Exhibit 10
OHIO CASUALTY CORPORATION
2005 INCENTIVE PLAN
1.00 PURPOSE
This Plan is intended to foster and promote the long-term financial success
of the Company and its Subsidiaries; to reward performance and to increase
shareholder value by providing Participants appropriate incentives and
rewards; to enable the Company to attract and retain the services of
outstanding individuals upon whose judgment, interest and dedication the
successful conduct of the Company's and its Subsidiary's business is largely
dependent; to encourage Participants' ownership interest in the Company; and
to align the interests of management and directors with that of the Company's
shareholders.
2.00 DEFINITIONS
When used in this Plan, the following terms will have the meanings given to
them in this section unless another meaning is expressly provided elsewhere
in this document or clearly required by the context. When applying these
definitions and any other word, term or phrase used in this document, the
form of any word, term or phrase will include any and all of its other
forms.
Act. The Securities Exchange Act of 1934, as amended.
Annual Meeting. The annual meeting of the Company's shareholders.
Award. Any Incentive Stock Option, Nonqualified Stock Option, Restricted
Stock, Restricted Stock Unit, Stock Appreciation Right, shares of Stock,
Stock Units and Cash Awards. Grants of Restricted Stock, Restricted Stock
Units, Stock Units and Cash Awards may, as determined by the Committee in
its sole discretion, constitute Performance-Based Awards, as described in
Section 11.00.
Award Agreement. The written or electronic agreement between the Company
and each Participant that describes the terms and conditions of each Award
and the manner in which it will be settled if earned. If there is any
conflict between the terms of this Plan and the terms of the Award
Agreement, the terms of the Plan will prevail.
Beneficiary. The individual a Participant designates to receive (or to
exercise) any Plan benefits (or rights) that are unpaid (or unexercised)
when the Participant dies. A Beneficiary may be designated only by
following the procedures described in Section 15.02; neither the Company nor
the Committee is required or permitted to infer a Beneficiary from any other
source.
Board. The Company's board of directors.
Business Combination. A transaction of the type described in Section 13.01.
Business Criteria. One or more of the criteria listed in Section 11.02.
Cash Award. Any Award that is granted to a Participant under Section 10.00
and which the Award Agreement specifies will be paid in cash.
Cause. For purposes of this Plan and unless otherwise specified in the
Award Agreement, with respect to any Participant who is an Employee:
[1] Any act of fraud, intentional misrepresentation, embezzlement,
misappropriation or conversion of any Company or Subsidiary asset or
business opportunity;
[2] Conviction of, or entering into a plea of nolo contendere to,
a felony;
[3] Intentional, repeated or continuing violation of any of the
Company's policies or procedures that occurs or continues after notice
to the Participant that he or she has violated a Company policy or
procedure; or
[4] Any breach of a written covenant or agreement with the Company
or any Subsidiary, including the terms of this Plan.
Code. The Internal Revenue Code of 1986, as in effect on the Effective Date
or as amended or superseded after the Effective Date, and any applicable
regulations and rulings issued under the Code.
Committee.
[1] In the case of Awards to Directors, the entire Board; or
[2] In the case of all other Awards, the Board's compensation
committee which also is a "compensation committee" within the
meaning of Section 1.162-27(c)(4) of U. S. Treasury Regulations.
The Committee will be comprised of at least three individuals
[a] each of whom must be [i] an outside director, as defined in
Section 1.162-27(e)(3)(i) of U. S. Treasury Regulations and [ii] a
"non-employee director" within the meaning of Rule 16b-3 under the
Act and [b] none of whom may receive remuneration from the Company
or any Subsidiary in any capacity other than as a director, except
as permitted under Section 1.162-27(e)(3) of U. S. Treasury
Regulations.
Company. Ohio Casualty Corporation, a corporation organized under the laws
of Ohio, and all successors to it.
Director. Each member of the Board or of the board of directors of any
Subsidiary who is not an Employee.
