Document:

Exhibit 10.36

 

 

THE TRAVELERS BENEFIT EQUALIZATION PLAN

 

(As Amended and Restated Effective as of January 1,
2009)

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I INTRODUCTION

  	
  1

  
	
  1.1

  	
  Plan; Purpose

  	
  1

  
	
  1.2

  	
  Non-Qualified “Top-Hat”
  Plan

  	
  1

  
	
  1.3

  	
  Plan Document

  	
  1

  
	
  1.4

  	
  Effective Date of
  Document

  	
  2

  
	
   

  	
   

  
	
  ARTICLE II DEFINITIONS
  AND CONSTRUCTION

  	
  2

  
	
  2.1

  	
  Definitions

  	
  2

  
	
  2.2

  	
  Choice of Law

  	
  5

  
	
   

  	
   

  
	
  ARTICLE III
  PARTICIPATION

  	
  5

  
	
  3.1

  	
  Participation

  	
  5

  
	
   

  	
   

  
	
  ARTICLE IV SUPPLEMENTAL
  BENEFITS

  	
  6

  
	
  4.1

  	
  Supplement Benefits

  	
  6

  
	
  4.2

  	
  Derivation of Supplemental
  Benefits

  	
  6

  
	
  4.3

  	
  Time and Form of
  Payment

  	
  7

  
	
  4.4

  	
  Earnings Crediting for
  Accounts

  	
  9

  
	
  4.5

  	
  Special Rules

  	
  10

  
	
   

  	
   

  
	
  ARTICLE V DISTRIBUTIONS
  AFTER DEATH

  	
  10

  
	
  5.1

  	
  Survivor Benefits Prior
  to Benefit Commencement Dates

  	
  10

  
	
  5.2

  	
  Payment After Benefit
  Commencement Dates

  	
  11

  
	
  5.3

  	
  Beneficiary Designation

  	
  11

  
	
  5.4

  	
  No Other Survivor
  Benefits

  	
  12

  
	
   

  	
   

  
	
  ARTICLE VI CONTRACTUAL
  OBLIGATIONS AND FUNDING

  	
  12

  
	
  6.1

  	
  Payment of Benefits

  	
  12

  
	
  6.2

  	
  Corporate Transactions

  	
  12

  
	
  6.3

  	
  Funding

  	
  12

  
	
   

  	
   

  
	
  ARTICLE VII AMENDMENT
  AND TERMINATION OF PLAN

  	
  13

  
	
  7.1

  	
  Right to Amend or
  Terminate

  	
  13

  
	
  7.2

  	
  Limits on Effect of
  Amendment or Termination

  	
  14

  
	
   

  	
   

  
	
  ARTICLE VIII
  ADMINISTRATION/CLAIMS PROCEDURES

  	
  14

  
	
  8.1

  	
  Administration

  	
  14

  
	
  8.2

  	
  Correction of Errors
  And Duty to Review Information

  	
  15

  
	
  8.3

  	
  Claims Procedure

  	
  15

  
	
  8.4

  	
  Indemnification

  	
  16

  
	
  8.5

  	
  Exercise of Authority

  	
  16

  
	
  8.6

  	
  Telephonic or
  Electronic Notices and Transactions

  	
  17

  
	
   

  	
   

  
	
  ARTICLE IX
  MISCELLANEOUS

  	
  17

  
	
  9.1

  	
  Nonassignability

  	
  17

  
	
  9.2

  	
  Withholding

  	
  17

  
	
  9.3

  	
  Successors of Travelers

  	
  17

  
	
  9.4

  	
  Employment Not
  Guaranteed

  	
  17

  
	
  9.5

  	
  Gender, Singular and
  Plural

  	
  17

  
	
  9.6

  	
  Captions

  	
  17

  
	
  9.7

  	
  Validity

  	
  17

  
	
  9.8

  	
  Waiver of Breach

  	
  17

  
	
  9.9

  	
  Notice

  	
  18

  
	
  9.10

  	
  Facility of Payment

  	
  18

  
	
   

  	
   

  
	
  APPENDIX A EXECUTIVE
  SAVINGS PLUS

  	
  A-1

  

 

1

 

THE TRAVELERS BENEFIT EQUALIZATION PLAN

 

ARTICLE I

 

INTRODUCTION

 

1.1          PLAN; PURPOSE.  THE TRAVELERS BENEFIT
EQUALIZATION PLAN is sponsored by The Travelers Companies, Inc.
to attract high-quality executives and to provide eligible executives with the
additional benefits they would have received under the Retirement Plan but for
the limits imposed on the compensation that can be taken into account under the
Retirement Plan (Code § 401(a)(17)), the limits imposed on the benefits accrued
and payable under the Retirement Plan (Code § 415(b)), or the reduction in the
compensation base under the Retirement Plan as a result of an election to
reduce compensation and make elective deferrals under a nonqualified deferred
compensation plan of the Company or an Affiliate.

 

The Plan was initially adopted effective January 1, 1976 as The
St. Paul Companies, Inc. Excess Benefit Plan, and has been amended and
restated from time to time thereafter. 
Effective January 1, 2005, the Plan was amended to “freeze” the
Executive Savings Plan component of the Plan (which now appears in Appendix
A).   Effective January 1, 2009, the
Plan is amended and restated to bring the Plan into full documentary compliance
with Code § 409A, and also to reflect the merger of the Travelers Benefit
Equalization Plan with and into the Plan. 
From January 1,
2005 to its restatement effective January 1, 2009, the Plan was operated
in good faith compliance with Code § 409A.

 

Participants in
the Plan who are not Active Participants at any time on or after January 1,
2005 — which is the effective date of Code § 409A — are intended to be
“grandfathered” and thus exempt from the application of Code § 409A.  The rights of such grandfathered Participants
will be determined in accordance with the provisions of the Plan in effect
prior to January 1, 2005, as such terms may be amended in a manner that
preserves “grandfather” status under Code § 409A.

 

1.2          NON-QUALIFIED
“TOP-HAT” PLAN.

 

1.2.1        ERISA Status.  The Plan is a “top-hat” plan — that is, an
unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of ERISA §§ 201(2), 301(a)(3) and 401(a)(1), and
therefore is exempt from Parts 2, 3 and 4 of Title I of ERISA.

 

1.2.2        Compliance with Code §
409A.  The Plan also is a
nonqualified deferred compensation plan that is intended to meet the
requirements of paragraph (2), (3) and (4) of Code § 409A.  The terms and provisions of the Plan should
be interpreted and applied in a manner consistent with such requirements,
including the regulations and other guidance issued under Code § 409A.

 

1.3          PLAN DOCUMENT.

 

1.3.1        Plan Documents.  The Plan consists of this document,
any appendix to this document and any document that is expressly incorporated
by reference into this document.

 

1.3.2        Modifications by Employment or Similar Agreement.  The
Company or an Affiliate may be a party to an employment or similar agreement
with a Participant, the terms of which may enhance or modify in some respect the
benefits provided under this Plan, including, but not necessarily limited to,
an enhancement to or modification of the benefit amount, payment forms and/or
other rights and features of the Plan. 
The Plan consists only of this document and the core documents
referenced in Sec. 1.3.1. Accordingly, any contractual rights that a
Participant may have to any enhancement or modification called for under an
employment or similar agreement are rights that derive from such agreement and
not directly from the Plan.  Nonetheless,
the Plan will be applied in a manner that

 

 

takes
into account any enhancements or modifications called for under an enforceable
employment or similar agreement as if such provisions were part of the Plan; provided that, no change can be made to the Plan by means of
an employment or similar agreement that would not have been allowed by means of
an amendment to the Plan (for example, an amendment inconsistent with Code
§ 409A).

 

1.4          EFFECTIVE DATE OF
DOCUMENT.  The Plan (as amended
and restated in this document) is effective January 1, 2009, to apply to
accruals on and after that date, and also to accruals prior to that date with
respect to any Participant (or Beneficiary) who has not commenced payment of
his/her benefits under the Plan.

