Ex. 10(3)
EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT (this “ Agreement ”), is entered into
as of June 27, 2005, by and between American International
Group, Inc., a Delaware corporation (the “ Company
”), and Steven J. Bensinger (“ Executive
”).
WHEREAS, Executive
is currently employed by the Company as its Executive Vice
President and Chief Financial Officer pursuant to that certain
employment letter dated as of March 16, 2005 (the “
Employment Letter ”); and
WHEREAS, as of the
date of this Agreement, the Company wishes to continue
Executive’s employment as Executive Vice President and Chief
Financial Officer under the terms of a new employment agreement on
the terms set forth herein, which shall supersede the Employment
Letter; and
WHEREAS, Executive
desires to enter into such agreement; and
WHEREAS,
Executive’s employment as the Company’s Executive Vice
President and Chief Financial Officer is a promotion from his
position with the Company prior to March 14, 2005, and the
Board of Directors of the Company (the “ Board
”) has acknowledged that Executive has been performing his
duties as Executive Vice President and Chief Financial Officer
under conditions at the Company that are demanding both in terms of
the time commitment required and the unique circumstances facing
the Company as of the date of this Agreement.
NOW, THEREFORE, in
consideration of the premises and mutual covenants herein and for
other good and valuable consideration, the parties hereby agree as
follows:
1. Term
of Employment . Subject to the provisions of Section 9 of
this Agreement, this Agreement shall be effective for a term
commencing as of March 14, 2005 (the “ Effective
Date ”) and ending on the day immediately preceding the
third anniversary of the Effective Date (the “ Employment
Term ”).
2.
Position .
(a) Executive
shall serve as Executive Vice President and Chief Financial Officer
of the Company. In such position, Executive shall have such duties
and authority as are consistent therewith. Executive shall report
to the Company’s Chief Executive Officer and to the Audit
Committee of the Board.
(b) During
the Employment Term, Executive will devote his full business time
and best efforts to the performance of his duties hereunder and
will not engage in any other business, profession or occupation for
compensation or otherwise which would conflict or interfere with
the rendition of such services, either directly or indirectly,
without the prior written consent of the Board; provided, that
nothing herein shall preclude Executive, subject to the prior
approval of the Board, from accepting appointment to or continuing
to serve on any
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board of directors or trustees of
any business corporation or any charitable or not-for-profit
organization or from managing his personal, financial and legal
affairs; provided, in each case, and in the aggregate, that such
activities do not conflict or interfere with the performance of
Executive’s duties hereunder or conflict with Section 11
of this Agreement in any material respect.
3. Base
Salary and Non-Variable Compensation .
(a)
Base Salary . During the Employment Term, the Company shall
pay Executive a base salary (the “ Base Salary
”) at the annual rate of $750,000, payable in regular
installments in accordance with the Company’s usual payroll
practices. The Base Salary shall be retroactive to the Effective
Date. During the Employment Term, the Compensation Committee of the
Board (the “ Compensation Committee ”) shall
review the Base Salary annually and may increase the Base Salary,
and the term “Base Salary” shall refer to such
increased amount.
(b)
Non-Variable Compensation . Executive shall receive an
additional cash payment with respect to each of fiscal years 2005,
2006 and 2007, in addition to any other amounts described in this
Agreement, in an amount equal to the excess, if any, of (i)
$750,000 over (ii) the aggregate of all (A) supplemental
quarterly interim cash bonuses in respect of the Company’s
long-term compensation arrangements or otherwise paid in respect of
the applicable fiscal year, which shall be paid consistent with
past practice, and (B) cash dividends received in respect of
the fiscal year, or with respect to the prior fiscal year to the
extent not previously taken into account in respect of this clause
(B), on common and preferred stock of C.V. Starr & Co., Inc.
(“ Starr ”) held by Executive, which
compensation shall be paid no later than March 31 of the
fiscal year following each of fiscal years 2005, 2006 and 2007.