Disability. A disability as defined in Code Section 22(e)(3).
Dividend Equivalent Right. A right to receive the amount of any dividend
paid on a Share of Stock underlying a Stock Unit, as provided in Section
9.03.
Effective Date. The earlier of [1] the date this Plan is approved by the
Board or [2] the date this Plan is approved by the Company's shareholders.
Employee. Any individual who is a common law employee of the Company or of
any Subsidiary. A worker who is classified as other than a common law
employee but who is subsequently reclassified as a common law employee of an
Employer for any reason and on any basis will be treated as a common law
employee only from the date of that
reclassification and will not retroactively be reclassified as an Employee
for any purpose of this Plan.
Exercise Price. The price, if any, at which a Participant may exercise an
Award.
Fair Market Value. The value of one share of Stock on any relevant date,
determined as follows:
[1] If the shares are traded on an exchange (including the
NASDAQ National Market System), the reported "closing price" on the
relevant date, if it is a trading day; otherwise on the next trading
day;
[2] If the shares are traded over-the-counter with no reported
closing price, the mean between the lowest bid and the highest asked
prices on that quotation system on the relevant date if it is a
trading day; otherwise on the next trading day; or
[3] If neither subsection [1] nor [2] of this definition applies,
the fair market value as determined by the Committee in good faith
and, with respect to Incentive Stock Options, consistent with rules
prescribed under Code Section 422.
Freestanding SAR. A Stock Appreciation Right that is not associated with an
Option and is granted under Section 7.00.
Grant Date. The later of [1] the date the Committee establishes the terms
of an Award or [2] the date specified in the Award Agreement.
Incentive Stock Option. Any Option granted under Section 5.00 that, on the
Grant Date, meets the conditions imposed under Code Section 422(b) and is not
subsequently modified in a manner inconsistent with Code Section 422.
Nonqualified Stock Option. Any Option granted under Section 5.00 that is
not an Incentive Stock Option.
Option. The right granted under Section 5.00 to purchase a share of Stock
at a stated price for a specified period of time. An Option may be either
[1] an Incentive Stock Option or [2] a Nonqualified Stock Option.
Participant. Any Employee or Director to whom the Committee grants an
Award. Designation of a Participant in any year will not require the
Committee to designate that person to receive an Award in any other year or,
once designated, to receive the same type or amount of Award granted to the
Participant in any other year. The Committee will consider the factors it
deems pertinent to selecting Participants and in determining the type and
amount of their respective Awards.
Performance-Based Award. An Award granted subject to Section 11.00.
Performance Period. The period over which the Committee will determine if a
Participant has met conditions imposed on a Performance-Based Award.
Plan. Ohio Casualty Corporation 2005 Incentive Plan.
Plan Year. The Company's fiscal year.
Prior Plan. The Ohio Casualty Corporation 2002 Stock Incentive Plan.
Restricted Stock: An Award granted under Section 6.01.
Restricted Stock Unit: An Award granted under Section 6.02.
Restriction Period. The period over which the Committee will determine if a
Participant has met conditions placed on Restricted Stock or Restricted
Stock Units.
Retirement or Retire. In the case of:
[1] An Employee, Termination of Service after meeting the
definition of normal or early retirement under the Company's tax-
qualified defined benefit pension plan (or if no plan of this type
is then in effect, as defined in the tax-qualified defined benefit
pension plan that the Company most recently maintained), whether or
not the Employee is then accruing (or ever has accrued) a benefit
under that plan; and
[2] In the case of Directors, their departure from the Board for
any reason other than Disability or death.
Stock. Common shares of the Company.
Stock Appreciation Right (or "SAR"). An Award granted under Section 7.00
that is either a Tandem SAR or a Freestanding SAR.
Stock Unit. An Award granted under Section 9.00.