 

ARTICLE II

 

DEFINITIONS AND CONSTRUCTION

 

2.1          DEFINITIONS.

 

2.1.1        “Account” means a
hypothetical record-keeping account to which the value of a Participant’s
Excess Benefit is credited following Separation from Service to ultimately
derive the Supplemental Benefit.

 

2.1.2        “Administrative
Committee” means the committee chartered by the Company to execute the
Company’s duties and responsibility as administrator of the Company’s qualified
and non-qualified deferred compensation plans.

 

2.1.3        “Actuarial Equivalent”
means a benefit having the same value as the benefit which it replaces,
determined using the actuarial assumptions or factors specified in the Plan, or
if no assumptions or factors are specified, using the assumptions or factors
used for the most comparable purpose under the Retirement Plan.

 

2.1.4        “Affiliate” means
any business entity that is required to be aggregated and treated as one
employer with the Company under Code § 414(b) or (c) (and for
purposes of determining whether a Separation from Service has occurred, a
standard of “at least 80 percent” will be used to identify an Affiliate under
Code § 414(b) and (c) notwithstanding the default standard of “at
least 50 percent” found in Treas. Reg. § 1.409A-1(h)(3)).

 

2.1.5        “Beneficiary” means
a person or persons designated as such pursuant to Sec. 5.3.

 

2.1.6        “Benefit Commencement
Date” means the date on which a Supplemental Benefit is paid in the form of
a lump-sum, or starts to be paid in the form of an annuity or in installments.

 

2.1.7        “Benefits Investment
Committee” means the committee chartered by the Company to manage and
invest the assets of the Company’s qualified and non-qualified deferred
compensation plans.

 

2.1.8        “Board” means the
Board of Directors of the Company.

 

2.1.9        “Code” means the Internal
Revenue Code of 1986, as amended.

 

2.1.10      “Company” means The
Travelers Companies, Inc.

 

2.1.11      “Domestic Partner”
means a person of the same sex or opposite sex who satisfies the following conditions
in relation to the Participant:

 

(a)           The person and the Participant have a long-term, intimate, committed
relationship with each other, which is demonstrated to be one of mutual caring,
affection, and responsibility for each other’s common welfare;

 

2

 

(b)           The person and the Participant hold themselves out as in a relationship
similar to marriage;

 

(c)           The person and the Participant intend to continue our relationship with
each other indefinitely;

 

(d)           The person and the Participant meet the following marital status
requirements:

 

(i)            If the person and the Participant are of the
opposite sex, both the person and the Participant are unmarried to each other
or anyone else;

 

(ii)           If the person and the Participant are of the same sex, both the person
and the Participant are unmarried to anyone else;

 

(e)           The person and the Participant are each other’s sole domestic partner;

 

(f)            The person and the Participant both are at
least 18 years of age and are capable to enter into a contract;

 

(g)           The person and the Participant are not related by blood closer than
permitted by marriage law in the Participant’s state of residence;

 

(h)           The person and the Participant share a principal residence and have
lived together for at least six consecutive months (and this six-month period
immediately precedes the date the Participant completes a domestic partnership
affidavit);

 

(i)            The person and the Participant are jointly
responsible to each other for basic living expenses; and

 

(j)            The following timing requirements are met (as
applicable):

 

(i)            At least six (6) months has elapsed since
the later of the divorce of the person or the Participant from a previous
spouse, or the death of the previous spouse of the person or the Participant;
and

 

(ii)           At least six (6) months has elapsed since the date the Participant
notified the Company that his/her previous domestic partnership ended.

 

A Participant must file an affidavit of domestic partner status
attesting to the above with the Company.

 

2.1.12      “Eligible Employee”
means any Employee of the Company or an Affiliate (while it is an Affiliate)
who is:

 

(a)           A participant in the
Retirement Plan; and

 

(b)           A Highly Compensated
Employee (as defined in the Retirement Plan).

 

The Company, in its sole
and absolute discretion, may determine that an Employee described above will
not be an Eligible Employee.

 

The Plan is intended to
cover only those Employees who are in a select group of management or highly
compensated employees within the meaning of ERISA §§ 201(2), 301(a)(3) and
401(a)(1); and, accordingly, if any interpretation is issued by the Department
of Labor that would exclude any Employee from satisfying that requirement, such
Employee immediately will cease to be an Eligible Employee.

 

2.1.13      “Employee” means any
common-law employee of the Company or an Affiliate (while it is an Affiliate).

 

2.1.14      “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

 

2.1.15      “Excess Benefit”
means the value calculated under the applicable provisions of Sec. 4.2.1 to
generally reflect the benefits lost under the Retirement Plan as a result of
certain tax-law limits, and which is used to derive the Supplemental Benefit
payable under this Plan.

 

3

 

2.1.16      “Normal Retirement Age”
means age sixty-five (65).

 

2.1.17      “Participant” means
Active Participant or Inactive Participant. 
An “Active Participant” is described in Article III; and an “Inactive
Participant” is any former Active Participant who has not yet received (or
deemed to have received) full payment of his/her Supplemental Benefit under
Plan.

 

2.1.18      “Plan” means The
Travelers Benefit Equalization Plan.

 

2.1.19      “Plan Year” means the
calendar year.

 

2.1.20      “Preserved Legacy
Travelers Supplemental Benefit” means the supplemental benefit that would
have been payable to a participant under the Travelers Benefit Equalization
Plan if he/she had terminated employment on December 31, 2004; provided
that, if on such date a participant would have been entitled to an enhanced
early retirement benefit, this benefit will be calculated as if the Participant
were entitled instead to a normal retirement benefit.

 

2.1.21      “Retirement Plan”
means The Travelers Pension Plan.

 

2.1.22      “Separation from Service”
means that the Company and the Participant anticipate that the Participant will
perform no future services (as an employee or a contractor) for the Company and
its Affiliates or that the level of services (as an employee or contractor) the
Participant will perform for the Company and its Affiliates will permanently
decrease to twenty percent (20%) or less of the average level of services over
the immediately preceding thirty-six (36) month period (or the full period of
services if the Participant has been providing services to the Company or an
Affiliate for less than thirty-six (36) months).  In the event of a bona fide leave of absence,
a Separation from Service will be deemed to have occurred on the date that is
six (6) months (or in the case of a
disability leave, the maximum duration of the leave under the Company’s
policies in effect at the time the disability leave begins (the “maximum
disability leave period”), provided, however, that the maximum disability leave
period may not exceed twenty-nine (29) months) following the start of
such leave, provided that, if the Participant has a
statutory or contractual right to return to active employment that extends
beyond the end of such six (6) month period or the maximum disability
leave period, the Separation from Service will be deemed to have occurred upon
the expiration of such statutory or contractual right, and if the individual
has a Termination of Employment during such six (6) month period or the
maximum disability leave period, the Separation from Service will be deemed to
have occurred on such Termination of Employment.  A “disability” leave for this purpose means
an absence due to a medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous
period of not less than six (6) months, where such impairment causes the
Participant to be unable to perform the duties of his/her position of
employment or any substantially similar position.

 

Whether a Separation from
Service occurs in the case of a corporate transaction may be affected by the
provisions of Sec. 6.2.

 

2.1.23      “Specified Employee”
means an Employee who at any time during the twelve-month period ending on the
identification date was a “key employee” as defined under Code § 416(i) (applied
in accordance with the regulations thereunder, but without regard to paragraph (5) thereof).

 

The Company may adopt a
Specified Employee Identification Policy which specifies the identification
date, the effective date of any change in the key employee group, compensation
definition and other variables that are relevant in identifying Specified
Employees, and which may include an alternative method of identifying Specified
Employees consistent with the regulations under Code § 409A.  In the absence of any such policy or policy
provision, for purposes of the above, the “identification date” is each December 31st, and an Employee who
satisfies the above conditions will be considered to be a “Specified Employee”
from April 1st following the identification date to March 31st of the following year, and the compensation
and other variables, and special rules for corporate events and special

 

4

 

rules relating to
nonresident aliens, that is necessary in identifying Specified Employees will
be determined and applied in accordance with the defaults specified in the
regulations under Code § 409A.  Any
Specified Employee Identification Policy will apply uniformly to all
nonqualified deferred compensation plans subject to Code § 409A that are
maintained by the Company or an Affiliate.

