonesty by Executive, (iii) Executive’s material
violation of a material provision of Parent’s Code of Conduct, as such code of
conduct or its equivalent policies may be in effect from time to time,
(iii) 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, or (iv) any material failure by Executive to comply with
a material provision of Section 10 of this Agreement.

If Executive is
terminated for Cause pursuant to this Section 9(a), he shall 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. If
Executive is terminated for Cause pursuant to Section 9(a)(i), he shall be
entitled to 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 were provided during Executive’s employment with the Company;
provided, that Executive shall reimburse the Company for the COBRA-equivalent
costs of such coverage and 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, and he
shall have no further rights to any compensation (including any Base Salary,
Annual Bonus (including any Annual Bonus that has been declared but not yet
paid), Retention Bonus, Options, Partners Units, Senior Partners Units or any
long-term or equity-based compensation awards or any other benefits under this
Agreement). For purposes of this Agreement, “COBRA” means the
Consolidated Omnibus Budget Reconciliation Act. All

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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 Parent; provided, however, that Executive shall not
participate in any severance plan, policy or program of the Company or Parent.

(b)           Disability
or Death. Executive’s employment prior to the end of the Employment Term
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 unpaid Annual Bonus for any
fiscal year preceding the year in which the termination occurs; and
(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”), and (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 were provided during Executive’s
employment with the Company; provided, that Executive shall reimburse the
Company for the COBRA-equivalent costs of such coverage and 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. Other than as set forth in the immediately
following sentence, Executive or Executive’s estate (as the case may be) shall
have no further rights to any compensation (including any Base Salary, Annual
Bonus, Retention Bonus, Options, Partners Units, Senior Partners Units 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
equity compensation plans of Parent; 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 or Parent.

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(c)           Without
Cause by the Company or for Good Reason by Executive.  Executive’s employment may be terminated
prior to the end of the Employment Term 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 December 31, 2009 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 within the period commencing on the first
anniversary of the Effective Date and ending on December 31, 2009, 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)           subject to Executive’s
continued compliance with Section 10 of this Agreement, an amount (as “Severance”)
equal to the greater of (I) $2,850,000 or (II) the sum of (x) 1.5 times
the Base Salary (at the rate in effect immediately prior to termination) and
(y) 1.5 times the last annual cash bonus paid by the Company during
Executive’s employment.  The Severance
shall be payable in equal monthly installments (each, a “Severance
Installment”) over the twelve (12) month period commencing no earlier
than 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 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 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; and

(iii)          continued health and
life insurance benefits for Executive and his

 8
 

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 were provided during
Executive’s employment with the Company; provided, that Executive shall
reimburse the Company for the COBRA-equivalent costs of such coverage and 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.

If Executive’s
employment is terminated by the Company without Cause (other than by reason of
Disability) or by Executive for Good Reason during the period commencing on the
Effective Date and ending on the date preceding the first anniversary of the
Effective Date, 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)           subject to Executive’s
continued compliance with Section 10 of this Agreement, an amount (as “Severance”)
equal to the greater of (I) $5,700,000 or (II) the sum of (x) 3 times the
Base Salary (at the rate in effect immediately prior to termination) and
(y) 3 times the last annual cash bonus paid by the Company during
Executive’s employment.  The Severance
Installments shall be payable in equal monthly installments over the twelve
(12) month period commencing no earlier than 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; and

(iii)          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 were provided
during Executive’s employment with the Company; provided, that Executive shall
reimburse the Company for the COBRA-equivalent

 9
 

costs of such coverage and 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.

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 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,
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,
Retention Bonus, Options, Partners Units, Senior Partners Units or any
long-term or equity-based compensation awards) or any other benefits under this
Agreement following a termination of employment pursuant to this Section 9(c).
All other benefits, if any, due Executive following a termination pursuant to
this Section 9(c) shall be determined in accordance with the equity
compensation plans of Parent; provided, however, that Executive shall not
participate in any severance plan, policy or program of the Company or Parent.
Executive and the Company acknowledge that any payments and benefits provided
to Executive under clauses (ii) through (iii) 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
with respect to AIG 21st Direct Auto that is
inconsistent in any material and adverse respect with Executive’s position,
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

 10
 

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 President, AIG 21st Direct Auto) 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 failure by Compensation
Committee to follow in their entirety, at the first Compensation Committee
meeting following the Effective Date, all of the recommendations of the Company
and Parent as to the grants of the, and to actually grant all of the, Options,
Partners Units, Senior Partners Units, and Restricted Stock Units specified in
Section 5; or

(iv)          any material breach of
this Agreement by the Company.