Subsidiary. Any corporation, partnership or other form of unincorporated
entity of which the Company owns, directly or indirectly, 50 percent or more
of the total combined voting power of all classes of stock, if the entity is
a corporation; or of the capital or profits interest, if the entity is a
partnership or another form of unincorporated entity.
Tandem SAR. An SAR that is associated with an Option and which expires when
that Option expires or is exercised, as described in Section 7.00.
Termination of Service (or references to a Participant's Service being
Terminated). As applicable, [1] termination of the employee-employer
relationship between a Participant and the Company and all Subsidiaries for
any reason, [2] with respect to an Employee of a Subsidiary, a severance or
diminution of the ownership relationship between the Company and that entity
after which that entity is no longer a Subsidiary and after which that
person is not an Employee of the Company or any entity that then is a
Subsidiary or [3] cessation of a Director's service on the Board (and the
boards of directors of all Subsidiaries) for any reason. However, (with
respect to any Award that is not an Incentive Stock Option) and unless the
Committee specifies otherwise either in the Award Agreement or subsequently,
a Termination of Service will not have occurred solely because an Employee
becomes a consultant to the Company or any Subsidiary but only if that
consultant is providing bona fide services to the Company or any Subsidiary.
Also, with respect to any Award (including an Incentive Stock Option), a
Termination of Service will not have occurred while the Employee is absent
from active employment for
a period of not more than three months (or, if longer, the period during
which reemployment rights are protected by law, contact or written agreement,
including the Award Agreement, between the Participant and the Company) due
to illness, military service or other leave of absence approved by the
Company.
3.00 ADMINISTRATION
3.01 Committee Duties.
[1] The Committee is granted all powers appropriate and necessary to
administer the Plan. Consistent with the Plan's purpose, the
Committee may adopt, amend and rescind rules and regulations relating
to the Plan, to the extent appropriate to protect the Company's
interests, and has complete discretion to make all other decisions
necessary or advisable for the administration and interpretation of
the Plan. Any action by the Committee will be final, binding and
conclusive for all purposes and upon all Participants.
[2] The Committee (or the Board, as appropriate) also may amend
the Plan and Award Agreements without any additional consideration
to affected Participants to the extent necessary to avoid penalties
arising under Code Section 409A, even if those amendments reduce,
restrict or eliminate rights granted under the Plan or Award
Agreement (or both) before those amendments.
3.02 Delegation of Duties. In its sole discretion, the Committee may
delegate to any individual or entity (including Employees) that it deems
appropriate any of its duties other than those described in Section 3.03[1]
and [2].
3.03 Participation.
[1] Consistent with the terms of the Plan, the Committee will:
[a] Decide which Employees and Directors may become
Participants;
[b] Decide which Participants will be granted Awards;
[c] Identify the type of Awards to be granted to each
Participant;
[d] Specify the terms and conditions imposed on any Awards
granted;
[e] Develop the procedures through which an Award may be
exercised;
[f] Specify the circumstances under which the Company may
cancel an Award or reacquire any Award or shares of Stock
acquired through the Plan;
[g] Impose any other terms and conditions the Committee
believes are appropriate and necessary to implement the
purpose of this Plan; and
[h] Discharge the duties described in Section 11.00 with
respect to Performance Based Awards.
[2] The Committee may establish different terms and conditions:
[a] For each type of Award;
[b] For Participants receiving the same type of Award; and
[c] For the same Participant for each Award the Participant
receives, whether or not those Awards are granted at different
times.
[3] The Committee (or its delegate) will prepare and deliver an
Award Agreement to each affected Participant with respect to each
Award. The Award Agreement will describe:
[a] The type of Award and when and how it may be exercised;
[b] The effect of exercising an Award;
[c] Any Exercise Price associated with the Award;
[d] Any conditions that must be met before the Award may be
exercised;
[e] Any performance objectives imposed on Performance-Based
Awards as described in Section 11.00;
[f] When and how the Award may be exercised; and
[g] Any other applicable terms and conditions affecting the
Award.