 

2.1.24      “Spouse” means a
person of the opposite sex to whom the Participant is legally married under
applicable state law as of the determination date (including a common-law
spouse in any state that recognizes common-law marriage, provided that
acceptable proof and certification of common-law marriage has been received by
the Company).

 

2.1.25      “Supplemental Benefit”
means the benefit payable to a Participant under the provisions of the Plan.

 

2.1.26      “Termination of Employment”
means that the common-law employer-employee relationship has ended between the
individual and the Company and its Affiliates, as determined under the employment
policies and practices of the Company (including by reason of voluntary or
involuntary termination, retirement, death, expiration of and failure to return
from a recognized leave of absence, or otherwise).  A Termination of Employment does not occur
merely as a result of transfer of employment from one Affiliate to another
Affiliate, or from the Company to an Affiliate or from an Affiliate to the
Company.

 

2.1.27      “Valuation Date”
means any date on which trading occurs on the New York Stock Exchange.

 

2.2           CHOICE
OF LAW.  The Plan will be
governed by the laws of the State of Minnesota to the extent that such laws are
not preempted by the laws of the United States. 
Any legal dispute with respect to a right or entitlement under the Plan
that is not covered by the claims and arbitration process required by the Plan,
must be submitted to the United States District Court for the District of
Minnesota

 

ARTICLE III

 

PARTICIPATION

 

3.1          PARTICIPATION.

 

3.1.1        Active Participants.  All Eligible Employees will be
Active Participants, and enrollment is not required to participate in the Plan.

 

3.1.2        End of Active Participation and
Participation.  An Active Participant
will continue as an Active Participant until the earlier of the following:

 

(a)            The date he/she ceases
to be an Eligible Employee (for any reason, including Separation from Service);
or

 

(b)            The date on which the
Plan is terminated and liquidated pursuant to Sec. 7.2.2.

 

A Participant will
continue as a Participant until having received a full distribution of the
benefit due under the Plan.

 

5

 

ARTICLE IV

 

SUPPLEMENTAL
BENEFITS

 

4.1          SUPPLEMENT
BENEFITS.  A Participant’s
Supplemental Benefit will be derived from his/her Excess Benefit and/or
Preserved Legacy Travelers Supplemental Benefit as determined under Sec. 4.2,
and will be paid at the time and in the form provided under Sec. 4.3.

 

4.2          DERIVATION OF
SUPPLEMENTAL BENEFITS.

 

4.2.1       Excess Benefit.  A Participant’s Supplemental Benefit will be
derived from his/her Excess Benefit, which is determined as follows:

 

(a)           Cash
Balance Only Participant.  If the
Participant is a “Cash Balance Participant” (as defined below) and is not
described in (b) or (c), his Excess Benefit is a single lump-sum amount payable
equal to A minus B, where:

 

“A” =     The balance that would have been in the
Participant’s Cash Balance Account under the Retirement Plan if credits had
been determined without regard to:

 

(i)            The
limit on compensation taken into account under the Retirement Plan under Code
§ 401(a)(17); and

 

(iii)          The exclusion of amounts deferred by the
Participant under The Travelers Deferred Compensation Plan (or other
non-qualified deferred compensation plan maintained or previously maintained by
the Company or Affiliate) from the compensation base used in determining the
benefit accrued and payable under the Retirement Plan.

 

“A” will also include the difference, if any, between the lump-sum
benefit that would be payable under the Retirement Plan without regard to the
benefit limits of Code § 415(b) and the lump-sum benefit actually payable
under the Plan.

 

“B” =      The actual balance of the Participant’s Cash
Balance Account under the Retirement Plan.

 

A Participant is a “Cash Balance Participant” for this purpose if
he/she has a Cash Balance Accrued Benefit under the Retirement Plan.

 

(b)           Grandfathered
Traditional Formula Only Participant - Retirement Eligible.  If the Participant is a “Grandfathered
Traditional Formula Participant” (as described below) and is not described in
(a), and he/she is entitled to an immediate commencement annuity under the Retirement
Plan (or would be so entitled if he/she had a Termination of Employment),
his/her Excess Benefit is an immediate single life annuity equal to A minus B,
where:

 

“A” =     The immediate single life annuity that would be
payable under the Retirement Plan (including any early commencement subsidies
that would be payable at that point) if such benefit had been determined
without regard to:

 

(i)            The
limit on compensation taken into account under the Retirement Plan under Code
§ 401(a)(17);

 

(ii)           The
limit on the benefits payable under the Retirement Plan under Code
§ 415(b); and

 

6

 

(iii)          The exclusion of amounts deferred by the
Participant under The Travelers Deferred Compensation Plan (or other
non-qualified deferred compensation plan maintained or previously maintained by
the Company or Affiliate) from the compensation base used in determining the
benefit accrued and payable under the Retirement Plan.

 

“B” =      The actual immediate single life annuity under
the Retirement Plan.

 

A Participant is a “Grandfathered Traditional Formula Participant” for
this purpose if he/she has a Grandfathered Traditional Formula Accrued Benefit
under the Retirement Plan.

 

(c)           Grandfathered
Traditional Formula Only Participant - Not Retirement Eligible.  If the Participant is a “Grandfathered
Traditional Formula Participant” (as described in (b)) and is not described in
(a), but is not entitled to an immediate commencement annuity under the Retirement
Plan (and would not be so entitled if he had a Termination of Employment),
his/her Excess Benefit is a deferred single life annuity starting as of first
day of the month following his/her Normal Retirement Age, equal to A minus B,
where:

 

“A” =     The deferred single life annuity that would be
paid under the Retirement Plan if such benefit had been determined without regard
to:

 

(i)            The
limit on compensation taken into account under the Retirement Plan under Code
§ 401(a)(17);

 

(ii)           The
limit on the benefits payable under the Retirement Plan under Code
§ 415(b); and

 

(iii)          The exclusion of amounts deferred by the
Participant under The Travelers Deferred Compensation Plan (or other
non-qualified deferred compensation plan maintained or previously maintained by
the Company or Affiliate) from the compensation base used in determining the
benefit accrued and payable under the Retirement Plan.

 

“B” =      The actual deferred single life annuity under the
Retirement Plan.

 

(d)           Cash
Balance and Grandfathered Traditional Formula Participant.  If the Participant is described in both (a) and
(b), or (a) and (c), his/her Excess Benefit is the combination of the two.

 

4.2.2        Special Rule for
Legacy Travelers Participants.   In
the case of a Legacy Travelers Participant, his/her Supplemental Benefit will
also include his/her Preserved Legacy Travelers Supplemental Benefit.

 

4.3          TIME AND FORM OF
PAYMENT.

 

4.3.1        Time of Payment.  A Participant’s Supplemental Benefit will be
paid (or start to be paid) at the following time:

 

(a)           Immediately Payable
Benefits.  With respect to a
Supplement Benefit derived from an Excess Benefit determined under Sec. 4.2.1(a) (for
a Cash Balance Participant) or under Section 4.2.1(b) (for a
Grandfathered Traditional Formula Participant entitled to an immediate commencement
annuity), the first payroll date (generally the 15th of
the month) in the seventh (7th)
month following the date of the Participant’s Separation from Service.

 

(b)           Deferred Benefits.   With respect to a Supplemental Benefit
derived from an Excess Benefit determined under Sec. 4.2.1(b) (for a
Grandfathered Traditional Formula Participant entitled to a deferred
commencement annuity), the later of:

 

7

 

(i)            The first payroll date
(generally the 15th of the month) in the seventh (7th) month following the date of the Participant’s
Separation from Service; or

 

(ii)           If the Participant has
at least one but less than ten (10) Years of Service, the first payroll
date (generally the 15th of the month) in the month after the month in
which the Participant attains age sixty-two (62),or, if the Participant has ten
(10) or more Years of Service, the first payroll date (generally the 15th of the month) in the month after the month in
which the Participant attains age fifty-five (55).

