THE ANNUAL MANAGEMENT INCENTIVE PLAN OF
THE CONTINENTAL CORPORATION
(Amended and Restated as of January 1, 1993)
(Incorporates Amendments No. 1 through 7)
ARTICLE I
Purpose
The purpose of this Plan is to provide key employees with increased
incentive, in addition to base compensation, to make significant
and extraordinary contributions to the performance and growth of
the Corporation and its subsidiaries; to attract key employees in
the future and to encourage key employees to remain with the
Corporation and its subsidiaries.
ARTICLE II
Definitions
2.1. Award. An amount determined by the application of
participant performance and organizational modifiers to the Par
Award as specified in paragraphs 2.8(a) through (e) of this
Article.
2.2. Board. The Board of Directors of The Continental
Corporation.
2.3. Committee. The Compensation Committee of the Board as
appointed from time to time.
2.4. Corporation. The Continental Corporation and any
subsidiary corporation at least 50% of whose issued and outstanding
voting stock is owned directly or indirectly by The Continental
Corporation.
2.5. Division. A staff department of the Corporation.
2.6. Group. An identifiable profit center within the
Corporation.
2.7. Par Award. The midpoint of a Participant's salary grade
multiplied by a percentage as determined from time to time by the
Board or Committee.
2.8. Par Award Modifiers.
(a) Participant Performance Modifier (Tier I). A factor
or factors determined by the Committee to reflect the level of
attainment by the Corporation of the Corporate Target Goals or
attainment by a Participant of individual goals for the Plan Year
which may increase or decrease a Tier I Participant's Par Award
within a range from 0% to 250% of par.
(b) Participant Performance Modifiers (Tier II). Percentage
factors determined by the Committee to reflect the level of
attainment by Participants of their respective individual
performance goals for the Plan Year, as determined by individual
performance ratings and modified by a formula adopted by the
Committee. The Par Award for each Tier II Participant is
multiplied by the factors and formula so determined to increase or
decrease the Par Award, provided that participant whose individual
performance rating is 2.4 or less is not eligible to receive an
Award.
(c) Corporate Modifiers. Percentage factors determined by
the Committee, by which the Par Award for each Tier II Participant
will be multiplied to reflect the level of attainment of Corporate
Target Goals, as determined by the Committee.
(d) Group Modifiers. Percentage factors determined by the
Committee, by which the Par Award for each Tier II Participant will
be multiplied to reflect the level of performance of the Group of
such Participant (as determined by the Chairman and the President,
who may take into account the Committee determination of the level
of attainment of Corporate Target Goals); the head of each Group
may further modify such Par Award to reflect the relative
performance of the business unit of such Participant (as determined
by such head of the Group), provided that such further
modifications in the aggregate may not increase or decrease the
total amount payable to all Participants in the Group.
(e) Division Modifier. A percentage factor determined by an
evaluation of the results for the combined property and casualty
operations, as determined by the Chairman and the President.
2.9. Participants. Active full-time or regular part-time
employees of the Corporation at the beginning of, or who qualify
during, the Plan Year and who are employed on December 31 of the
Plan Year, as follows:
(a) Tier I Participant. Senior Management Employees
designated by the Board or Committee.
(b) Tier II Participant. Employees in positions
assigned to salary grades above 46, except any Tier I
Participant.
2.10. Plan. The Annual Management Incentive Plan, as amended
from time to time.
2.11. Plan Year. January 1 to December 31.
2.12. Target Goals. In the case of the Corporate Target
Goals, the criteria and the amounts established by the Board or
Committee prior to or at the beginning of each Plan Year by which
the performance of the Corporation is measured. In the case of
Group Target Goals, the criteria or amounts established by the
Chief Executive Officer of the Corporation which are consistent
with the Corporate Target Goals.
ARTICLE III
Administration
The Plan shall be administered by the Committee who shall report to
the Board with respect to action taken pursuant to the Plan at the
first meeting of the Board following such action. The Committee
may delegate to the Office of the Chairman or the senior Human
Resources officer such of the administrative functions and powers
as the Committee considers appropriate, subject to the terms of the
Plan.
The Committee shall have full authority to administer the Plan,
including, but not limited to, the power to determine the time of
payment of Awards, to interpret the Plan, to determine for each
Plan Year the Participant Performance Modifiers for Tier I and Tier
II, to determine the Corporate and Group Modifiers to reflect the
level of attainment of the Corporate and Group Target Goals for
that Plan Year, to recommend to the Board the Award of the Chief
Executive Officer, and to approve individual Awards for all Tier I
Participants. The Office of the Chairman is authorized to
determine all other Awards, subject to approval in the aggregate by
the Committee.
The Board has the discretion during or after any Plan Year to
increase or decrease the amount of any Target Goal for that Plan
Year to reflect (1) extraordinary, unusual or non-recurring items
or events, or (2) material differences between any significant
assumptions used by the Board in fixing a Target Goal and actual
events or conditions experienced during the Plan Year.
Decisions of the Board, Committee or Office of the Chairman with
respect to the interpretation or administration of the Plan shall
be final, conclusive and binding.
