SAMPLE 2 – Original

Annual Incentive Compensation

ABC’s CEO and his direct reports (including Messrs. Smith, Jones, White, and Ms. Brown) participate in the Annual Performance Plan (the “Performance Plan”). Awards made under this plan are fully tax deductible by ABC. Bonuses under the Performance Plan are calculated using a two-step approach: First, a bonus pool is funded based on the attainment of an objective performance measure and each executive is allocated a potential share of the pool. For 2006, this measure was 0.55% of total revenue. This measure was selected due to it’s stability in the event of structural changes and ABC’s focus on revenue growth.

Second, the Committee establishes specific annual and long term targets for the CEO and his direct reports and determines the amount actually paid to each participant following the end of the year based on the achievement of the financial and strategic objectives established for the Annual Incentive Plan (the “Incentive Plan”) for the year and performance against individual goals. The Committee assesses participants’ performance against these goals to determine the incentive earned by each. Under the Incentive Plan, the Compensation and Organization Committee uses the three primary performance metrics-EPS, ROE and EPA-each of which is assigned a specific weight. The assigned weights for 2006 were 50% EPS and 25% each ROE and EPA. In establishing goals for each metric, the Committee considered ABC’s 2006 operating plan, the outlook for the industry, and its peer group, and the median performance of peer companies during the preceding three- and five-year periods.

At year-end, ABC’s actual corporate results are measured and expressed as a performance percentage. The Committee may make adjustments for changes in accounting rules, gains from the sales of subsidiaries or assets outside the ordinary course of business, or a restructuring or other non-recurring charge or adjustment when measuring actual corporate results. To receive the minimum payout, results must reach defined threshold levels. For performance at threshold, the Incentive Plan will fund 50% of target. If results fall below the defined threshold level for one or more measure, a knockout factor may be triggered. If the knockout factor is triggered, the Committee has the discretion to fund up to 25% of target in order to reward progress toward goal achievement and facilitate retention of critical employees. When results meet Board expectations, the Plan funding will equal 100% of target and for outstanding performance, the maximum plan funding will equal 300% of target. The maximum funding was set at 300% of target to allow for significant leverage in the event the Company performed at a “break out” level relative to specific financial goals and in the top decile of the peer group. An example of the calculation that establishes a payout percentage between 0% and 300% for performance results relative to the achievement of the annual goals is as follows:

[table omitted]

The Committee may increase or decrease that percentage by as much as 30% up or down to account for factors such as the quality of earnings, the overall performance of the economy and the industry, earnings per share growth and return on equity compared to peers and qualitative items. We believe that 30% discretion is appropriate because it allows for the committee to make adjustments without rendering the performance goals and calculation irrelevant. It is not our intention to waive the goals. An overall incentive pool is established by adding together the target incentive opportunities for each of the CEO’s direct reports and multiplying the payout percentage to determine the funded pool of incentive compensation available for distribution. Individual payouts are based on each executive officer’s performance and contribution to ABC, taking into account the performance and contribution of the group or business line in which the officer leads. The annual incentive compensation award may vary from zero to multiples of target based on performance, so long as it is within the funded pool of incentive compensation available for distribution that year under the Incentive Plan and the amount is within the allocated share of the bonus pool funded for the year under the Performance Plan.

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