3.04 Conditions of Participation. By accepting an Award, each Participant
agrees:
[1] To be bound by the terms of the Award Agreement and the Plan;
and
[2] That the Committee (or the Board) may amend the Plan and the
Award Agreements without any additional consideration to the extent
necessary to avoid penalties arising under Code Section 409A, even
if those amendments reduce, restrict or eliminate rights granted
under the Plan or Award Agreement (or both) before those amendments.
4.00 STOCK SUBJECT TO PLAN
4.01 Number of Shares.
[1] Subject to Section 4.03, the number of shares of Stock subject to
Awards under the Plan is the sum of:
[a] 988,000; plus
[b] The number of shares of Stock that were authorized to be
awarded under the Prior Plan but were not awarded under the Prior
Plan; plus
[c] The number of shares of Stock that were awarded under the
Prior Plan but which are subsequently forfeited under the terms
of the Prior Plan.
The terms of the Prior Plan will continue to apply to all awards
issued under the Prior Plan while those awards are outstanding under
the Prior Plan. However, the terms of this Plan will apply to Awards
issued with respect to all shares of Stock described in Section
4.01[1][a], [b] and [c].
[2] The shares of Stock to be delivered under the Plan may consist,
in whole or in part, of treasury Stock or authorized but unissued
Stock not reserved for any other purpose.
4.02 Unfulfilled Awards. Any Stock subject to an Award that, for any
reason, is forfeited, cancelled, terminated, relinquished, exchanged or
otherwise settled without the issuance of Stock or without payment of
cash equal to the difference between the Award's Fair Market Value and
its Exercise Price may again be granted under the Plan and, in the
discretion of the Committee, may be subject to a subsequent Award.
4.03 Adjustment in Capitalization. If, after the Effective Date, there
is a Stock dividend or Stock split, recapitalization (including payment
of an extraordinary dividend), merger, consolidation, combination,
spin-off, distribution of assets to shareholders, exchange of shares, or
other similar corporate change affecting Stock, the Committee will
appropriately adjust the number of Awards that may or will be granted to
Participant in any Plan Year, the aggregate number of shares of Stock
available for Awards under Section 4.01 or subject to outstanding Awards
(as well as any share-based limits imposed under this Plan) the
respective Exercise Prices and/or limitations applicable to outstanding
or subsequently granted Awards and any other affected factor, limit or
term applying to Awards. Any decision of the Committee under this
section will be final and binding on all Participants and Beneficiaries.
4.04 Limitations on Number of Shares Issuable to a Participant. The
aggregate number of shares of Stock with respect to which Awards may be
issued under this Plan to any Participant in any calendar year will not
exceed 400,000 (adjusted as provided in Section 4.03), including Awards
that are cancelled or deemed to have been cancelled under Section
162-27(e)(2)(vi)(B) of U. S. Treasury Regulations during the Plan Year
granted.
5.00 OPTIONS
5.01 Grant of Options.
[1] The Committee may grant Options to Participants who are Employees
at any time during the term of this Plan. Options granted to Employees
may be either [a] Incentive Stock Options or [b] Nonqualified Stock
Options.
[2] The Committee may grant Nonqualified Stock Options to each
Director at any time, subject to any terms and conditions imposed by
the Committee on the Grant Date.
5.02 Option Price. Except as provided in Section 5.04[2], each Option
will bear an Exercise Price that is not less than the Fair Market Value
of a share of Stock on the Grant Date.
5.03 Exercise of Options. Options awarded to a Participant under Section
5.01 may be exercised at the times and subject to the restrictions and
conditions (including a
vesting schedule) that the Committee specifies in the Award Agreement
and to the terms of the Plan. However:
[1] An Option may not be exercised for a fraction of a share,
(instead, fractional shares will be settled in cash);
[2] The Committee may prohibit a Participant from exercising
Options for fewer than the minimum number of shares specified by the
Committee in the Award Agreement but only if this prohibition does
not prevent a Participant from acquiring the full number of shares
of Stock for which Options are then exercisable; and
[3] Unless the Committee specifies otherwise in the Award
Agreement, no Option may be exercised more than 10 years after its
Grant Date.