ARTICLE IV
Participation
4.1. Participants as defined in Article II are eligible to
participate in the Plan under the terms and conditions thereof.
4.2. If a Participant ceases to be employed by the Corporation
prior to the end of the Plan Year for any reason other than death,
disability, or normal, early or postponed retirement under The
Retirement Plan of The Continental Corporation, except as provided
in Article 5.3., then the Participant's participation in the Plan
will terminate forthwith and he will not be eligible to receive an
Award for such Plan Year.
4.3. If prior to the end of a Plan Year a Participant having
completed at least six months full time or regular part-time active
service terminates employment by reason of death, disability, or
normal, early or postponed retirement under The Retirement Plan of
The Continental Corporation or if prior to the end of the Plan Year
the Participant's eligibility is terminated because of a change of
Salary Grade, the Participant will receive only that portion of the
Award determined by multiplying the Award, if any, that the
Participant otherwise would have received under the Plan for the
full Plan Year by a fraction, the numerator of which is the number
of calendar months of the Participant's active service during the
Plan Year and the denominator of which is twelve. In the event a
Participant terminates employment by reason of death, the Office of
the Chairman or senior Human Resources officer for employees in
Tier II may determine to pay the pro rata Award to the
Participant's estate prior to or after the end of the Plan Year.
4.4. Subject to the provisions of paragraphs 4.2. and 4.3. of
this Article IV, if the effective date of participation for a
Participant is prior to July 1 of a Plan Year, the Participant will
be entitled to receive only that portion of the Award determined by
multiplying the Award, if any, that the Participant otherwise would
have received under the Plan for the full Plan Year by a fraction,
the numerator of which is the number of calendar months of the
Participant's active service during the Plan Year and the
denominator of which is twelve. No Participant whose effective
date of participation is after June 30 of a Plan Year may receive
an Award for such Plan Year.
4.5. In the event a Participant's Tier level changes during
the Plan Year, or the participant moves from a Division, Group or
Unit to another such organization within the Corporation, the
Participant's Award, if any, will be determined on a pro rata basis
for participation in each Tier level or organization, as the case
may be, by application of fractions, the numerators of which are
the numbers of calendar months of active service in each Tier level
or organization and the denominators of which are twelve.
4.6. Any Participant who is eligible to participate in any
other short term or sales incentive plan within the Corporation is
not eligible to participate herein unless selected for a Special
Award.
4.7. Special Awards may be granted to employees other than the
Chairman, whom the Office of the Chairman may recommend, subject to
approval of the Committee.
ARTICLE V
Payment of Awards
5.1. Standard Method of Payment. Subject to the terms and
conditions of this Plan, the Corporation shall pay each eligible
Participant an Award for each Plan Year.
5.2. Optional Methods of Payment.
(a) Three Installments. A Participant may elect to
receive one third of an Award on the date specified for
payment and one third on the first and second anniversary
dates thereafter.
(b) Deferral Until Retirement. Payment of an Award may
be deferred until a Participant retires under The Retirement
Plan of The Continental Corporation or the first anniversary
thereafter.
(c) Deferral Until A Specific Date. A Participant may
elect to defer payment of an Award until a specific future
date.
(d) Interest On Deferral Awards. Interest will accrue
annually on all deferral amounts and will be paid together
with payment of such amounts. The rate of interest will be
determined periodically by the Chief Financial Officer of the
Corporation, closely paralleling the Corporation's cost of
money.
(e) Upon Death Of A Participant. In the event a
Participant dies prior to any deferral date(s) elected
pursuant to subsections (a) through (c) above, all deferral
amounts of such Participant, together with interest accrued
thereon, shall be paid as directed by the Executor or
Administrator of the Participant's estate.
(f) Payment Upon Termination. If a Participant ceases
to be employed by the Corporation, except as provided in
Article 5.3., for any reason other than death, disability, or
normal, early or postponed retirement under The Retirement
Plan of The Continental Corporation, any deferred Award(s) and
accrued interest thereon shall be computed as of the date of
termination and paid thereafter within a reasonable period of
time.
