Document:

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American Financial Group, Inc.

Deferred Compensation Plan

(As amended and restated effective November 1, 2007)

	Establishment and Purpose

Effective November 1, 1999, American Financial Group, Inc. ("AFG" or the "Company") adopted this Deferred Compensation Plan (the "Plan") to enable eligible Employees of the Company and its subsidiaries to defer payment of a portion of their compensation.  This Plan has subsequently been amended and restated.  This Plan was amended and restated for deferrals made on or after January 1, 2005 to provide good faith compliance with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended.  This Plan is amended and restated as set forth herein effective as of November 1, 2007 unless otherwise provided.

	Plan Objectives

The purpose of the Plan is to assist eligible Employees to:

	Accumulate income for retirement; and

	Provide opportunity for financial growth.

	Definitions

When used in this Plan, the following words and phrases shall have the following meanings:

	"Account" means the record maintained for each Participant to which all deferrals, earnings (or losses) and distributions are credited and debited for each Plan Year.

	"Administrator" means the person or persons appointed by the Board of Directors of the Company who is responsible for those functions assigned to the Administrator under the terms of the Plan.

	"Base Salary" means annual base pay, excluding any bonuses and other extraordinary payments, payable by the Company to a Participant.

	"Bonus" means any direct lump-sum payment paid for services rendered in addition to the Participant's Base Salary.

	"Code" means the Internal Revenue Code of 1986, as amended.

	"Common Stock" means the Company's common stock.

	"Company" means American Financial Group, Inc. and (unless the context indicates otherwise) its subsidiaries and affiliates.

	"Compensation" means Base Salary and Bonus.

	"Disabled" or "Disability" means the Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company.

	"Election Form" means a Participant's agreement, on a form provided by the Administrator or in such other manner acceptable to the Administrator, to defer the Participant's Base Salary and/or Bonus.

	"Employee" means an employee of the Company.

	"Expiration Date" means, with respect to each annual deferral hereunder, the earlier of (i) December 31 of the year prior to the year to which a Participant elects to defer Compensation, or (ii) the pay date for the payroll period in which a Participant dies, becomes Disabled or terminates employment with the Company.

	"Participant" means an officer or other highly compensated Employee who participates in the Plan for a designated Plan Year in accordance with the terms of the Plan, and who has an Account in the Plan.

	"Plan" means this American Financial Group, Inc. Deferred Compensation Plan, as amended and restated from time to time.

	"Plan Year" means the calendar year, January 1 through December 31.  The initial Plan Year commenced on January 1, 2000.

	Eligibility

Officers and other highly compensated Employees of the Company and its subsidiaries will be eligible to become Participants in the Plan either through annual invitation by the Administrator or through an employment agreement approved by the Chief Executive Officer.

	Participation

	A Participant participates in the Plan by delivering to the Administrator at the time and in the manner specified each year by the Administrator prior to the beginning of each Plan Year, a properly completed Election Form that conforms to the terms and conditions of the Plan.  Unless otherwise provided by the Administrator, an Election Form that is timely delivered to the Administrator shall be effective for the Plan Year following the year in which the Election Form is delivered to the Administrator.

	Notwithstanding the above, an individual's Election Form relating to a Bonus that is a performance-based payment based on services over a period of at least 12 months must be made no later than 6 months before the end of the service period.

	Deferred Compensation Account

	For each Plan Year, a deferred compensation Account will be established for each Participant.

	All Compensation deferred by the Participant, all earnings (or losses) determined under Section 9 and all distributions from the Account to the Participant or the Participant's beneficiaries or estate shall be reflected in the Account.

	The Administrator shall maintain all Accounts.

	Deferral Sources

	At the time of enrollment, a Participant must elect through an Election Form to defer a stated percentage of his or her Compensation for services rendered in the next Plan Year.

	Any Base Salary deferral must be at least 5% and no more than 80% of Base Salary.  Any Bonus deferral must be at least 10% and no more than 80% of each Bonus.  No deferral election shall reduce a Participant's paid Compensation below the amount necessary to satisfy applicable employment taxes (e.g., FICA/Medicare) on amounts deferred, benefit plan withholding requirements or income tax withholding for Compensation that cannot be deferred.

	Compensation deferred under this Plan shall be credited to the Participant's Account on the date such amounts would have otherwise been paid.

	The deferral sources and amounts elected for a given Plan Year are irrevocable.

