Exhibit 10.1


 


THE ST. PAUL TRAVELERS
COMPANIES, INC.


SENIOR EXECUTIVE PERFORMANCE PLAN


 


1.               PURPOSE


 


The purpose of The St. Paul Travelers Companies, Inc.
Senior Executive Performance Plan is to permit The St. Paul Travelers
Companies, Inc. (the “Company”), through awards of annual incentive
compensation which satisfy the requirements for performance-based compensation
under Section 162(m) of the Internal Revenue Code, to attract and retain
executives and to motivate these executives to promote the profitability and
growth of the Company.


 


2.               DEFINITIONS


 


“AFTER-TAX OPERATING EARNINGS” shall mean, for each Performance Period,
the Company’s net income from continuing operations as reported in the Company’s
financial statements for the Performance Period, including accompanying
footnotes and management’s discussion and analysis, adjusted to eliminate the
after-tax effects of net realized investment gains or losses in the fixed
maturities and real estate portfolios, extraordinary items, and the cumulative
effect of accounting changes, each as defined by accounting principles
generally accepted in the United States. 
This amount will be further adjusted to eliminate the after-tax impact
of any restructuring charges (as reported in the Company’s financial statements
for the Performance Period, including accompanying footnotes and management’s
discussion and analysis), losses from catastrophes (as designated by the
Insurance Service Office’s Property Claims Service Group, the Lloyd’s Claim
Office, Swiss Reinsurance Company’s sigma report, or a comparable report or
organization generally recognized by the insurance industry) in the Company’s “ongoing”
businesses (to the extent reported in the Company’s financial statements for
the Performance Period, including accompanying footnotes and management’s
discussion and analysis ), and underwriting results for the Performance Period
of all businesses (except “voluntary pools and other”) previously included in
the Company’s “Other” segment to report exited businesses placed in runoff.


 


 “AWARD” shall
mean the amount granted to a Participant by the Committee for a Performance
Period.


 


“BEGINNING TOTAL COMMON STOCKHOLDERS’ EQUITY” shall
mean, for each Performance Period, the Company’s total common stockholders’
equity as reported in the Company’s balance sheet for the beginning of the
Performance Period, excluding net unrealized appreciation or depreciation of
investments.


 


“BOARD” shall mean the Board of Directors of the
Company.


 


“CODE” shall mean the Internal Revenue Code of 1986,
as amended.


 


“COMMITTEE” shall mean the Compensation Committee of
the Board or any subcommittee thereof which meets the requirements of Section 162(m)(4)(C) of the Code.


 





















 


“EXCHANGE ACT” shall mean the Securities Exchange Act
of 1934, as amended.


 


“EXECUTIVE” shall mean any covered employee as defined
in Section 162(m) of the Code and, in the discretion of the Committee, any
other executive officer of the Company or its Subsidiaries.


 


 “PARTICIPANT”
shall mean, for each Performance Period, each Executive who is a “covered
employee” (as defined in Section 162(m) of the Code) for that Performance
Period, unless otherwise determined by the Committee in its sole discretion.


 


“PERFORMANCE PERIOD” shall mean the Company’s fiscal
year or any other period designated by the Committee with respect to which an
Award may be granted.


 


“PLAN” shall mean The St. Paul Travelers Companies,
Inc. Senior Executive Performance Plan, as amended from time to time.


 


“RETURN ON EQUITY” shall mean, for each Performance
Period, the percentage equivalent to the fraction resulting from dividing
After-Tax Operating Earnings by Beginning Total Common Stockholders’ Equity.


 


“STOCK PLANS” shall mean The St. Paul Companies, Inc.
Amended and Restated 1994 Stock Incentive Plan and/or any prior and successor
stock plans adopted or assumed by the Company.


 


“SUBSIDIARY” shall mean any entity that is directly or
indirectly controlled by the Company or any entity, in which the Company has at
least a 50% equity interest.