5.3 Change of Control
(a) A "Change of Control" means the occurrence of any of the
following events: (i) any "person" or "group" of persons (as such
terms are used in sections 13 and 14 of the Securities Exchange Act
of 1934, as amended), other than any employee benefit plan
sponsored by The Continental Corporation ("Continental") becomes
the "beneficial owner" (as such term is used in section 13 of such
Act) of 30% or more of the outstanding shares of Continental's
capital stock entitled to vote for the election of directors; or
(ii) any shares of any class of Continental's capital stock are
purchased pursuant to a tender or exchange offer (other than an
offer by Continental or any subsidiary thereof); (iii) or the
approval by the requisite vote of Continental's shareholders of any
merger, consolidation, sale of assets, liquidation or
reorganization as a result of which Continental will not survive as
a publicly-owned corporation; or (iv) a change in the composition
of the Board during any period of two consecutive years such that
individuals who at the beginning of such period were members of the
Board cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Corporation's shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
(b) "Qualifying Termination" means a termination of a
Participant's employment with the Corporation (under circumstances
where such Participant is no longer employed by the Corporation)
for any reason other than
(i) death,
(ii) Disability,
(iii) willful misconduct in the performance of such
Participant's duties as an employee,
(iv) Retirement, or
(v) a termination by such Participant, other than a
termination for one or more of the following reasons:
(x) the assignment to such Participant of any
duties inconsistent, in a way significantly
adverse to such Participant, with such
Participant's positions, duties,
responsibilities and status with the
Corporation and its Subsidiaries immediately
prior to such Change of Control, or a
significant reduction in the duties and
responsibilities held by such Participant
immediately prior to such Change in Control; a
change in such Participant's reporting
responsibilities, titles or offices as in
effect immediately prior to such Change of
Control; or any removal of such Participant
from or any failure to re-elect such
Participant to any position with the
Corporation that such Participant held
immediately prior to such Change of Control
except in connection with such Participant's
promotion or termination of employment for any
of the reasons specified in paragraphs (i)
through (iv) above; or
(y) a reduction by the Corporation in such
Participant's base salary as in effect
immediately prior to such Change of Control;
the failure by the Corporation to continue in
effect any employee benefit plan or
compensation plan in which such Participant
was participating immediately prior to such
Change of Control unless such Participant is
permitted to participate in other plans
providing substantially comparable benefits to
such Participant; or the taking of any action
by the Corporation that which would adversely
affect such Participant's participation in or
materially reduce such Participant's benefits
under any such plan; or
(z) the Corporation's requiring such
Participant to be based anywhere other than
such Participant's present location; or the
Corporation's requiring such Participant to
travel on the Corporation's business to an
extent substantially more burdensome than such
Participant's travel obligations immediately
prior to such Change of Control.
(c) In the event that any Participant's employment with the
Corporation terminates prior to the end of a Plan Year by reason of
a Qualifying Termination within two years after a Change of
Control, such Participant shall become irrevocably vested with the
right to receive an amount equal to his Par Award for that Plan
Year multiplied by a fraction, the numerator of which is the number
of calendar days from January 1 of such year through the date of
his termination and the denominator of which is 365. The
Corporation shall pay the Participant such amount within 15 days
after the date of such Qualifying Termination of his employment.
ARTICLE VI
Miscellaneous
6.1. Limitations on Participants' Rights. No Participant, or
other person, shall have any right or claim to any Award under the
Plan except in accordance with the provisions of the Plan. The
Plan shall not be construed as creating any contract of employment
or otherwise conferring upon any Participant any legal right to
continuation of employment, nor as limiting or qualifying the right
of any company included within the Corporation to discharge any of
its employees without regard to the effect that such discharge
might have upon such employee's rights under the Plan.
6.2. Non-Assignability of Rights. No interest, right or claim
in or to any Award hereunder shall be assignable, transferable or
subject to sale, mortgage, pledge, hypothecation, commutation,
anticipation, garnishment, attachment, execution, or levy of any
kind, and the Corporation shall not recognize any attempt to
assign, transfer, sell, mortgage, pledge, hypothecate, commute or
anticipate the same, except to the extent required by law.
6.3. Facility of Payments. In the event that the Office of
the Chairman or senior Human Resources officer shall find that any
Participant to whom an Award is payable under the Plan is unable to
care for his affairs because of illness or accident, or otherwise,
the Office of the Chairman or senior Human Resources officer may
direct that any payment due shall be paid to the duly appointed
legal representative of such person, or if there be no duly
appointed legal representative, to the spouse, a child, a parent or
other blood relative of the person, or to any person deemed by the
Office of the Chairman or senior Human Resources officer to have
incurred expense for the benefit of such person, and any such
payments so made shall be a complete discharge of the liabilities
of the Plan therefor.
6.4. Number and Gender. Where from the context it appears
appropriate, each term used in this Plan in either the singular or
the plural shall include the singular and the plural, and pronouns
stated in either the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.
6.5. Captions. Captions of this Plan are inserted for
convenience of reference only, and the Plan is not to be construed
by interpretation thereof.
6.6. Applicable Law. This Plan shall be interpreted,
construed and administered in accordance with the laws of the State
of New York.
6.7. Amendment or Termination. The Board or Committee may
amend, suspend or terminate the Plan. The Office of the Chairman
(or, in the cases of clauses (i) or (iii) below, the senior Human
Resources officer) may approve in writing any amendment of the Plan
when it finds that such amendment:
(i) is required to conform the Plan to applicable laws
or regulations,
(ii) will neither increase the annual cost of the Plan
by more than the greater of 5% or $1 million, nor
significantly decrease the benefits to, or rights
of, any participant in the Plan, or
(iii) is intended only to implement transactions by the
Board,
provided that following, or in connection with, a Change of control
(as defined in Article 5.3.) the Board, Committee or Office of the
Chairman may not amend, suspend or terminate the Plan with respect
to Awards for the Plan Year in which such Change of Control occurs.