	Deferral Term

At the time a Participant elects to defer Compensation, the Participant must also elect the term for which such deferral is made (the "deferral term").  The deferral term shall be either (i) a period ending on the date on which the Participant terminates employment with the Company for any reason, including death or disability (a "Termination of Service"), or (ii) until a specific payment year.  Notwithstanding a Participant's election to defer until a specific payment year, in the event of a Termination of Service, the Company shall distribute the Participant's Account to the Participant at any time prior to the expiration of the fixed number of years originally selected by such Participant; provided, however, for deferrals after December 31, 2004, the Company may not accelerate the payment, except as may be provided in Section 10 of this Plan or otherwise in accordance with Section 409A and all regulations thereunder.

	Crediting of Earnings

	There shall be credited to the Account of each Participant an additional amount of earnings (or losses) determined under this Section 9.

	At the time a Participant elects to defer Compensation, each Participant also shall elect (in whole percentages) to have earnings (or losses) credited to his or her Account under one (or a combination) of the investment elections provided herein.  Prior to January 1, 2006, the investment elections were the following:

	Interest Election 

	Common Stock Election

Effective as of January 1, 2007, in addition to the investment elections named above, there shall be a Mutual Fund Election.  A Participant who makes the Mutual Fund Election may allocate his or her Account among any combination of the Mutual Funds that are selected and made available by the Plan Administrator from time to time as identified in the attached Schedule A.

To the extent a Participant selects the Interest Election, his or her Account will be adjusted to earn interest during any Plan Year of the deferral term at a rate determined by the Board of Directors of the Company not later than the prior November 15.  The interest rate selected will be based on the general level of interest rates as well as interest rates the Company is paying on its debt obligations.  In the exercise of its discretion, the Board of Directors of the Company may raise (but not lower) such selected interest rate for any Plan Year, based upon significant movements in the general level of interest rates.

To the extent a Participant selects to invest in the Common Stock Election, his or her Account will change in value based on the price of AFG Common Stock, beginning on the date of the investment in such Common Stock in accordance with the terms of the Plan.  The Account will be adjusted to reflect stock splits, distributions and dividends affecting the Common Stock.

Prior to January 1, 2008, Participants electing to invest in the Common Stock Election will also receive a matching contribution from the Company equal to 7-1/2% of their deferral (the "Common Stock Match").  The Common Stock Match will be credited to a Participant's Account at the same time as the Participant deferrals.  Effective as of January 1, 2008, Participants electing to invest in the Common Stock Election will not receive any additional contributions as the Common Stock Match.

	Prior to January 1, 2007, except as provided in Section 9(d), an investment election shall be effective for the entire deferral term to which it relates and may not be modified or terminated; provided, however, the Administrator may provide certain limited time periods to permit a Participant to make a transfer, reallocation or reinvestment subject to the procedures adopted by the Administrator.

	For each Plan Year prior to January 1, 2007, the Participant's Account shall be increased or decreased as if it had earned the rate of return corresponding to the amount determined under this Section.  Such increase or decrease shall be based on the varying balances in each of the investment elections comprising the Participant's Account throughout the Plan Year and shall be credited daily.

	Effective as of January 1, 2008, an investment election may be changed by a Participant in the time and manner determined by the Plan Administrator.

	Payment Form and Method

	Payments from the Plan shall be made in the form of cash, except in the case where a Participant's Account is being credited based on the Common Stock Election, in which case such Participant shall receive benefit payments in the form of whole shares of AFG Common Stock, or at the Company's election, in cash.  Any fractional shares shall be paid in cash.  Any required tax withholding will be deducted from the Participant's Account as determined by the Administrator.

	At the time of enrollment for a given Plan Year, a Participant shall elect the method of payment desired upon the Expiration Date of the deferral term(s) elected.  A Participant may choose either a lump sum or installment payment method for a given Plan Year.  For deferral elections made after December 31, 2004, installment payments will be limited to a payout over a two-year period. 

	For deferrals made after December 31, 2004, all elections regarding the time and form of payment must meet the following requirements:

	Elections shall not be effective until 12 months after the date the election is made.

	For all elections for payments other than because of Disability, death or an unforeseeable emergency, as defined in Section 13, the first payment may not be made for a period of not less than 5 years from the date such payment would otherwise have been made.

	Any payment to be made in an installment may not be made less than 12 months prior to the date of the first scheduled payment and in accordance with Section 10.h.ii above.

	No acceleration of any distribution shall be permitted except for any acceleration permitted by Treasury regulations including, but not limited to, a de minimis amount set forth in the Plan; an amount in accordance with a domestic relations order; an amount necessary to comply with federal conflicts of interest requirements, or an amount necessary to pay FICA tax due under Section 3121(v)(2) of the Code.