This amount shall be payable in respect of fiscal year 2007
irrespective of the expiration of the Employment Term on the day
immediately preceding the third anniversary of the Effective Date,
if such amount has not been paid by such time.
4.
Bonuses .
(a)
Transition Bonus . The Company shall pay Executive a
transition bonus, in cash, in an amount equal to $1,000,000 (the
“ Transition Bonus ”), which shall be paid in
four equal installments on, or as soon as reasonably practicable
following, each of the following dates, whether or not Executive is
employed by the Company on such dates, unless Executive’s
employment has been terminated by the Company for
“Cause” or by Executive without “Good
Reason” (as such terms are defined below): (i) the date
Executive and the Company sign this Agreement, and (ii) the
last day of each of the second, third and fourth fiscal quarters of
the Company in 2005. If Executive’s employment is terminated
for any reason other than by the Company for Cause or by Executive
without Good Reason before any payment date set forth in the
preceding sentence, then, if necessary to avoid the application of
Section 409A of the Internal Revenue Code of 1986, as amended
(the “ Code ”), to any such unpaid portion of
the Transition Bonus, Executive shall not receive any such amounts
until the first scheduled payroll date that occurs more than six
months following the date of termination of employment (the “
First Payment Date ”) and, on the First Payment Date,
the Company will pay Executive an amount equal to the sum of all
amounts that would have been payable following termination
of
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employment in respect of the
period preceding the First Payment Date but for the delay imposed
on account of the aforementioned Section 409A.
(b)
Annual Bonus . Executive may receive an additional annual
cash bonus in respect of each full or partial fiscal year of the
Company during the Employment Term, as determined in the sole
discretion of the Compensation Committee based on its assessment of
Company and individual performance in relation to performance
targets, a subjective evaluation of Executive’s performance
and/or such other criteria as may be established by it (the “
Annual Bonus ”). Notwithstanding the foregoing, during
the Employment Term, Executive shall be eligible, with respect to
each of fiscal years 2006 and 2007, for an annual cash bonus based
on the attainment of targets established by the Compensation
Committee, which, together with the target value of any long-term
or equity-based award in respect of such year (as described in
Section 5), shall have a total target value of
$5,000,000.
5.
Long-Term and Equity-Based Incentives . During the
Employment Term, Executive shall be eligible to participate in any
long-term incentive compensation plans or equity-based compensation
plans maintained by the Company on such basis as may be determined
by the Compensation Committee; provided that, as of a date that is
not later than March 31, 2006, Executive shall be granted
awards in respect of fiscal year 2005 having a value, determined at
the date of grant, as reasonably determined by the Compensation
Committee, of no less than the excess of (A) $4,000,000 over
(B) the sum of (i) the grant date value (as reasonably
determined by the Compensation Committee in the same manner) of
Company stock options and other equity awards granted to Executive
no later than December 31, 2005, in respect of fiscal year
2005, (ii) the annualized fiscal year 2005 grant value (as
reasonably determined by the Compensation Committee) of any award
made to Executive pursuant to a Company arrangement intended to be
in lieu of Executive’s participation in the Starr
International Company, Inc. Deferred Compensation Profit
Participation Plan and (iii) the value (as reasonably
determined by the Compensation Committee) of any additional shares
of preferred stock awarded to Executive with respect to fiscal year
2005 by Starr and any growth in book value in respect of 2005
attributable to any common stock of Starr held by Executive. In the
event that any shares pursuant to clause (iii) of the
preceding sentence have not been awarded, or increase in book value
determined, by Starr by March 31, 2006, the Company shall
grant Executive a long-term or equity-based award having a value,
as reasonably determined by the Compensation Committee, equal to
the excess of (X) $4,000,000 over (Y) the value of the awards
described in clauses (i) and (ii) of the preceding
sentence. Notwithstanding anything to the contrary in this
Section 5, during the Employment Term, Executive shall be
eligible, with respect to each of fiscal years 2006 and 2007, for a
long-term or equity-based award, which, together with any annual
cash bonus target in respect of such year (as described in
Section 4(b)), shall have a total target value (as reasonably
determined by the Compensation Committee) of $5,000,000. The amount
actually awarded in respect of 2006 and 2007 shall be offset by the
value of (I) awards described in clause (B) of the first
sentence of this Section 5, but substituting 2006 or 2007, as
applicable, for 2005 in such clause and (II) any shares
awarded, or increase in book value determined, in accordance with
such clause (B) in respect of the applicable year but later
than March 31 of the subsequent year.