 

(c)           Preserved Legacy
Benefits.  With respect to a
Supplemental Benefit derived from a Preserved Legacy Travelers Supplemental
Benefit, the later of:

 

(i)            The first payroll date
(generally the 15th of the month) in the seventh (7th) month following the date of the Participant’s
Separation from Service; or

 

(ii)           The first payroll date
(generally the 15th of the month) in the month after the month in
which the Participant attains age fifty-five (55).

 

The
above payment timing rules are intended to prevent any Specified Employee
(and other Participants) from receiving a payment due to his/her Separation
from Service prior to the first payroll date in the seventh (7th) month following the date of his/her Separation from Service, except in
the case of an intervening death of the Participant as provided in Article V.

 

Any payment may be
delayed if necessary for administrative reasons, at the sole discretion of the
Company, to a later date within the calendar year or, if later, to the
fifteenth (15th)
day of the third calendar month following the Benefit Commencement Date.

 

4.3.2        Form of Payment.   A Participant’s Supplemental Benefit will be
paid in the following form:

 

(a)           General Rule (Other
Than Preserved Legacy Benefits).  If
the value of the Excess Benefit as of the applicable measurement date is
fifty-thousand dollars ($50,000) or less, the Supplemental Benefit derived from
such Excess Benefit) will be paid in the form of a single lump-sum payment;
otherwise, it will be paid in the form of ten (10) annual installments,
determined under Sec. 4.3.4.

 

The “value” of an Excess
Benefit for this purpose is the sum of the Excess Benefit determined under Section 4.2.1(a) (for
a Cash Balance Participant) as of the applicable measurement date, and the
Actuarial Equivalent lump-sum value of the Excess Benefit determined under Sec.
4.2.1(b) or (c) (for a Grandfathered Traditional Formula Participant)
as of the applicable measurement date.  
Actuarial Equivalence for this purpose will be determined using the Applicable
Interest Rate and Applicable Mortality Table then in effect under the
Retirement Plan.

 

The “applicable
measurement date” for this purpose is the date of Separation from Service (or
later date selected for administrative convenience by the Company) or, in the
case of an Excess Benefit determined under Sec. 4.2.1(c) (for a
Grandfathered Traditional Formula Participant entitled to a deferred
commencement annuity), such later date specified in Sec. 4.3.1(b)(ii).

 

(b)           Preserved Legacy
Travelers Supplement Benefits.  The
Supplemental Benefit derived from a Preserved Legacy Travelers Supplemental
Benefit will be paid in accordance with the payment election made by the
Participant with respect thereto prior to December 31, 2006.  If a Participant failed to file a timely
election, she/she will be deemed to have elected to receive his/her entire
Preserved Legacy Travelers Supplement Benefit as a life contingent annuity.

 

A Participant who elects
a life contingent annuity (or who is defaulted into a life contingent annuity)
may elect to receive either of the following:

 

8

 

(i)            A
single life annuity — that is, a monthly annuity payable to the Participant for
life, with the last payment being the payment for the month in which the
individual dies; or

 

(ii)           A joint and survivor
annuity with a survivor percentage of 50%, 75% or 100% - that is, a monthly
annuity payable to the Participant for life, with the provision that, if the
Participant’s joint annuitant survives the Participant, a monthly annuity
payable to such joint annuitant for life equal to fifty percent (50%), seventy-five
percent (75%) or one-hundred percent (100%), as elected by the Participant, of
the monthly annuity previously payable to the Participant.

 

Each life contingent
annuity will have a value that is the Actuarial Equivalent of the value of each
other life contingent annuity, with Actuarial Equivalence determined using the
Applicable Interest Rate and Applicable Mortality Table.

 

4.3.3        Deposit Into
Book-Keeping Account.  The value of
an Excess Benefit as determined under Sec. 4.3.2(a) as of the applicable measurement
date will be credited to an Account maintained on behalf of the Participant on,
or as soon as administratively practicable after, the applicable measurement
date, which Account will be adjusted for earnings credits in the manner
provided in Sec. 4.4.

 

Accounts are for bookkeeping purposes only and the maintenance of
Accounts will not require any segregation of assets of the Company or any
Affiliate.  Neither the Company nor any
Affiliate will have any obligation whatsoever to set aside funds for the Plan
or for the benefit of any Participant or Beneficiary, and no Participant or
Beneficiary will have any rights to any amounts that may be set aside other
than the rights of an unsecured general creditor of the Company or Affiliate
that employs (or employed) the Participant.

 

4.3.4        Determination of
Installment Payments.   If a
Supplemental Benefit is paid in the form of annual installments, the first
annual installment amount will be established by dividing the balance of the Account
as of the Benefit Commencement Date, or an earlier date selected for
administrative convenience by the Company, by ten (10), and each subsequent
installment will be determined by dividing the remaining balance of the Account
as of the scheduled installment date, or an earlier date selected for
administrative convenience by the Company, by the number of remaining
installments (including the installment to be made at that time).

 

Each installment payment will be treated as a
separate payment for purposes of Code § 409A.

 

4.4           EARNINGS
CREDITING FOR ACCOUNTS.

 

4.4.1        Earnings Credits for Bookkeeping Accounts.  Accounts will be adjusted (increased or
decreased) as of each Valuation Date to reflect earnings credits as determined
hereunder.

 

Earnings credits will be determined based on the performance of one or
more investment options deemed to be available under the Plan.

 

The Company, in its sole discretion, will determine the investment
options that will be available as benchmarks for determining the earnings
credit, which may include mutual funds, common or commingled investment funds,
group annuity contracts or any other investment option deemed appropriate by
the Company, and may include a fund that is deemed to invest in common stock of
the Company.  The Company may at any time
and from time to time add to, remove from or substitute the investment options
deemed to be available under the Plan.

 

 

9

 

A Participant (or Beneficiary following the death of the Participant)
will be allowed on a hypothetical basis to direct the investment of his Account
among the investment options available under the Plan. Hypothetical investment
directions may be given with such frequency as is deemed appropriate by the
Company, and must be made in such percentage or dollar increments, in such
manner and in accordance with such rules as may be prescribed for this
purpose by the Company (including by means of a voice response or other
electronic system under circumstances so authorized by the Company).  If an investment option has a loss, the
earnings credit attributable to such investment option will serve to reduce the
Account; similarly, if an investment option has a gain, the earnings credit attributable
to such investment option will serve to increase the Account.  If the Participant fails to elect an
investment option, the earnings credit will be based on such “default”
investment option as may be selected for this purpose by the Company.

 

Earnings credits (both increase and reductions) will be reflected
through the date of payment.

 

4.4.2        Hypothetical Investments.  All investment directions of a Participant or
Beneficiary will be on a “hypothetical” basis for the sole purpose of
establishing the earnings credit for his/her Account — that is, the Account
will be adjusted for earnings credits as if the Account were invested pursuant
to the investment directions of the Participant or Beneficiary, but actual
investments need not be made pursuant to such directions.  However, the Company, in its sole discretion
and without any obligation, may direct that investments be made per the
investment directions of Participants and Beneficiaries in order to hedge the
liability of the Company and its Affiliates.

 

4.5           SPECIAL
RULES.

 

4.5.1        Supplemental Benefit
Conditioned on Vesting.  A
Participant will be entitled to a Supplemental Benefit only if he/she is vested
in and entitled to a pension under the Retirement Plan.

 

4.5.2        No Duplicative Benefits.  In no event will any benefits be payable
under this Plan that would duplicate benefits that become payable under any
other non-qualified retirement plan maintained by the Company or any Affiliate
based upon the same period of service for the Company or Affiliate.