	For deferrals made prior to January 1, 2005, all elections regarding the time and form of payment may only be changed upon notice at least 6 months prior to the date the first scheduled payment will be made.  While the installment period originally elected is irrevocable, Participants selecting installment payments may change their distribution election to a lump sum upon six month's prior notice to the Company.

	Notwithstanding a Participant's election, a Participant who terminates employment for any reason prior to normal retirement shall have the Participant's benefit paid in a single lump sum in cash as soon as administratively reasonable after such termination of employment as determined by the Plan Administrator, but in no event later than 90 days after such termination of employment.

	Notwithstanding the Participant's payment election for a Participant who is a "key employee" as defined in Section 409A of the Code, a distribution may not be made before the date which is 6 months after the date of termination of service of such Participant (or if earlier, the date of death of the Participant).  The determination of "key employee" shall include a Participant who is a "key employee" at any time during the 12-month period ending on December 31 of each year.  This limitation on distributions shall only be applicable if Employer's stock is publicly traded on an established securities market or otherwise.

	Account Statement

An Account Statement will be sent to each Participant quarterly until the Participant's Account has been completely distributed.

	Account Distribution

	Payment will begin in January of the year following the Expiration Date, subject to the restrictions provided in Section 10 above.  Provided, however, for deferrals made after December 31, 2004, the distribution may not be made before the date which is 6 months after the date of Termination of Service, or, if earlier, the date of death of the Participant, for a Participant who is a key employee as defined in Section 416(i) of the Code without regard to paragraph 5 thereto, as long as the Company has stock which is publicly traded on an established securities market or otherwise.

	Elections regarding the installment method must be made at the time the Election Form is submitted.  

	Applicable federal, state, local and foreign taxes will be deducted from the gross amount of the payment, whether in cash or in shares of AFG Common Stock, as determined by the Administrator.

	If installment payments are in effect, the Participant's Account shall continue to be credited with earnings (or losses) hereunder until payment of the final installment.

	Hardship Distributions; Suspensions of Deferral

	Distribution of payments from a Participant's Account for deferrals prior to January 1, 2005 prior to the Expiration Date shall be made only if the Administrator, after consideration of an application by such Participant, determines that the Participant has sustained financial hardship caused by events beyond the Participant's control.  In such event, and notwithstanding anything to the contrary herein, the Administrator may, at its sole discretion, direct that all or a portion of the Account be paid to the Participant in such manner, and at such times as determined by the Administrator.

	Distribution of payments from a Participant's Account for deferrals after December 31, 2004 prior to the Expiration Date shall be made only if the Administrator, after consideration of an application by such Participant, determines that the Participant has the occurrence of an "unforeseeable emergency."  An "unforeseeable emergency" means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant's spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.  In such event, and notwithstanding anything to the contrary herein, the Administrator may, at its sole discretion, direct that all or a portion of the Account be paid to the Participant in such manner, and at such times as determined by the Administrator.

	The Administrator may suspend deferrals upon request by any Participant if the Administrator determines that the Participant has sustained financial hardship caused by events beyond the Participant's control.

	Beneficiary Designation

	A Participant shall have the right to designate one or more beneficiaries and to change any beneficiary previously designated.

	A Participant shall submit his or her beneficiary designation in writing using the beneficiary designation portion of the Election Form.  The Participant shall deliver the completed form to the Administrator.  The most recently dated and filed beneficiary designation shall cancel all prior designations.

	In the event of the Participant's death before or after the commencement of payments from the Account, the amount otherwise payable to the Participant shall be paid to the designated beneficiaries, and if there are no beneficiaries, to the estate of the Participant, according to the provisions of Section 12.

	GAFRI Deferred Compensation Plan Merger

	Effective as of November 1, 2007, the Great American Financial Resources, Inc. Deferred Compensation Plan (the "GAFRI Plan") shall be merged into this Plan.  Employees of Great American Financial Resources, Inc. ("GAFRI") and terminated employees with deferred benefits who were participants in the GAFRI Plan as of October 31, 2007, shall be Participants in this Plan as of November 1, 2007 (a "GAFRI Participant").

	All Election Forms completed by the GAFRI participants under the terms of the GAFRI Plan will be honored until December 31, 2007.  To the extent a GAFRI Participant elected to receive an installment payment over a period greater than two years, that election will be honored.  Any changes to such election will be subject to the two-year limitation provided in Section 10.  The Plan will also honor all valid beneficiary designation forms submitted to the GAFRI Plan.