6.
Employee Benefits . During the Employment Term, Executive
shall be
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entitled to participate in the
Company’s employee benefit plans (other than any severance or
change-in-control plan) as in effect from time to time on the same
basis as those benefits are generally made available to other
senior executives of the Company. In addition, Executive and the
Company will negotiate in good faith to determine, prior to
January 1, 2006, the nature of Executive’s participation
in the Company’s Supplemental Executive Retirement
Plan.
7.
Vacation . Executive shall be entitled to four
(4) weeks annual paid vacation in accordance with the vacation
policy of the Company.
8.
Business Expenses and Perquisites .
(a)
Expenses . During the Employment Term, reasonable business
expenses incurred by Executive in the performance of his duties
hereunder shall be reimbursed by the Company in accordance with
Company policies.
(b)
Perquisites . During the Employment Term, Executive shall be
entitled to participate in all of the Company’s perquisite
plans, programs and arrangements that are generally provided by the
Company to other senior executives from time to time, including,
without limitation, the provision of financial and tax planning
assistance.
9.
Termination . Notwithstanding any other provision of the
Agreement:
(a)
For Cause by the Company . The Employment Term, and
Executive’s employment hereunder, may be terminated at any
time by the Company for Cause upon delivery of a “Notice of
Termination” (as defined in Section 9(f)) by the Company
to Executive. For purposes of this Agreement, “ Cause
” shall mean, whether occurring prior to, or on or after the
Effective Date, (i) Executive’s willful and continued
failure to perform substantially his duties with the Company (other
than any such failure resulting from Executive’s incapacity
due to physical or mental illness) for a period of 10 days
after a written demand for substantial performance is delivered to
Executive by the Board, which specifically identifies the manner in
which the Board believes that Executive has not substantially
performed Executive’s duties, (ii) Executive’s
willful malfeasance or willful misconduct that results in
substantial damage to the Company, (iii) Executive’s willful
and material violation of a material provision of the
Company’s Code of Conduct or the Director, Executive Officer
and Senior Financial Officer Code of Business Conduct and Ethics,
as such codes of conduct may be in effect from time to time, or
other policies regarding behavior of employees,
(iv) conviction of, or entry of a plea of guilty or no contest
by Executive with respect to, a felony or any lesser crime of which
fraud or dishonesty is a material element, (v) any willful
failure by Executive to comply with a material provision of
Section 11 of this Agreement, or (vi) Executive’s
breach of Section 14 of this Agreement.
For
purposes of this provision, no act or failure to act on the part of
Executive, shall be considered “willful” unless it is
done, or omitted to be done, by Executive in bad faith or without
reasonable belief that Executive’s action or omission was in
the best interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by
the Board or upon the instructions of the Board or the Chief
Executive
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Officer of the Company or based
upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by Executive in good
faith and in the best interests of the Company. The cessation of
employment of Executive shall not be deemed to be for Cause unless
and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of a simple
majority of the members of the Board (other than Executive, if he
is a member of the Board) at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to Executive,
and Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that, in the good faith opinion of
the Board, Executive is guilty of the conduct described in clauses
(i), (ii), (iii), (v) or (vi) above, and specifying the
particulars thereof in detail; provided, that, no such resolution
shall be required for any termination for Cause due to the conduct
described in clause (iv) above.