 

4.5.3        Benefits Due Only for
Time in Eligible Group.  If a Participant
ceases to be an Eligible Employee prior to his/her actual Separation from
Service (for example, if the Company removes the Employee as an Eligible
Employee), the Excess Benefit of a Participant under Sec. 4.2 will be
calculated as if the Participant had a Separation from Service as of the date
he/she ceased to be an Eligible Employee.

 

ARTICLE V

 

DISTRIBUTIONS
AFTER DEATH

 

5.1           SURVIVOR BENEFITS
PRIOR TO BENEFIT COMMENCEMENT DATES.

 

5.1.1        Entitlement to a Survivor Benefit.  A Survivor Benefit determined in accordance
with this Sec. 5.1 will be payable to the Beneficiary of a Participant if:

 

(a)           The
Participant is vested in a pension under the Retirement Plan; and

 

(b)           The
Participant dies before his/her Benefit Commencement Date.

 

If a Participant dies before he/she is vested in a pension under the
Retirement Plan, no Survivor Benefit will be payable under the Plan.

 

10

 

5.1.2        Survivor Benefit
Attributable to Cash Balance Supplemental Benefit.  The Survivor Benefit attributable to an
Excess Benefit determined under Sec. 4.2.1(a) (for a Cash Balance
Participant) will be a lump-sum payment in an amount equal to such Excess
Benefit, which will be paid to the Participant’s Beneficiary within ninety (90)
days following the death of the Participant.

 

5.1.3        Survivor Benefit
Attributable to Grandfathered Traditional Formula Supplemental Benefit.  The Survivor Benefit attributable to an
Excess Benefit determined under Sec. 4.2.1(b) or (c) (for a Grandfathered
Traditional Formula Participant) will be a lump-sum payment in an amount equal
to the applicable percentage of the Actuarial Equivalent lump-sum value of the
Excess Benefit determined under Sec. 4.2.1(b) or (c), which will be paid
to the Participant’s Beneficiary within ninety (90) days following the death of
the Participant.

 

The “applicable
percentage” for this purpose is fifty percent (50%), unless the Participant
then has full (100%) survivor protection in place under the Retirement Plan, in
which case the applicable percentage will be one-hundred percent (100%).

 

Actuarial Equivalence for
this purpose will be determined using the Applicable Interest Rate and Applicable
Mortality Table.

 

5.1.4        Survivor Benefit
Attributable to Legacy Travelers Preserved Supplemental Benefit.  The Survivor Benefit attributable to a Legacy
Travelers Preserved Supplemental Benefit will equal the survivor benefit
determined under the Retirement Plan for the comparable pension benefit on
which the Legacy Travelers Preserved Supplemental Benefit was derived under
this Plan.

 

5.2          PAYMENT
AFTER BENEFIT COMMENCEMENT DATES.  If
a Participant dies after his/her Benefit Commencement Date, any remaining
balance in his/her Account will be paid to the Participant’s Beneficiary in a
single lump-sum payment within ninety (90) days after the death of the
Participant.  If the Participant was
receiving an annuity attributable to an Excess Benefit or Preserved Legacy
Travelers Supplemental Benefit at the time of his/her death, the form of
annuity will determine whether any payments remain payable following the death
of the Participant.

 

5.3           BENEFICIARY
DESIGNATION.

 

5.3.1        General
Rule.   Any Survivor Benefit will be
paid to the Participant’s designated Beneficiary.  A Participant may designate any person
(natural or otherwise, including a trust) as his/her Beneficiary to receive any
Survivor Benefit payable under the Plan, and may change or revoke a designation
previously made without the consent of any Beneficiary.

 

5.3.2        Form and Method of
Designation.  A Beneficiary
designation must be made on such form and in accordance with such rules as
may be prescribed for this purpose by the Company. A Beneficiary designation
will be effective (and will revoke all prior designations) if it is received by
the Company (or if sent by mail, the post-mark of the mailing is) prior to the
date of death of the Participant.  The
Company may rely on the latest Beneficiary designation on file (or if an
effective designation is not on file may direct that payment be made pursuant
to the default provision of the Plan) and will not be liable to any person
making claim for such payment under a subsequently filed designation or for any
other reason.

 

5.3.3        Default Designation.  If a Beneficiary designation is not on file
for a Participant,  or if no designated
Beneficiary survives the Participant, the Participant’s Beneficiary will be
deemed to be the first of the following categories applicable to the
Participant:

 

(a)           Surviving Spouse or
Domestic Partner; or if none,

 

(b))          Participant’s estate.

 

11

 

5.4          NO
OTHER SURVIVOR BENEFITS.  No
survivor benefits are payable to anyone with respect to a Participant except as
provided in Sec. 5.1 or Sec. 5.2.

 

ARTICLE
VI

 

CONTRACTUAL
OBLIGATIONS AND FUNDING

 

6.1           PAYMENT
OF BENEFITS.   Benefits payable
under the Plan will be the responsibility of, and paid by, the Company; provided that, the Company, in its sole discretion, may
transfer its obligations with respect to one or more Participants to an
Affiliate.  Such transfer may occur at
any time, including in connection with a corporate transaction described in
Sec. 6.2.  If the Company transfers its
obligations with respect to a Participant to an Affiliate other than in connection
with a corporate transaction, the Company will retain secondary liability for
the payment of such benefit under the Plan.

 

6.2          CORPORATE
TRANSACTIONS.   In the event of a
sale of the stock to an unrelated buyer, or a disposition by means of a forward
or reverse merger involving an unrelated buyer, where an employer ceases as a
result of the transaction to be an Affiliate, for any individual who remains
employed with the employer after it ceases to be an Affiliate, the transaction
will not be deemed to constitute a Separation from Service and benefits
thereafter will be paid in accordance with the terms of the Plan or, if applicable,
the successor plan established by the buyer or an affiliate in a manner
consistent with Code § 409A.

 

In the event of a
sale of substantial assets (such as a location or division, or substantially
all assets of a trade or business) of the Company or an Affiliate to an
unrelated buyer, the Company and the buyer may agree to transfer the
contractual obligation and liability for benefits with respect to any
individual who becomes an employee of the buyer or an affiliate of the buyer
upon the closing or in connection with such transaction.  In such case, the transaction will not be
deemed to constitute a Separation from Service and benefits thereafter will be
paid in accordance with the terms of the Plan or a successor plan established
by the buyer or an affiliate in a manner consistent with Code § 409A.

 

6.3           FUNDING.

 

6.3.1        Establishment and
Funding of Rabbi Trust.  The Company
may, in its sole and absolute discretion, establish a “rabbi” trust to serve as
a funding vehicle for benefits payable under the Plan.  Neither the Company nor any Affiliate will
have any obligation to establish such a trust, or to fund such trust if established.

 

The above notwithstanding,
neither the Company nor any Affiliate will transfer or contribute any funds
during any “restricted period,” as defined in Code § 409A(b)(3)(B), to any
rabbi trust established under this Section 6.3.1.  If any funds are transferred or contributed
during a restricted period and the Company certifies in writing that such
transfer or contribution was disallowed under this provision, the funds will be
deemed to have been transferred or contributed under a mistake of fact and will
be returned to the Company or the Affiliate, along with any earnings allocable
to such funds, regardless of whether the rabbi trust’s terms establish it as
revocable or irrevocable.

 

Any rabbi trust hereby
established may be revocable if so established under the terms of the
trust.  The assets of any rabbi trust
hereby established will not be held or transferred outside of the United
States, and the trust will not have any other feature that would result in a
transfer of property being deemed to have occurred under Code § 409A (for
example, there will be no funding obligation or restrictions on assets in
connection with a change in financial health of the Company or any Affiliate).

 

12

 

Any rabbi trust used to
fund benefits payable under this Plan may be used to fund benefits payable
under any other non-qualified deferred compensation plan maintained by the
Company or any Affiliate.