	All amounts merged that were deferred prior to January 1, 2005 will be paid in accordance with the following provision.  Payment will begin on the first payroll date of the month which first follows a 30-day processing period beginning on the Expiration Date.  All other payments will be made in accordance with Section 12.  

	General Provisions

	Participant's Rights Unsecured.   The right of any Participant to receive payments under the provisions of this Plan shall be an unsecured claim against the general assets of the Company.  It is not required or intended that the amounts credited to the Participant's Account be segregated on the books of the Company or be held by the Company in trust for a Participant and a Participant shall not have any claim to or against a specific asset or assets of the Company.  All credits to an Account are for bookkeeping purposes only.

	Non-assignability.   The right to receive payments shall not be transferable or assignable by a Participant.  Any attempted assignment or alienation of payments shall be void and of no force or effect.

	Administration.   The Administrator shall have the authority to adopt rules, regulations and procedures for carrying out this Plan, and shall interpret, construe and implement the provisions of the Plan according to the laws of the Code and to the extent not preempted by federal law, according to the laws of the State of Ohio.

	Amendment and Termination.   This Plan may at any time or from time to time be amended or terminated.  No amendment, modification or termination shall adversely affect the Participant's rights under this Plan.

	Construction.   The singular shall also include the plural where appropriate.

	Employment Rights.   This Plan does not constitute a contract of employment and participation in the Plan will not give any Participant the right to be retained in the employ of the Company.

	No Bonus Rights.   This Plan does not confer the right for a Participant to receive a Bonus.

 

 

 

 

Schedule A

Mutual Fund Investment Election

as of

November 1, 2007

 

	AFG Fixed Interest Fund
	Fidelity Capital & Income Fund
	Fidelity Inflation-Protected Bond Fund 
	Fidelity Balanced Fund
	Spartan® Total Market Index Fund - Investor Class 
	Fidelity Leveraged Company Stock Fund 
	DFA U.S. Small Cap Portfolio
	Fidelity International Discovery Fund 
	Fidelity Emerging Markets Fund 
	AFG Common Stock Fund2008 Annual Sr Exec Bonus Plan

 

 

 

 

 

 

 

 

 

2008 ANNUAL SENIOR EXECUTIVE BONUS PLAN

 

Adopted on February 25, 2008

 

 

 

 

 

 

 

 

 

AMERICAN FINANCIAL GROUP, INC.

2008 ANNUAL SENIOR EXECUTIVE BONUS PLAN

 

 

1.PURPOSE

The purpose of the 2008 Annual Senior Executive Bonus Plan (the "Plan") is to further the profitability of American Financial Group, Inc. (the "Company") to the benefit of the shareholders of the Company through promoting high levels of corporate performance by including performance-based compensation as a component of a Plan participant's annual compensation. 

2.ADMINISTRATION

Except as otherwise expressly provided herein, the Plan shall be administered by the Compensation Committee or a successor committee or subcommittee (the "Committee") of the Board of Directors of the Company (the "Board") composed solely of two or more "outside directors" as defined pursuant to Section 162(m) of the Internal Revenue Code.  No member of the Committee while serving as such shall be eligible to be granted a bonus under the Plan.  Subject to the provisions of the Plan (and to the approval of the Board where specified in the Plan), the Committee shall have exclusive power to determine the conditions (including performance requirements) to which the payment of the bonuses may be subject and to certify that performance goals are attained.  Subject to the provisions of the Plan, the Committee shall have the authority to interpret the Plan and establish, adopt or revise such rules and regulations and to make all determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan.  The Committee's interpretation of the Plan and all of its actions and decisions with respect to the Plan shall be final, binding and conclusive on all parties.

3.PLAN TERM AND BONUS YEARS

The term of the Plan is one year, commencing January 1, 2008, which term shall be renewed from year to year unless and until the Plan shall be terminated or suspended as provided in Section 9.  As used in the Plan the term "Bonus Year" shall mean a calendar year.

4.PARTICIPATION

Subject to the approval of the Committee, each of the Company's Co-Chief Executive Officers and Senior Vice Presidents, if any, shall participate in the Plan (the "Participants"). 

5.ESTABLISHMENT OF INDIVIDUAL BONUS TARGETS AND PERFORMANCE CRITERIA

The Committee shall approve the individual target amount of bonus (the "Bonus Target") that may be awarded to each Participant.  In no event shall the establishment of any Participant's Bonus Target give a Participant any right to be paid all or any part of such amount unless and until a bonus is actually awarded pursuant to Section 6.