If
Executive is terminated for Cause pursuant to this
Section 9(a), he shall be entitled to receive only his Base
Salary through the date of termination and reimbursement for any
unreimbursed business expenses properly incurred by Executive in
accordance with Company policy through the date of
Executive’s termination, and he shall have no further rights
to any compensation (including any Base Salary, Transition Bonus,
Annual Bonus (including any Annual Bonus that has been declared but
not yet paid), payments from the Company pursuant to Section 3(b)
of this Agreement or any long-term or equity-based compensation
awards) or any other benefits under this Agreement. All other
benefits, if any, due Executive following Executive’s
termination of employment for Cause pursuant to this Section 9(a)
shall be determined in accordance with the plans, policies and
practices of the Company; provided, however, that Executive shall
not participate in any severance plan, policy or program of the
Company.
(b)
Disability or Death . The Employment Term, and
Executive’s employment hereunder, shall terminate immediately
upon Executive’s death or following delivery of a Notice of
Termination by the Company to Executive if Executive becomes
physically or mentally incapacitated and is therefore unable for a
period of ninety (90) consecutive days or one-hundred twenty
(120) days during any consecutive six (6) month period to
perform his duties with substantially the same level of quality as
immediately prior to such incapacity (such incapacity is
hereinafter referred to as “ Disability ”). Upon
termination of Executive’s employment hereunder for either
Disability or death, Executive or Executive’s estate (as the
case may be) shall be entitled to receive (i) his Base Salary
through the last day of the payroll period during which such
termination occurs; (ii) any declared but unpaid Annual Bonus for
any fiscal year preceding the year in which the termination occurs;
(iii) reimbursement for any unreimbursed business expenses
properly incurred by Executive in accordance with Company policy
through the date of Executive’s termination (the sum of (i),
(ii) plus (iii), the “ Accrued Obligations
”); (iv) a pro rata portion of any Annual Bonus that
Executive would have been entitled to receive pursuant to Section
4(b) of this Agreement with respect to the fiscal year of
termination based upon the percentage of the fiscal year that shall
have elapsed through the date of Executive’s termination of
employment, and determined by using (X) the Transition Bonus,
if such termination occurs during fiscal year 2005, and reducing
the pro rata portion of the Transition Bonus by the aggregate
amount of all installments of the Transition Bonus that have been
paid through the date of termination, or (Y) Executive’s
target Annual Bonus for the fiscal year of such termination, if
such termination occurs following the end of fiscal year 2005
(the
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“ Pro-Rata Bonus
”), payable as soon as reasonably practicable following the
date of Executive’s termination of employment, and
(v) in the case of a termination due to Disability,
continuation of the Base Salary in effect on the date of
termination until the earlier of (A) the second anniversary of
the date of termination, and (B) the date Executive is
eligible to commence receiving payments under the Company’s
long-term disability policy. Notwithstanding the foregoing, in the
event of Executive’s termination of employment due to
Disability, if necessary to avoid the application of
Section 409A of the Code to the amounts payable pursuant to
clauses (iv) and (v) of the preceding sentence, Executive
shall not receive any such amounts until the First Payment Date
and, on the First Payment Date, the Company will pay Executive an
amount equal to the sum of all amounts that would have been payable
in respect of the period preceding the First Payment Date but for
the delay imposed on account of the aforementioned
Section 409A. Executive or Executive’s estate (as the
case may be) shall have no further rights to any compensation
(including any Base Salary, Annual Bonus, payments under
Section 3(b) of this Agreement or any long-term or
equity-based compensation awards) or any other benefits under this
Agreement. All other benefits, if any, due Executive following
Executive’s termination for Disability or death shall be
determined in accordance with the plans, policies and practices of
the Company; provided, however, that Executive (or his estate, as
the case may be) shall not participate in any severance plan,
policy or program of the Company.