 


3.               ADMINISTRATION


 


The Plan shall be administered by the Committee, which
shall have full authority to interpret the Plan, to establish rules and
regulations relating to the operation of the Plan, to select Participants, to
determine the maximum Awards and the amounts of any Awards and to make all
determinations and take all other actions necessary or appropriate for the
proper administration of the Plan. 
Before any payments are made under the Plan, the Committee shall certify
in writing that the Return on Equity required by Section 4(b) has been
met.  The Committee’s interpretation of
the Plan, and all actions taken within the scope of its authority, shall be
final and binding on the Company, its stockholders and Participants,
Executives, former Executives and their respective successors and assigns.  No member of the Committee shall be eligible
to participate in the Plan.


 


4.               DETERMINATION OF
AWARDS


 


(a)   Prior to the beginning of each
Performance Period, or at such later time as may be permitted by applicable
provisions of the Code, the Committee shall establish for each Participant a
maximum Award, expressed as a percentage of the incentive pool for the
Performance Period pursuant to paragraph (b) of this section, provided that the
maximum percentage for any single Participant shall not exceed 50%.


 


(b)  If the Return on Equity for a
Performance Period is greater than 8%, the incentive pool for the Performance
Period shall be equal to 1.5% of After-Tax Operating Earnings.  If the 


 





















 


Return on Equity for a Performance Period is equal to
or less than 8%, the incentive pool shall be $0.


 


(c)   Following the end of each
Performance Period, the Committee may determine to grant to any Participant an
Award, which may not exceed the maximum amount specified in paragraph (a) of
this section for such Participant. 
The aggregate amount of all Awards under the Plan for any Performance
Period shall not exceed 100% of the incentive pool pursuant to paragraph (b) of
this section.


 


5.               PAYMENT OF AWARDS


 


Each Participant shall be eligible to receive, as soon
as practicable after the amount of such Participant’s Award for a Performance
Period has been determined, payment of all or a portion of that Award.  Awards may be paid in cash, stock, restricted
stock, options, other stock-based or stock-denominated units or any combination
thereof determined by the Committee. 
Equity or equity-based awards may be granted under the terms and
conditions of the applicable Stock Plan. 
Payment of the award may be deferred in accordance with a written
election by the Participant pursuant to procedures established by the
Committee.


 


6.               AMENDMENTS


 


The Committee may amend the Plan at any time and from
time to time, provided that no such amendment that would require the consent of
the stockholders of the Company pursuant to Section 162(m) of the Code or
the Exchange Act, or any other applicable law, rule or regulation, shall be
effective without such consent.  No such
amendment which adversely affects a Participant’s rights to, or interest in, an
Award granted prior to the date of the amendment shall be effective unless the
Participant shall have agreed thereto in writing.


 


7.               TERMINATION


 


The Committee may terminate this Plan at any time, but
in no event shall the termination of the Plan adversely affect the rights of any
Participant to deferred amounts previously awarded such Participant, plus any
earnings thereon.


 


8.               OTHER PROVISIONS


 


(a)   No Executive or other person
shall have any claim or right to be granted an Award under this Plan until such
Award is actually granted.  Neither the
establishment of this Plan, nor any action taken hereunder, shall be construed
as giving any Executive any right to be retained in the employ of the
Company.  Nothing contained in this Plan
shall limit the ability of the Company to make payments or awards to Executives
under any other plan, agreement or arrangement.


 


(b)   The rights and benefits of a
Participant hereunder are personal to the Participant 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.


 


(c)   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.


 





















 


(d)   The Company shall have the
right to deduct from Awards any taxes or other amounts required to be withheld
by law.


 


(e)   All questions pertaining to
the construction, regulation, validity and effect of the provisions of the Plan
shall be determined in accordance with the laws of the State of Minnesota
without regard to principles of conflict of laws.


 


(f)   If any provision of this Plan
would cause Awards not to constitute “qualified performance-based compensation”
under Section 162(m) of the Code, that provision shall be severed from,
and shall be deemed not to be a part of, the Plan, but the other provisions
hereof shall remain in full force and effect.


 


(g)   No member of the Committee or
the Board, and no officer, employee or agent of the Company shall be liable for
any act or action hereunder, whether of commission or omission, taken by any
other member, or by any officer, agent, or employee, or, except in
circumstances involving bad faith, for anything done or omitted to be done in
the administration of the Plan.


 


9.               EFFECTIVE DATE


 


The Plan shall be effective as of January 1,
2002, subject to approval by the stockholders of the Company in accordance with
Section 162(m) of the Code.