 

6.3.2        Effect on Benefit
Obligations.  The establishment and
funding of a rabbi trust will not affect the obligations of the Company under
Sec. 6.1, except that such obligations with respect to any Participant or
Beneficiary will be offset to the extent that payments actually are made from
the trust to such Participant or Beneficiary. 
In the case of any transfer of benefit obligations and liabilities under
Sec. 6.2, the parties may arrange for a transfer of assets to a rabbi trust
maintained by the buyer or an affiliate of the buyer.

 

ARTICLE VII

 

AMENDMENT AND TERMINATION OF PLAN

 

7.1           RIGHT TO AMEND OR
TERMINATE.

 

7.1.1        Amendment.  The Company may amend the Plan at any time
and for any reason by action of the following:

 

(a)           Board of Directors.  The Board or its Compensation Committee can
adopt any amendment to the Plan, and the following amendments are reserved
exclusively to the Board or its Compensation Committee:

 

(i)            Any amendment that has
a material negative cost impact to the Company; or

 

(ii)           Any amendment that is
required to be adopted by the Board or its Compensation Committee by law or regulation,
or under the terms of the charter documents of the Company.

 

(b)           Chief Executive
Officer.  The Chief Executive Officer
of the Company can adopt any amendment that is not reserved to the Board or its
Compensation Committee.

 

(c)           Persons with Delegated
Authority. The Board or its Compensation Committee, and the Chief Executive
Officer, by resolution or written action, can delegate the amendment authority
vested in such person or body to any other person, committee or body.

 

7.1.2        Termination.  The Company may terminate the Plan at any
time and for any reason by action of the Board or its Compensation Committee.

 

7.1.3        Delayed Timing of
Amendment or Termination Effective Under Code § 409A.  The Company, acting pursuant to Sec. 7.1.1,
generally will determine the effective date of any amendment to the Plan.  However, if Code § 409A requires a
delayed effective date (for example, if an amendment changes a deferral rule in
a way that must be delayed for twelve (12) months), then the amendment will be
effective as of the later of the date determined by the Company or the earliest
effective date allowed under Code § 409A.

 

                The Company
generally will determine the effective date of a termination of the Plan.

 

13

 

7.2           LIMITS ON EFFECT OF
AMENDMENT OR TERMINATION.

 

7.2.1        No Negative Effect on
Accrued Benefit.  An amendment or
termination of the Plan may not have the effect of reducing the overall benefit
attributable to the period prior to amendment or termination and payable to the
Participant under the Retirement Plan or this Plan.  This will not prohibit an amendment that
reduces or eliminates the benefit accrued and payable under this Plan and
shifts the liability for such benefit to another nonqualified retirement plan
maintained by the Company or an Affiliate, or any successor, or to the
Retirement Plan, or an amendment that is required by law or for which the
failure to adopt the amendment would have adverse tax consequences to the
Participants affected by such amendment (as determined by the Company).

 

7.2.2        Liquidation
Terminations.  The Company may
terminate the Plan and provide for the acceleration and liquidation of all
benefits remaining due under the Plan pursuant to Treas. Reg.
§ 1.409A-3(j)(4)(ix). If such a termination and liquidation occurs, all
accruals under the Plan will be discontinued (and all Active Participants will
cease to be Active Participants) as of the termination date established by the
Company, and benefits remaining due will be paid in a lump-sum at the time
specified by the Company as part of the action terminating the Plan and
consistent with Treas. Reg. § 1.409A-3(j)(4)(ix).

 

7.2.3        Other
Terminations.  The Company may terminate the Plan other than
pursuant to Treas. Reg. § 1.409A-3(j)(4)(ix).  In the event of such other termination, all
accruals under the Plan will be discontinued (and all Active Participants will
cease to be Active Participants), but all benefits remaining payable under the
Plan will be paid at the same time and in the same form as if the termination
had not occurred — that is, the termination will not result in any acceleration
of any distribution under the Plan.

 

ARTICLE VIII

 

ADMINISTRATION/CLAIMS PROCEDURES

 

8.1           ADMINISTRATION.

 

8.1.1        Administration.  The Company is the administrator of the Plan
with the authority to control and manage the operation and administration of
the Plan and to make all decisions and determinations incident thereto.  Action on behalf of the Company as
administrator will be taken by the following:

 

(a)           The
Administrative Committee.  The
Administrative Committee of the Company is responsible for determining Eligible
Employees under the Plan, and is responsible for all matters relating to the
overall and day-to-day administration of the Plan, and the selection and monitoring
of non-investment service providers (including the selection of recordkeeper)
with respect to the Plan.

 

(b)           The
Investment Committee.  The Investment
Committee of the Company is responsible for all investment matters relating to
the Plan, including the selection of the funds available for hypothetical
investments by Participants and Beneficiaries, the actual investment of assets
that may be (but are not required to be) set aside to hedge liabilities
resulting from the Plan, and actual investment of any rabbi trust assets if
such a trust is established and funded, including the selection and monitoring
of investment providers (including the trustee of any rabbi trust).

 

(c)           Delegates.  The Administrative Committee and Investment
Committee each will have the authority to delegate, from time to time,
responsibilities under the Plan to such person or persons as it deems
advisable, and may revoke such delegation of responsibility.  Any action by the person exercising such
delegated responsibility will have the same force and effect as if such action
was taken by the Company.

 

14

 

8.1.2        Third-Party Service
Providers.  The Company may from time
to time contract with or appoint a recordkeeper or other third-party service
provider for the Plan.  Any such
recordkeeper or other third-party service provider will serve in a
non-discretionary capacity and will act in accordance with directions given
and/or procedures established by the Company.

 

8.1.3        Rules of Procedure.  The Company may establish, adopt or revise
such rules and regulations as it may deem necessary or advisable for the
administration of the Plan.

 

8.2           CORRECTION OF ERRORS
AND DUTY TO REVIEW INFORMATION.

 

8.2.1        Correction of Errors.  Errors may occur in the operation and
administration of the Plan.  The Company
reserves the right to cause such equitable adjustments to be made to correct
for such errors as it considers appropriate (including adjustments to
Participant or Beneficiary pension statements), which will be final and binding
on the Participant or Beneficiary.

 

8.2.2        Participant Duty to
Review Information.  Each Participant
and Beneficiary has the duty to promptly review any information that is
provided or made available to the Participant or Beneficiary and that relates
in any way to the operation and administration of the Plan or his/her payment
elections under the Plan and to notify the Company of any error made in the
operation or administration of the Plan that affects the Participant or
Beneficiary within thirty (30) days of the date such information is provided or
made available to the Participant or Beneficiary (for example, the date the information
is sent by mail or the date the information is provided or made available
electronically).

 

If the Company is
notified of an alleged error within the thirty (30) day time period, the
Company will investigate and either correct the error or notify the Participant
or Beneficiary that it believes that no error occurred. If the Participant or
Beneficiary is not satisfied with the correction (or the decision that no
correction is necessary), he/she will have sixty (60) days from the date of
notification of the correction (or notification of the decision that no
correction is necessary), to file a formal claim under the claims procedures
under Sec. 8.3.

 

8.3           CLAIMS PROCEDURE.

 

8.3.1        Claims.  If a Participant or Beneficiary does not feel
as if he has received full payment of the benefit due to such person under the
Plan, or if a Participant or Beneficiary feels that an error has been made with
respect to his/her benefit and has filed a claim pursuant to Sec. 8.2.2, the
Participant or Beneficiary may file a written claim with the Company setting
forth (i) the determination being appealed under Sec. 8.2.2, or (ii) the
nature of the benefit claimed, the amount thereof, and the basis for claiming
entitlement to such benefit.  If the
Participant alleged error and an appeal was filed under this Sec. 8.3.1
pursuant to Sec. 8.2.2, then neither the Participant nor any Beneficiary may
file a formal claim under this Sec. 8.3.1 seeking a second review of the same
error (including the impact of that error on benefits claimed to be due under
the Plan).  The Administrator will
determine the validity of the claim and communicate a decision to the claimant
promptly and, in any event, not later than ninety (90) days after the date of
the claim. The claim may be deemed by the claimant to have been denied for
purposes of further review described below in the event a decision is not
furnished to the claimant within such ninety (90) day period.  If additional information is necessary to
make a determination on a claim, the claimant will be advised of the need for
such additional information within forty-five (45) days after the date of the
claim.  The claimant will have up to one
hundred and eighty (180) days to supplement the claim information, and the
claimant will be advised of the decision on the claim within forty-five (45)
days after the earlier of the date the supplemental information is supplied or
the end of the one hundred and eighty (180) day period.

