Section 162(m) of the Internal Revenue Code (“Section 162(m)”) precludes a deduction by any publicly held corporation for compensation paid to the CEO and the next four highest compensated executives to the extent the annual compensation exceeds $1 million. However, if compensation qualifies as “performance-based,” it is not subject to the $1 million limitation.

      In order for annual bonuses under the Company’s Management Incentive Plan (“MIP”) to certain executive officers of the Company, its subsidiaries and its affiliates to be deemed performance-based compensation, the Company each year will create a bonus pool in which such executives will be awarded compensation under the MIP equal to 5% of Adjusted Net Operating Income (the “Bonus Pool”).

      The Bonus Pool shall be calculated using the Adjusted Net Operating Income (“ANOI”) that is disclosed to stock analysts for such year, and is generally defined as net income as adjusted to eliminate certain items that do not reflect results from continuing operations. Such items may but need not include: open block realized/unrealized gains and losses; DAC and VOBA associated with the open block realized/unrealized gains and losses; non-insurance gains and losses; DAC and VOBA associated with the open block realized/unrealized gains and losses; non-insurance tax provisions; discontinued operations and the cumulative effect of change in accounting.

      In order to for MIP bonuses from the Bonus Pool to be considered performance-based compensation, the procedures set forth below are to be followed:

      1. Within 90 days of the start of the year or such earlier time as required to comply with Section 162(m), the Committee shall in writing, by resolution or otherwise:




      a. Affirm the formula for determining the size of the Bonus Pool




      b. Specify the executives that will be entitled to participate in the Bonus Pool (each a “Participant”) and




      c. For each Participant, specify a maximum award, expressed as a percentage of the Bonus Pool. The maximum award shall include any match under the Company’s MIP Deferral Plan. The maximum percentage that may be paid to anyone Participant will not exceed 40% of the Bonus Pool. The total of the maximum percentages for all Participants shall not exceed 100% of the Bonus Pool.

      2. Following the end of the applicable year, and before any payments are made to a Participant under the MIP, the Committee shall certify in writing (i) that the Company had positive ANOI for the year and (ii) the size of the Bonus Pool.

      3. Following the end of the applicable year, the Committee may determine to grant any Participant a MIP bonus, which may not exceed the amount equal to such Participants maximum percentage specified in

1(c) above multiplied by the Bonus Pool. The Committee may reduce or eliminate any MIP bonus granted to any Participant based on any factors determined by the Committee, including individual performance goals established for such Participant.

      Amounts paid out of the Bonus Pool will otherwise be paid in accordance with the terms of the MIP. Other than as set forth herein, all terms of the MIP shall govern the Bonus Pool.

      The Bonus Pool and all payments out of the Bonus Pool are contingent upon shareholders of the Company approving the material terms of these procedures as required by Section 162(m).