5.04 Incentive Stock Options. Notwithstanding anything in the Plan to
the contrary:
[1] The aggregate Fair Market Value of the Stock (determined as
of the Grant Date) with respect to which Incentive Stock Options are
exercisable for the first time by any Participant during any
calendar year (under all option plans of the Company and all
Subsidiaries) will not exceed $100,000 [or the amount specified in
Code Section 422(d)], determined under rules issued under Code
Section 422;
[2] Each Incentive Stock Option granted to a Participant who
owns [as defined in Code Section 424(d)] Stock possessing more than
10 percent of the total combined voting power of all classes of
Stock or the combined voting power of any Subsidiary, determined
under rules issued under Code Section 422, will bear an Exercise
Price that is at least 110 percent of the Fair Market Value of a
share of Stock on the Grant Date;
[3] No Incentive Stock Option may be granted to any individual
who is not an Employee on the Grant Date;
[4] No Incentive Stock Option may be exercised more than 10
years after it is granted (five years if the Participant owns [as
defined in Code Section 424(d)] Stock possessing more than 10
percent of the total combined voting power of all classes of Stock
or the combined voting power of any Subsidiary), determined under
rules issued under Code Section 422; and
[5] The maximum number of shares of Stock that may be granted
through Incentive Stock Options during the term of the Plan will not
be larger than 2,000,000.
5.05 Payment for Options. The Committee will develop procedures through
which a Participant may pay an Option's Exercise Price, including a
cashless exercise or tendering shares of Stock the Participant already has
owned for at least six months, either by actual delivery of the previously
owned shares of Stock or by attestation, valued at their Fair Market Value
on the exercise date, as partial or full payment of the Exercise Price.
5.06 Restrictions on Transferability. The Committee may impose restrictions
on any shares of Stock acquired through an Option, including restrictions
related to applicable
federal securities laws, the requirements of any national securities exchange
or system on which Stock is then listed or traded, or any applicable blue sky
or state securities laws.
5.07 Restrictions on Reload/Repricing. Regardless of any other provision of
this Plan:
[1] Neither the Company nor the Committee may "reprice" (as
defined under rules issued by the exchange on which the Stock then
is traded or, if the Stock is not then traded on an exchange, as
defined under rules issued by the New York Stock Exchange) any Award
without the prior approval of the shareholders; and
[2] No Participant will be entitled (and no Committee discretion
may be exercised to extend to any Participant) to an automatic grant
of additional Options in connection with any exercise of an Option.
6.00 RESTRICTED STOCK AND RESTRICTED STOCK UNITS
6.01 Restricted Stock. Subject to the terms of this Plan, the Committee
may grant Restricted Stock to Participants at any time during the term of
this Plan under terms and conditions that the Committee specifies in the
Award Agreement and to the terms of the Plan.
[1] Restricted Stock may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated until the end of the
applicable Restriction Period. At the Committee's sole discretion,
all shares of Restricted Stock will:
[a] Be held by the Company as escrow agent during the
Restriction Period; or
[b] Be issued to the Participant in the form of certificates
bearing a legend describing the restrictions imposed on the
shares.
[2] Restricted Stock will be:
[a] Forfeited (or if shares were issued to the Participant for
a cash payment, those shares will be resold to the Company for
the amount paid), if all restrictions have not been met at the
end of the Restriction Period, and again become available under
the Plan; or
[b] Released from escrow and distributed (or any restrictions
described in the certificate removed) as soon as practicable
after the last day of the Restriction Period, if all
restrictions have then been met.