 

A claim for benefits which is denied will be denied by written
notice.  The written notice will set
forth the specific reason or reasons for the denial, including a specific
reference to any provisions of the Plan (including any internal rules,
guidelines, protocols, criteria, etc.) on which the denial is based, a
description of any additional material or information that is necessary to
process the claim, and an explanation of the procedure for further reviewing
the denial of the claim.

 

15

 

8.3.2        Appeals.  Within sixty (60) days after the receipt of a
denial on a claim, a claimant or his authorized representative may file a
written request for review of such denial. 
Such review will be undertaken by the Administrator and will be a full
and fair review.  The claimant will have
the right to review all pertinent documents. 
The Administrative Committee will issue a decision not later than sixty
(60) days after receipt of a request for review from a claimant unless special
circumstances, such as the need to hold a hearing, require a longer period of
time, in which case a decision will be rendered as soon as possible but not
later than one hundred and twenty (120) days after receipt of the claimant’s request
for review.  The Administrative Committee’s
decision will be in writing and will include specific reasons for the decision
and include specific reference to any provisions of the Plan on which the decision
is based.  The Administrative Committee
will decide all claims and its decision on appeal will be final and binding
subject to Sec. 8.3.3.  Following the
claims procedures through to completion is a condition of filing an arbitration
action described under Sec. 8.3.3.

 

8.3.3        Arbitration.  If a Participant or Beneficiary follows the
claims procedure but his/her final appeal is denied in whole or in part, he/she
will have one (1) year to file an arbitration action with respect to that
claim, and failure to meet the one-year deadline will extinguish his/her right
to file an arbitration action with respect to that claim.

 

Any claim, dispute or other matter in question of any kind relating to
this Plan which is not resolved by the claims procedures will be settled by
arbitration in accordance with the Travelers Employment Arbitration
Policy.  Notice of demand for arbitration
will be made in writing to the opposing party and to the American Arbitration
Association within one (1) year after the claim, dispute or other matter
in question has been finally decided under the claims procedures set forth in
Sec. 8.3.1 and 8.3.2.  In no event will a
demand for arbitration be made after the date when the applicable statute of limitations
would bar the institution of a legal or equitable proceeding based on such
claim, dispute or other matter in question. 
The decision of the arbitrator(s) will be final and may be enforced
in any court of competent jurisdiction.

 

The arbitrator(s) may award reasonable fees and expenses to the
prevailing party in any dispute hereunder and will award reasonable fees and
expenses in the event that the arbitrator(s) find that the losing party
acted in bad faith or with intent to harass, hinder or delay the prevailing
party in the exercise of its rights in connection with the matter under
dispute.

 

8.3.4        Participant Responsible
for Timely Action Under Code § 409A. 
The Participant will be solely responsible for taking prompt actions in
the event of disputed payments as necessary to avoid any adverse tax
consequences under Code § 409A, even if action is required to be taken
under Code § 409A in a more timely manner than is required under the
claims procedures of this Sec. 8.3.

 

8.4           INDEMNIFICATION.  The Company and its Affiliates jointly
and severally agree to indemnify and hold harmless, to the extent permitted by
law, each director, officer, and employee against any and all liabilities,
losses, costs, or expenses (including legal fees) of whatsoever kind and nature
that may be imposed on, incurred by, or asserted against such person at any
time by reason of such person’s services in the administration of the Plan, but
only if such person did not act dishonestly, or in bad faith, or in willful
violation of the law or regulations under which such liability, loss, cost, or
expense arises.

 

8.5          EXERCISE OF AUTHORITY.
The Company, its Chief Executive Officer, the Administrative Committee and
Investment Committee and any other person who has authority with respect to the
management, administration or investment of the Plan may exercise that
authority in its/his/her full discretion. 
This discretionary authority includes, but is not limited to, the
authority to make any and all factual determinations and interpret all terms
and provisions of this document (or any other document established for use in
the administration of the Plan) relevant to the issue under consideration.  The exercise of
authority will be binding upon all persons; and it is intended that the exercise
of authority be given deference in arbitration, and that it not be overturned
or set aside in arbitration unless found to be arbitrary and capricious.

 

16

 

8.6          TELEPHONIC
OR ELECTRONIC NOTICES AND TRANSACTIONS. 
Any notice that is required to be given under the Plan to a
Participant or Beneficiary, and any action that can be taken under the Plan by
a Participant or Beneficiary (including distribution, consents, etc.), may be
by means of voice response or other electronic system to the extent so
authorized by the Company.

 

ARTICLE
IX

 

MISCELLANEOUS

 

9.1           NONASSIGNABILITY.

 

9.1.1        General Rule Regarding
Assignment.  Neither the rights of,
nor benefits payable to, a Participant or Beneficiary under the Plan may be
alienated, assigned, transferred, pledged or hypothecated by any person, at any
time, or to any person whatsoever.  Such
interest and benefits will be exempt from the claims of creditors or other
claimants of the Participant or Beneficiary and from all orders, decrees,
levies, garnishments or executions to the fullest extent allowed by law, except
as provided in Sec. 9.1.2.

 

9.1.2        Domestic Relations
Orders.  The Plan will comply with
any court order purporting to divide the benefits payable under this Plan
pursuant to a state’s domestic relations laws to the extent permitted under
Code § 409A.  However, such court order
will be deemed to only apply to such amounts that actually become payable to a
Participant under the terms of this Plan (and will not create a separate interest
in favor of the alternate payee).

 

9.2          WITHHOLDING.  A Participant must make appropriate
arrangements with the Company or Affiliate for satisfaction of any federal,
state or local income tax withholding requirements and Social Security or other
employee tax requirements applicable to the payment of benefits under the
Plan.  If no other arrangements are made,
the Company or Affiliate may provide, at its discretion, for such withholding
and tax payments as may be required, including, without limitation, by the
reduction of other amounts payable to the Participant.

 

9.3          SUCCESSORS
OF TRAVELERS.  The rights and
obligations of the Company under the Plan will inure to the benefit of, and
will be binding upon, the successors and assigns of the Company.

 

9.4          EMPLOYMENT
NOT GUARANTEED.  Nothing
contained in the Plan nor any action taken hereunder will be construed as a
contract of employment or as giving any Participant any right to continued
employment with the Company or an Affiliate.

 

9.5          GENDER,
SINGULAR AND PLURAL.  All
pronouns and any variations thereof will be deemed to refer to the masculine,
feminine, or neuter, as the identity of the person or persons may require.  As the context may require, the singular may
be read as the plural and the plural as the singular.

 

9.6          CAPTIONS.  The captions of the articles, paragraphs
and sections of this document are for convenience only and will not control or
affect the meaning or construction of any of its provisions.

 

9.7          VALIDITY.  In the event any provision of the Plan is
held invalid, void or unenforceable, the same will not affect, in any respect
whatsoever, the validity of any other provisions of the Plan.

 

9.8          WAIVER
OF BREACH.  The waiver by the
Company of any breach of any provision of the Plan will not operate or be
construed as a waiver of any subsequent breach by that Participant or any other
Participant.

 

17

 

9.9          NOTICE.  Any notice or filing required or
permitted to be given to the Company or the Participant under this Agreement
will be sufficient if in writing and hand-delivered, or sent by registered or
certified mail, in the case of the Company, to the principal office of the
Company, directed to the attention of the Company, and in the case of the
Participant, to the last known address of the Participant indicated on the
employment records of the Company.  Such
notice will be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration
or certification.  Notices to the Company
may be permitted by electronic communication according to specifications
established by the Company.