(c)
Without Cause by the Company or for Good Reason by Executive
. The Employment Term, and Executive’s employment hereunder,
may be terminated by the Company without Cause (other than by
reason of Executive’s Disability) following the delivery by
the Company of a Notice of Termination to Executive or by Executive
for Good Reason following the delivery by Executive of a Notice of
Termination to the Company. The expiration of the Employment Term
on the date immediately preceding the third anniversary of the
Effective Date shall not be considered a termination without Cause
under this Agreement or otherwise result in the payment of
severance or post-employment benefits pursuant to Section 9(c) of
this Agreement if Executive is not otherwise terminated pursuant to
Section 9(c) of this Agreement prior to such date. If
Executive’s employment is terminated by the Company without
Cause (other than by reason of Disability) or by Executive for Good
Reason, Executive shall be entitled to receive:
(i) within
five (5) business days following termination, a lump sum
payment in an amount equal to the Accrued Obligations;
(ii) the
Pro-Rata Bonus, payable as soon as reasonably practicable following
the date of Executive’s termination of employment; provided,
that, if necessary to avoid the application of Section 409A of
the Code to the Pro Rata Bonus, Executive shall not receive any
such Pro Rata Bonus installment until the First Payment
Date;
(iii) subject
to Executive’s continued compliance with Section 11 of
this Agreement, an amount equal to the greater of (A) $7,500,000,
and (B) an amount equal to the sum of (I) three times the
Base Salary (at the rate in effect immediately prior to
termination) and (II) three times the actual Annual Bonus paid
with respect to the preceding fiscal year (any such amount shall be
referred to in this Agreement as the “ Severance
”); provided that, for purposes of this sentence, an Annual
Bonus shall be deemed to be “paid” at the time
that
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Executive receives an amount in
respect thereof at the time that Annual Bonuses are paid to other
senior executives of the Company. The Severance shall be payable in
equal installments (each, a “ Severance Installment
”) over the twelve (12) month period (eighteen
(18) month period in the event of a termination by Executive
for Good Reason based on the circumstances described in clause
(iv) or clause (v) under the definition of Good Reason in
this Section 9(c)) commencing with the second of the
Company’s standard payroll dates falling after such
termination; provided, however, that, if necessary to avoid the
application of Section 409A of the Code to the Severance,
Executive shall not receive any installment payment until the First
Payment Date, and, on the First Payment Date, the Company will pay
Executive an amount equal to the sum of all Severance Installments
that would have been payable in respect of the period preceding the
First Payment Date but for the delay imposed on account of the
aforementioned Section 409A;
(iv) continued
health and life insurance benefits for Executive and his spouse and
dependents, if any, for a thirty six (36) month period
following the date of Executive’s termination of employment,
on the same basis as such benefits are provided from time to time
to actively employed senior executives of the Company; provided,
that the Company’s obligation to provide such health and life
insurance benefits shall cease with respect to such benefits at the
time Executive becomes eligible for such benefits from another
employer;
(v) three
years of additional service credit and credit for three years of
additional age under the Company’s employee pension plans,
except for under any plan that is qualified or intended to be
qualified under the provisions of Section 401 of the Code, for
purposes of benefit accrual, matching contributions, vesting and
eligibility for retirement. For the avoidance of doubt, no amounts
provided in Section 9(c)(ii) or (iii) of this Agreement
shall be included in such calculation, and Executive shall not be
entitled to receive any payments pursuant to any non-qualified
pension plan of the Company until expiration of the thirty six
(36) month period following the Executive’s termination
of employment under this Section 9(c); and
(vi) if,
as of the date of such termination, (a) Executive is not
eligible to participate in any retiree medical or life insurance
program of the Company and (b) Executive would have at least
10 years of service with the Company and reached at least age
55 if credited with three years of additional age and service, then
the Company shall purchase for Executive a medical and/or life
insurance policy, as applicable, that provides coverage that is as
comparable as is commercially available to the coverage under the
retiree medical and/or retiree life insurance program of the
Company, as applicable, as in effect as of the date of
Executive’s termination of employment. For the avoidance of
doubt, nothing in this Section 9(c)(vi) shall provide
Executive with any extra age or service credit for purposes of
eligibility or for any other purpose under any retiree medical or
life insurance program of the Company.