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. Executive’s employment may be terminated
prior to the end of the Employment Term 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 (i) his Base Salary through the date of such termination and
reimbursement for any unreimbursed business expenses properly incurred by
Executive in accordance with Parent policy through the date of Executive’s
termination, and (ii) 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 were provided during Executive’s
employment with the Company; provided, that Executive shall reimburse the
Company for the COBRA-equivalent costs of such coverage and the Company’s
obligation to provide such health and life insurance benefits shall cease with
respect to such benefits at the time Executive

 11
 

becomes eligible for such
benefits from another employer, and he shall have no rights to any further
compensation (including any Base Salary, Annual Bonus, Retention Bonus,
Options, Partners Units, Senior Partners Units 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 Parent; 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(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 Parent, 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 13(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 the Company can elect to waive the sixty
(60) day notice required and require Executive’s employment to terminate
immediately upon written notice to Executive; and provided, further, 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 13(i).

 12

(g)           Continuation
of Employment; Termination On or After Expiration of Employment Term.
Except as otherwise provided in this Agreement or 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 December 31, 2009 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. If Executive’s employment
is continued after December 31, 2009, nothing in this Agreement shall be
construed as limiting, prohibiting or guaranteeing his participation in any
compensation, severance, or benefit plan from and after January 1, 2010,
subject to the terms of such plans.

10.           Restrictive
Covenants.

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

(i)            While employed by the
Company and for a period of twelve (12) months following the date
Executive ceases to be employed by the Company, 
(the “Restricted Period”), Executive will not directly or
indirectly (u) engage in any “Competitive Business” (defined below) for Executive’s
own account, (v) enter the employ of, or render any services to, any
person engaged in any Competitive Business, (w) 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,
(x) 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, (y) solicit, contact, communicate or attempt to
communicate with, regarding products or services offered or proposed to be
offered by the Company (if such products are in the development stage while
Executive is employed by the Company), any customer or client or prospective
customer or prospective client of the Company (for purposes of this Section 10,
“customer or client” shall not include insurance brokers) or (z)

 13
 

regardless of who initiates the
communication, solicit, participate in the solicitation or recruitment of, or
in any manner encourage or provide assistance to, any employee, consultant or
agent of the Company (or who was an employee of the Company within the prior 12
months) to terminate his or her employment or other relationship with the
Company or to leave its employ or other relationship with the Company for any
engagement in any capacity or for any other person or entity.

(ii)           For purposes of Section
10(b), (c), and (d), the Company shall be construed to include the Company,
Parent and each of their subsidiaries and affiliates. For purposes of Section
10(a)(i), the Company shall mean AIG 21st Direct Auto and shall, to the extent relevant,
include any employees, consultants or agents of Parent or its subsidiaries and
affiliates who Executive comes into contact with as a result of his employment.

(iii)          For purposes of this
Section 10, 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 personal auto insurance business.

(iv)          Notwithstanding anything
to the contrary in the Agreement, Executive may 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.

(v)           Executive understands
that the provisions of this Section 10(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

 14
 

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 10(a) otherwise are void,
voidable or unenforceable or should be voided or held unenforceable.

(vi)          It is expressly
understood and agreed that, although Executive and the Company consider the
restrictions contained in this Section 10(a) to be reasonable, if a judicial
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Section 10(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. 
Notwithstanding the foregoing, nothing in this or any other section of
this Agreement is intended to discourage or in any way limit Executive’s
responsibility under the Sarbanes Oxley Act or similar local, state or federal

 15
 

laws or regulations
concerning the identification or reporting of any fraud, financial reporting
issue or other violation of law.

(c)           Confidentiality/Company
Property. Executive shall not, without the prior written consent of the
Company, during and after his employment with 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 10(c), (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 business of the Company 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.

(d)           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

 16
 

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.

(e)           Clawback.  If
Executive breaches Section 10(a) of this Agreement, the Company may demand that
Executive repay to the Company, and upon such demand Executive shall repay to
the Company, the gross amount of the Severance Installments made by the Company
to Executive pursuant to Section 9(c) of this Agreement.

11.           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 10 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 the
Severance Installments to Executive pursuant to Section 9 of this
Agreement upon a determination by the Company that Executive has violated any
provision of Section 10 of this Agreement.

12.           Indemnification. At all times during and after the
Employment Term, the Company shall indemnify Executive to the fullest extent
permitted by the laws of the state of Delaware 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 indemnification of an officer by a corporation
is allowed by Delaware 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

 17
 

pursuant to the
preceding sentence shall include an undertaking by Executive to repay the
amount of such advance if it shall ultimately be determined that Executive is
not entitled to be indemnified against such costs and expenses. Any
determination required to be made with respect to whether Executive’s conduct
complies with the standards set forth under Delaware law shall be made by
independent counsel selected by Executive (such independent counsel to be
reasonably acceptable to the Company).

13.           Miscellaneous.

(a)           GOVERNING LAW.
EXCEPT ONLY WITH RESPECT TO EXECUTIVE’S RIGHT TO INDEMNIFICATION UNDER SECTION
12 (AS TO WHICH DELAWARE LAW APPLIES IN THE FIRST INSTANCE), THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA 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 CALIFORNIA.