 

9.10        FACILITY
OF PAYMENT.  When a Participant
or the Beneficiary is under legal disability, or in the opinion of the Company
is in any way incapacitated so as to be unable to manager his/her financial
affairs, the Company may cause payments to be paid to the Participant’s or
Beneficiary’s legal representative for the Participant’s or Beneficiary’s
benefit, or the Company may cause payments to be applied for the benefit of the
Participant or Beneficiary, in any manner that it may determine.

 

18

 

APPENDIX A

 

EXECUTIVE
SAVINGS PLUS

 

The Plan contained
an Executive Savings Plus component (the “ESP”) prior to January 1, 2005,
which provided participants the ability to make elective deferrals of amounts
in excess of the maximum deferral amounts permitted for a participant under the
Company’s qualified defined contribution plan by reason of the limitations
imposed by Code §§ 401(a)(17), 402(g), and 415.

 

The ESP was closed
to further deferrals effective January 1, 2005, pursuant to an amendment
to the Plan. The provisions of this Appendix A apply with respect to deferrals
made under the ESP prior to January 1, 2005, with respect to any Active
Participant in the Plan on or after January 1, 2005.  With respect to any other Participant (that
is, any Participant who was not an Active Participant on or after January 1,
2005), this Appendix will not apply; rather, his/her rights will be determined
in accordance with the ESP provisions of the Plan in effect prior to January 1,
2005, as such terms may be amended in a manner that preserves “grandfather”
status under Code § 409A.

 

A.1          Definitions.  Capitalized terms not otherwise defined in
this Appendix A have the meaning ascribed to such terms in the main Plan.

 

(a)           “ESP
Account” means a recordkeeping account to which a Participant’s ESP
Deferrals, Excess Matching Credits and certain supplemental credits were
recorded.

 

(b)           “Excess
Deferrals” means the elective deferrals made under the ESP by a Participant
prior to January 1, 2005.

 

(c)           “Excess
Matching Credits” means the credit under the ESP on behalf of a Participant
prior to January 1, 2005, to reflect the amount of matching contributions
that would have been contributed to the Participant’s matching allocation
account under the Company’s qualified defined contribution plan for the
calendar year if the limitations under Code Sections 401(a)(17), 402(g) and
415 were disregarded, minus the amount of matching contributions actually made
to his matching allocation account under the Company’s qualified defined
contribution plan for the calendar year.

 

A.2          Participant Accounts.

 

                The
Company will maintain the following recordkeeping ESP Accounts for each
Participant:

 

(a)           An
Excess Deferral Account to reflect a balance attributable to ESP Deferrals;

 

(b)           An
Excess Matching Credit Account to reflect a balance attributable to Excess
Matching Credits.

 

(c)           An
Economy Supplemental Account to reflect certain supplemental credits for
certain Economy employees that were credited prior to January 1,
1997.  Such supplemental credits were
equal to the amount by which supplemental contributions under The St. Paul
Companies, Inc. Savings Plus Plan were reduced due to applicable limits
under the Code for a calendar year.

 

A Participant or Beneficiary may elect to have his or
her Account adjusted based on the performance of one or more investment options
deemed to be available under the Plan. 
The Company, acting through its Employee Benefits Investment Committee,
will determine the investment options that will be made available under the
ESP, which may include mutual funds, common or commingled investment funds,
group annuity, deposit administration or separate account contracts issued by
an

 

A-1

 

insurance company, a self-directed brokerage account
option or any other investment option deemed appropriate by the Company.  The Company, acting through the Investment
Committee, may at any time and from time to time add to or remove from the
investment options under the ESP.

 

A.3          Vesting.  A Participant will at all times be fully
vested in his Excess Deferral Account.  A
Participant is vested in his/her Excess Matching Contribution Account and
Economy Supplemental Account to the same extent that he/she is vested in the
comparable account under the Travelers 401(k) Savings Plan (or a successor
plan).

 

A.4          Distribution of
Benefits.

 

(a)           $50,000
or Less.  If a Participant’s ESP
Account balance is $50,000 or less as of his/her Separation from Service, the
Participant’s vested Account balance will be distributed in a single lump sum
on the first day of the seventh (7th)
month after the month in which the Participant has a Separation from Service.

 

(b)           More
than $50,000.  If a Participant’s
vested ESP Account balance exceeds $50,000 as of the date of his/her Separation
from Service, the Participant’s vested Account balance will be paid to him in
ten (10) annual installments, commencing on the first day of the seventh
(7th) month
after the month in which the Participant has a Separation from Service.

 

A.5          Death
Benefit.  Any undistributed vested ESP
benefit remaining at the time of a Participant’s death will be distributed to
the Participant’s designated beneficiary after the Company determines that a
survivor benefit is payable under the Plan — that is, the date the Company is
provided with the documentation necessary to establish the fact of death of the
Participant and the identity and entitlement of the Beneficiary.  The Participant’s ESP Account will be paid in
a lump sum, based upon the value of the Participant’s ESP Account as of the
close of the last day on which the major stock exchanges were open on or
immediately prior to the date of payment; provided however, that if an installment
payout to the Participant has already commenced at the time of the Participant’s
death with respect to a given ESP Account, the installment payout will continue
in accordance with the originally elected schedule.

 

A.6          Beneficiary
Designation.  Unless a Participant
otherwise designates, in the manner prescribed by the Company, the Beneficiary
to whom the undistributed balance of the Participant’s vested ESP Account will
be paid in the event of his/her death will be the same as the Participant has
designated, or in the absence of a valid designation hereunder, as is otherwise
applicable with respect to the Participant under the Travelers 401(k) Savings
Plan.  The Company’s good faith
distribution based on his actual knowledge of the existence of a Participant’s
beneficiaries will be conclusive and binding on all beneficiaries of a
Participant.  Notwithstanding any provision
of the Travelers 401(k) Savings Plan to the contrary, a Participant may
designate any beneficiary or beneficiaries under the ESP and may revoke any
previous designations without the consent of the Participant’s Spouse.

 

A-2form8k_exhibit10-1.htm

     

    
      Exhibit
10.1

      

      Summary of 2009 Named
Executive Officer Cash Compensation

      

      The
Compensation Committee of our Board of Directors has approved 2009 base salaries
for our named executive officers as set forth below.

      

      The
Compensation Committee has also approved a process for the determination of 2009
cash bonuses for our named executive officers, pursuant to which bonuses will be
determined in the discretion of the Compensation Committee based on the
achievement of certain corporate and individual goals in 2009.  The
corporate goals include objectives relating to the development of drug
candidates and the achievement of specified financial targets.  The
achievement of these goals will be evaluated by the Compensation Committee in
making determinations regarding bonuses for 2009 performance.  The
Compensation Committee has established a bonus target, expressed as a percentage
of base salary, for each of our named executive officers, assuming that
corporate and individual goals are fully achieved.  The bonus target
percentage for each of our named executive officers is set forth
below.

      

      
        
          
            
              
                
                  	
                          Name and Position

                        	 
      	
                          2009

                          Base Salary

                        	 	
                          2009

                          Bonus Target

                        
	
                          Arthur
      T. Sands, M.D., Ph.D.

                          President
      and Chief Executive Officer

                        	 
      	
                          $560,000

                        	 	
                           50%

                        
	
                          Alan
      J. Main, Ph.D.

                          Executive
      Vice President of Pharmaceutical Research

                        	 
      	
                          $340,000

                        	 	
                           35%

                        
	
                          Jeffrey
      L. Wade, J.D.

                          Executive
      Vice President and General Counsel

                        	 
      	
                          $340,000

                        	 	
                           35%

                        
	
                          Brian
      P. Zambrowicz, Ph.D.

                          Executive
      Vice President and Chief Scientific Officer

                        	 
      	
                          $365,000

                        	 	
                           40%

                        
	
                          James
      F. Tessmer

                          Vice
      President, Finance and Accounting

                        	 
      	
                          $225,000

                        	 	
                           25%

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