 

The Committee shall establish the performance criteria (the "Performance Criteria") that will apply to the determination of the bonus of each Participant for that Bonus Year and recommend that the Board adopt such action.  The Bonus Targets and Performance Criteria shall be set forth annually on Schedules attached to this Plan and shall be recommended by the Committee and approved by the Board.  The Performance Criteria are to be established based on financial measurements and operational metrics.  The financial measurements may include, among other things, return on equity, per share price of common stock relative to prior periods and comparable companies as well as financial markets, status of credit ratings on outstanding debt and claims paying ability of the Company's subsidiaries, and the status of the Company's debt-to-capital ratio.  The operational metrics may include performance goals relating to, among other things, the combined ratios of the Company's insurance subsidiaries, investment portfolio performance including realized gains and losses, as well as other operational, qualitative measurements relating to the development and implementation of strategic initiatives and annual objectives, responses to unexpected developments, the development of management personnel, but generally exclude the results of any announced re-examination of asbestos, environmental and other tort liabilities, and the impact of any extraordinary transactions involving or affecting the Company and its subsidiaries.

6.DETERMINATION OF BONUSES AND TIME OF PAYMENT

As soon as practicable after the end of each calendar year during the term of the Plan, the Committee shall determine whether or not the Performance Criteria of each Participant have been attained and shall determine the amount of the bonus, if any, to be awarded to each Participant for such year according to the terms of this Plan.  Such bonus determinations shall be based on achievement of the Performance Criteria for such year.  The Committee shall certify in writing that the Performance Criteria have been achieved prior to payment of any bonus under the Plan.

As a separate element of the Plan, the Committee retains the discretion to pay an amount above or below the amounts attributable to the achievement of the objective performance goals, based on such factors and circumstances as the Committee deems appropriate..  However, no such payment may increase the amount paid to a participant above 175% of their bonus target.  

Once the bonus is so determined for each Participant, it shall be paid in cash.

7.TERMINATION OF EMPLOYMENT

If a Participant's employment with the Company or a subsidiary, as the case may be, is terminated for any reason other than discharge for cause, he may be entitled to such bonus, if any, as the Committee, in its sole discretion, may determine.

In the event of a Participant's discharge for cause from the employment of the Company or a Subsidiary, as the case may be, he shall not be entitled to any amount of bonus.

8.MISCELLANEOUS

A.Government and Other Regulations.  The obligation of the Company to make payment of bonuses shall be subject to all applicable laws, rules and regulations and to such approvals by governmental agencies as may be required.

B.Tax Withholding.  The Company or a Subsidiary, as appropriate, shall have the right to deduct from all bonuses paid in cash any federal, state or local taxes required by law to be withheld with respect to such cash payments.

C.Claim to Bonuses and Employment Rights.  Neither this Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ of the Company or a Subsidiary.

D.Beneficiaries.  Any bonuses awarded under this Plan to a Participant who dies prior to payment shall be paid to the beneficiary designated by the Participant on a form filed with the Company.  If no such beneficiary has been designated or survives the Participant, payment shall be made to the Participant's legal representative.  A beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Company.

E.Nontransferability.  A person's rights and interests under the Plan may not be assigned, pledged or transferred except, in the event of a Participant's death, to his designated beneficiary as provided in the Plan or, in the absence of such designation, by will or the laws of descent and distribution.

F.Indemnification.  Each person who is or shall have been a member of the Committee or of the Board shall be indemnified and held harmless by the Company (to the extent permitted by the Articles of Incorporation and Code of Regulations of the Company and applicable law) against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit or proceeding to which he may be a party or in which they may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company's approval, or paid by him, in satisfaction of judgment in any such action, suit or proceeding against him.  He shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's Articles of Incorporation or Code of Regulations, as a matter of law or otherwise or of any power that the Company may have to indemnify him or hold him harmless.

G.Reliance on Reports.  Each member of the Committee and each member of the Board shall be fully justified in relying or acting in good faith upon any report made by the independent certified public accountants of the Company or of its Subsidiaries or upon any other information furnished in connection with the Plan by any officer or director of the Company or any of its Subsidiaries.  In no event shall any person who is or shall have been a member of the Committee or of the Board be liable for any determination made or other action taken or any omission to act in reliance upon any such report or information or for any action taken, including the furnishing of information, or failure to act, if in good faith.