(b)           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
Retention Agreement, the Company’s Short Term Incentive Plan and the Company’s
Executive Severance Plan. 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 9, 10, 11 , 12 and 13 of this Agreement
shall survive the termination of Executive’s employment with the Company, to
the extent specifically stated
therein. Notwithstanding the foregoing, nothing in this Agreement shall affect
Executive’s entitlements pursuant to the Company’s Supplemental Executive
Retirement Plan.

(c)           Jurisdiction and Choice of Forum.  EXECUTIVE AND THE
COMPANY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED IN THE COUNTY OF LOS

 18
 

ANGELES OVER
ANY CONTROVERSY OR CLAIM BETWEEN EXECUTIVE AND THE COMPANY ARISING OUT OF OR
RELATING TO OR CONCERNING THIS AGREEMENT OR ANY ASPECT OF EXECUTIVE’S
EMPLOYMENT WITH THE COMPANY OR THE TERMINATION OF THAT EMPLOYMENT (together, an
“Employment Matter”).  Both
Executive and the Company (i) acknowledge that the forum stated in this
Section 13(c) has a reasonable relation to this Agreement and to the
relationship between Executive and the Company and that the submission to the
forum will apply even if the forum chooses to apply non-forum law,
(ii) waive, to the extent permitted by law, any objection to personal
jurisdiction or to the laying of venue of any action or proceeding covered by
this Section 13(c) in the forum stated in this Section 13(c),
(iii) agree not to commence any such action or proceeding in any forum
other than the forum stated in this Section 13(c) and (iv) agree
that, to the extent permitted by law, a final and non-appealable judgment in
any such action or proceeding in any such court will be conclusive and binding
on Executive and the Company.  However,
nothing in this Agreement precludes Executive or the Company from bringing any
action or proceeding in any court for the purpose of enforcing the provisions
of this Section 13(c).

(d)           WAIVER OF JURY TRIAL.  TO THE EXTENT PERMITTED BY LAW, EXECUTIVE AND
THE COMPANY WAIVE ANY AND ALL RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY
EMPLOYMENT MATTER.

(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)           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

 19
 

any remuneration
attributable to any subsequent employment that Executive may obtain.

(h)           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 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.

(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

 20
 

With a copy to:

Thompson Hine LLP

3900 Key Center

127 Public Square

Cleveland, OH  44114-1291

Fax: 216-566-5800

Attn: Roy L. Turnell, Esq.

If to the Company, to:

American International
Group, Inc.

70 Pine Street

New York, NY 10270

Fax: 212-425-2175

Attn: General Counsel

With a copy to:

21st Century Insurance Group

6301 Owensmouth Avenue

Woodland Hills, CA 91367

Fax: 818-704-3737

Attn: General Counsel

With a further copy to:

Sullivan & Cromwell
LLP

125 Broad Street

New York, New York 10004-2498

Attn: Marc R. Trevino, Esq.

Fax: 212-558-3345

(j)            Withholding Taxes.
The Company may withhold from any amounts payable under this Agreement such
Federal, state and local taxes as may be

 21
 

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.

 22
 

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

	
  

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Bruce W. Marlow

  	
   

  
	
   

  	
   

  	
  Bruce
  W. Marlow

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  21ST CENTURY INSURANCE GROUP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Michael J. Cassanego

  	
   

  
	
   

  	
   

  	
  Name:
  Michael J. Cassanego

  
	
   

  	
   

  	
  Title:
  Senior Vice President and General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMERICAN
  INTERNATIONAL GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Brian T. Schreiber

  	
   

  
	
   

  	
   

  	
  Name:
  Brian T. Schreiber

  
	
   

  	
   

  	
  Title:
  Senior Vice President Strategic Planning

  

 

 23

EXHIBIT A

A                                      RELEASE
OF CLAIMS

1.                                       Release
of Claims

In partial consideration
of the payments and benefits described in Section 9(c) of the employment
agreement (the “Employment Agreement”), dated May   , 2007, by and between Bruce W. Marlow (“Executive”),
21st Century Insurance Group (the “Company”)
and American International Group, Inc. (“Parent”), 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 three 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, Parent, or any of their subsidiary companies,
shareholders, successors, assigns, directors, officers, partners, members,
employees or agents, or any benefit plan sponsored by such company
(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. Nothing herein modifies or affects any
vested

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rights that Executive may
have under the American International Group, Inc. Retirement Plan, the Company’s
Supplemental Executive Retirement Plan, any 401(k) or other incentive savings
plan, or with respect to any equity compensation or other benefit plans.

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.

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), in writing to
the General Counsel of the Company and with a copy to the General Counsel of
Parent, 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

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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.

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 California without giving effect to conflict of
laws principles.

8.                                       Jurisdiction
and Choice of Forum

Executive and the Company
irrevocably submit to the exclusive jurisdiction of any state or federal court
located in the County of Los Angeles over any controversy or claim between
Executive and the Company arising out of or relating to or concerning this
Release.

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

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  DATE

  	
  Bruce
  W. Marlow

  

 

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