Notwithstanding
anything to the contrary in this Agreement, no further payments or
benefits shall be due under this Section 9(c) if, at any time after
Executive’s employment is terminated pursuant to this Section
9(c) and prior to the time when any payment is made or benefit
provided pursuant to this Section 9(c), the Board determines,
in accordance with the procedures set forth in Section 9(a) of this
Agreement, that grounds existed, on or prior to the date of
termination of Executive’s employment with the Company,
including prior to the Effective Date, for the Company to terminate
Executive’s employment for Cause; provided,
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however, that, Executive shall in
all events be entitled to receive his Base Salary through the date
of termination and reimbursement for any unreimbursed business
expenses properly incurred by Executive in accordance with Company
policy through the date of Executive’s
termination.
Executive shall
have no rights to any further compensation (including any Base
Salary, Annual Bonus, payments under Section 3(b) of this Agreement
or any long-term or equity-based compensation awards) or any other
benefits under this Agreement. All other benefits, if any, due
Executive following a termination pursuant to this Section 9(c)
shall be determined in accordance with the plans, policies and
practices of the Company; provided, however, that Executive shall
not participate in any severance plan, policy or program of the
Company. Executive and the Company acknowledge that any payments
and benefits provided to Executive under clauses (ii) through
(vi) of this Section 9(c) relate solely to services rendered
by Executive to the Company on and after the Effective
Date.
For purposes of this Agreement,
“ Good Reason ” means:
(i) any
change in the duties or responsibilities (including reporting
responsibilities) of Executive that is inconsistent in any material
and adverse respect with Executive’s current position(s),
duties, responsibilities or status with the Company (including any
material and adverse diminution of such duties or
responsibilities); provided, however, that Good Reason shall not be
deemed to occur pursuant to this clause (i) solely on account
of the Company no longer being a publicly traded entity or on
account of any change to Executive’s duties as a result of
his physical or mental incapacity;
(ii) a
material and adverse change in Executive’s titles or offices
(including his position as Executive Vice President and Chief
Financial Officer) with the Company; provided, however, that Good
Reason shall not be deemed to occur pursuant to this clause
(ii) on account of any change to Executive’s titles or
offices as a result of his physical or mental
incapacity;
(iii) any
material breach of this Agreement by the Company;
(iv) the
failure of the Compensation Committee to adopt, by
December 31, 2005 (or such later date mutually agreed by
Executive and the Compensation Committee), an incentive
compensation program in respect of each of the 2006 and 2007 fiscal
years setting forth target awards that are, in the aggregate, no
less than $5,000,000 and, as and if appropriate to the award type,
performance metrics and payout schedules for earning target,
above-target, or below-target award amounts;
(v) within
30 days following notice by the Compensation Committee to
Executive of adoption of an incentive compensation program in
respect of each of the 2006 and 2007 fiscal years,
Executive’s written notification to the Compensation
Committee that such program is not acceptable to Executive;
or
(vi) the
relocation of Executive’s primary office to a location that
is more than thirty five (35) miles from both of (A) the
Company’s headquarters in New
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York, New York, unless such
office is moved closer to Executive’s primary residence at
the time of such relocation, and (B) Executive’s
residence at the time of such relocation;
provided that, a termination by
Executive with Good Reason shall be effective only if, within
thirty (30) days following Executive’s first becoming
aware of the circumstances giving rise to Good Reason, Executive
delivers a Notice of Termination for Good Reason by Executive to
the Company, and the Company within thirty (30) days following
its receipt of such notification has failed to cure the
circumstances giving rise to Good Reason.
(d)
Termination by Executive without Good Reason . The
Employment Term, and Executive’s employment hereunder, may be
terminated by Executive without Good Reason following the delivery
of a Notice of Termination to the Company. Upon a termination by
Executive pursuant to this Section 9(d), Executive shall be
entitled to his Base Salary through the date of such termination
and reimbursement for any unreimbursed business expenses properly
incurred by Executive in accordance with Company policy through the
date of Executive’s termination, and he shall have no rights
to any further compensation (including any Base Salary, Transition
Bonus, An
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