THE ST. PAUL COMPANIES, INC.
ANNUAL INCENTIVE PLAN
1. Purpose
The purpose of this Annual Incentive Plan ("AIP") is to
provide key executives of The St. Paul Companies, Inc. and
its subsidiaries (the "Company") with financial incentives
which will motivate and reward performance that achieves
established goals, including annual corporate earnings and
business unit performance objectives. It is also intended
to provide a procedure whereby a plan participant may defer
the payment of all or a specified percentage of any awards
under this plan payable to him/her until a specified time or
event, elect an investment vehicle in which an award will be
deemed invested for the period of deferral, and specify the
manner and timing of the payment of any deferred amount.
Further, it is intended that this plan be unfunded for tax
purposes and for Title I of ERISA.
2. Eligibility
Executive officers of the Company (as defined under
Rule 3b-7 of the Securities Exchange Act of 1934) at the end
of the previous year are eligible to participate in the AIP.
The participants will be those eligible executive officers
who are selected prior to the beginning of the AIP plan year
by the Executive Compensation Committee to receive awards
for the plan year.
3. Awards under the AIP
The Executive Compensation Committee of the Board of
Directors administers the AIP and approves awards based on
the achievement of Company and/or business unit objectives.
For purposes of the AIP, the Committee may consider and
establish only the following measures: total shareholder
return, return on equity, earnings per share, expense
management, business unit achievement of profit or revenue
targets, revenues, net income, operating income, or any
combination thereof. Maximum awards to the eligible
participants under the AIP range from 50%-105% of the
participant's annual base salary as in effect on March 31 of
the year for which the award is based. In no event shall
the annual base salary used to compute a maximum award for
any participant exceed 120% of that participant's annual
base salary in effect on January 1 of the year for which the
award is paid. Awards are either paid in cash or deferred,
at the election of each participant, during the first
quarter of the year following the year for which the award
was earned.
4. Deferral of Awards
Commencing with the calendar year in which a
Participant is first entitled to an award and each
subsequent year in which he/she is so entitled, the Company
shall retain the awards that participants have previously
elected to defer, payable to the Participant at the time or
times and in the manner specified by the Participant in a
written election notice.
Deferral elections may be made annually. An election
notice will specify the amount or percentage, if any, of any
award to be deferred, the deferral period, the investment
vehicle in which the amount deferred will be deemed
invested, and the manner and timing of payment. Investment
options are such investment vehicles as the Company may from
time to time offer. The election notice must be delivered
to the Company on or before December 31 preceding the year
for which the award is made. An election is irrevocable
once the year for which the award will be made has
commenced, except that a participant may change his/her
investment election periodically as the Company in its
discretion may provide.
5. Non-Alienation
The rights and benefits of a participant hereunder and
any other person or persons to whom payments may be made
pursuant to this plan are personal to her/him and them, as
the case may be, and, except for payments made following a
participant's death, shall not be subject to any voluntary
or involuntary alienation, assignment, pledge, transfer,
encumbrance, attachment, garnishment or other disposition.
6. Exclusion From Benefits
Awards under this plan shall not constitute
compensation for the purpose of determining participation or
benefits under any other plan of the Company unless
specifically included as compensation in such plan.
7. Status of Deferred Awards
This plan constitutes a mere promise by the Company to
pay the deferred awards in the future. To the extent a
participant or any other person acquires a right to receive
payments from the Company under this plan, such rights shall
be no greater than the right of any unsecured general
creditor of the Company.
8. Payment Options
A Participant may elect to have deferred awards paid in
a single payment or in annual installments ranging from two
to twenty years.
Payment or commencement of payment of deferred awards
may be elected as of the last day of the month in which the
following events or dates (Valuation Dates) occur:
a. Termination from employment, which means a
complete severance of a participant's employment
relationship with the Company and all affiliated
companies. Accordingly, neither a transfer of a
participant's employment among affiliated
companies nor his/her absence from active service
with the Company by reason of a disability leave
or any other leave of absence will constitute a
termination from employment.
b. Retirement, which shall be deemed to occur if the
participant terminates from employment with
eligibility for an immediate and regular benefit
payment under a tax qualified defined benefit plan
of the Company.
c. Total permanent disability, which shall be deemed
to have occurred if the Executive Compensation
Committee finds on the basis of medical evidence
satisfactory to it that the participant is
prevented from engaging in any suitable gainful
employment or occupation and that such disability
will be permanent and continuous during the
remainder of his/her life.
d. Death.
e. December 31 of a year of the participant's choice.
Except as provided herein with respect to insiders, the
actual first or single payment will be made within 30
days of the first elected Valuation Date to occur. In
the case of installments, subsequent installments will
be valued as of the last day of each subsequent
calendar year and will be paid within sixty days
thereafter.
9. Payment of Deferred Awards
Awards deferred, together with interest and dividend
equivalents accrued thereon, and/or valued and adjusted for
income, gains, and losses hereunder, as the case may be,
shall be paid in cash to the participant at such time or
times as the participant shall have specified in writing in
his/her irrevocable deferral notices to the Company.
However, if a Phantom Company Stock Account is offered as an
investment vehicle for deferred awards, a payment shall not
be made to or on behalf of a participant subject to Section
16 of the Securities Exchange Act of 1934 ("insider") with
respect to the participant's Phantom Company Stock Account
hereunder unless at least six months shall have elapsed from
the date the Company stock represented by such payment was
credited to such participant's Phantom Company Stock Account
except in case of the participant's death, disability,
retirement or termination of employment with the Company and
all affiliated organizations.
10. Amendment and Termination
The Board of Directors of the Company may amend or
terminate this Plan at any time.