H.Expenses.  The expenses of administering the Plan shall be borne by the Company and its subsidiaries in such proportions as shall be agreed upon by them from time to time.

I.Pronouns.  Masculine pronouns and other words of masculine gender shall refer to both men and women.

J.Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only, and, in the event of any conflict between any such title or heading and the text of the Plan, such text shall control.

9.AMENDMENT AND TERMINATION

The Board may at any time terminate the Plan.  The Board may at any time, or from time to time, amend or suspend and, if suspended, reinstate the Plan in whole or in part.  Notwithstanding the foregoing, the Plan shall continue in effect to the extent necessary to settle all matters relating to the payment of bonuses awarded prior to any such termination or suspension.

 

 

 

 

 

 

 

 

Schedule I

Annual Senior Executive Bonus Plan

for 2008

Participants and

Bonus Targets

 

 

	
 

Name
	

Position
	
Total

Bonus Target
	
EPS

Component
	
Performance

Component

	 	 	 	 	 
	
Carl H. Lindner III
	
Co-CEO & Co-President
	
$1,300,000
	
50%
	
50%

	 	 	 	 	 
	
S. Craig Lindner
	
Co-CEO & Co-President
	
$1,300,000
	
50%
	
50%

	 	 	 	 	 
	
James E. Evans
	
Senior Vice President
	
$875,000
	
50%
	
50%

	 	 	 	 	 
	
Keith A. Jensen
	
Senior Vice President
	
$580,000
	
50%
	
50%

	 	 	 	 	 
	
Thomas E. Mischell
	
Senior Vice President
	
$390,000
	
50%
	
50%

 

 

 

 

 

 

 

Schedule II

Annual Senior Executive Bonus Plan

for 2008

2008 Performance Criteria for Participants

The overall bonus for 2008 for each Participant will be the sum of such Participant's bonuses for the following two Performance Criteria components:

A.EPS Component.

Each participant's bonus allocated to the EPS Component will range from 0% up to 175% with respect to the Co-Chief Executive Officers, and 0% up to 125% with respect to the Senior Vice Presidents, of the dollar amount of the Bonus Target allocated to the EPS Component, based on the following levels of reported earnings per common share from insurance operations ("Operating EPS" defined below) achieved by the Company and its consolidated subsidiaries for 2007:

	 	
Percentage of Bonus Target to be paid

	
Operating EPS
	
                For EPS Component               

	 	 	 
	 	
Co-CEOs
	
Senior VPs

	
Less than $3.50
	
0%
	
0%

	
$3.85
	
100%
	
100%

	
$4.10 or more
	
175%
	
125%

	 	 	 

If the Operating EPS is $3.50 or greater, but less than $3.85, or if the Operating EPS is greater than $3.85 and less than $4.10, the bonus will be determined by straight-line interpolation.

The Operating EPS to be considered is diluted EPS from the Company's insurance operations and not including investee results, realized gains and losses in the investment portfolio and unusual or non-recurring items; non-recurring items shall include any charge taken as a result of a regularly scheduled re-examination of asbestos, environmental and other mass tort liabilities.  Additionally, the Committee shall have the power and authority, in its discretion, to adjust reported Operating EPS upward or downward for purposes of the Plan to the extent the Committee deems equitable.

B.Performance Component

Each participant's bonus allocated to the Company and Individual Performance Component will range from 0% up to 175% with respect to the Co-Chief Executive Officers, and 0% up to 125% with respect to the Senior Vice Presidents (of the dollar amount of the Bonus Target allocated to the Company and Individual Performance Component) and will be determined by the Compensation Committee, based on the achievement of the established performance objectives and the Compensation Committee's rating of the Company's and the Participant's performance for the prior year.  Such rating shall include a consideration of all factors deemed relevant, including financial, non-financial and strategic factors.

When determining the Company's and the Participant's performance, the Committee intends to establish the factors it believes are relevant to such performance.  It may be appropriate to consider factors including, but not limited to:

	Financial measurements such as growth in book value per share, return on equity, per share price of common stock relative to certain indices, status of the Company's debt-to-capital ratio, the combined ratios of the Company's insurance subsidiaries, and investment portfolio performance; and

	Other operational, qualitative measurements relating to the development and implementation of strategic initiatives and annual objectives, responses to unexpected developments, and the development of management personnel.

The Committee intends to review these factors periodically with the Co-Chief Executive Officers in connection with the discussion of management's progress in addressing corporate plans, results, and opportunities in the context of new economic and business developments.

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