[3] During the Restriction Period, and unless the Award Agreement
provides otherwise, each Participant to whom Restricted Stock has
been issued as described in Section 6.01[1][b]:
[a] May exercise full voting rights associated with that
Restricted Stock; and
[b] Will be entitled to receive all dividends and other
distributions paid with respect to that Restricted Stock;
provided, however, that if any
dividends or other distributions are paid in shares of Stock,
those shares will be subject to the same restrictions on
transferability and forfeitability as the shares of Restricted
Stock with respect to which they were issued.
6.02 Restricted Stock Units. Subject to the terms of this Plan, the
Committee may grant Restricted Stock Units to Participants at any time
during the term of this Plan under terms and conditions that the Committee
specifies in the Award Agreement and to the terms of the Plan.
[1] Restricted Stock Units may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated.
[2] Restricted Stock Units will be:
[a] Forfeited, if all restrictions have not been met at the
end of the Restriction Period, and again become available under
the Plan; or
[b] As soon as practicable after all restrictions have then
been met, will be settled in the form specified in the Award
Agreement. If the Award Agreement specifies that SARs will be
settled [i] in shares of Stock, the number of shares issued will
equal the number of Restricted Stock Units to be settled, [ii]
for cash equal, the amount distributed will equal the number of
Restricted Stock Units to be settled multiplied by the Fair
Market Value of a share of Stock on the settlement date or [iii]
in a combination of shares of Stock or cash, as computed under
subsection 6.02[2][b][i] and [ii].
[3] During the Restriction Period, Participants may not exercise
any voting rights associated with the shares of Stock underlying his
or her Restricted Stock Units or to receive any dividends or other
distributions otherwise payable with respect to the shares of Stock
underlying his or her Restricted Stock Units.
7.00 STOCK APPRECIATION RIGHTS
The Committee may grant Freestanding SARs and Tandem SARs (or a combination
of each) to Participants at any time during the term of this Plan.
[1] The Exercise Price specified in the Award Agreement will:
[a] In the case of a Freestanding SAR, never be less than 100
percent of the Fair Market Value of a share of Stock on the
Grant Date; and
[b] In the case of a Tandem SAR, never be less than the
Exercise Price of the related Option.
[2] Tandem SARs may be exercised with respect to all or part of
the shares of Stock subject to the related Option by surrendering
the right to exercise the equivalent portion of the related Option.
However:
[a] A Tandem SAR may be exercised only with respect to
the shares of Stock for which its related Option is then
exercisable;
[b] A Tandem SAR will expire no later than the date the
related Option expires;
[c] The value of the payout with respect to a Tandem SAR
related to an Incentive Stock Option will not be more than
100 percent of the difference between the Exercise Price of
the related Option and the Fair Market Value of the shares
of Stock subject to the related Option at the time the
Tandem SAR is exercised; and
[d] A Tandem SAR related to an Incentive Stock Option may be
exercised only if the Fair Market Value of the shares of Stock
subject to the related Option is greater than the Option's
Exercise Price.
[3] Freestanding SARs will be exercisable subject to the terms
the Committee specifies in the Award Agreement and to the terms of
the Plan.
[4] A Participant exercising an SAR will receive an amount equal to:
[a] The difference between the Fair Market Value of a share of
Stock on the exercise date and the Exercise Price; multiplied by
[b] The number of shares of Stock with respect to which the SAR
is exercised.
Unless otherwise specified in the Award Agreement, all SARs will be
settled in shares of Stock.
8.00 OTHER STOCK AWARDS TO PARTICIPANTS
The Committee may grant Awards of shares of Stock to any Participant as an
incentive, bonus or in lieu of any retainer due to a Director as it
determines to be in the best interests of the Company and subject to such
other terms and conditions as it deems appropriate.
9.00 STOCK UNITS
9.01 Stock Unit Awards. The Committee may, in its discretion, grant
Stock Units to Participants. Stock Units will be subject to any terms and
conditions, including vesting that the Committee specifies in the Award
Agreement and to the terms of the Plan. Stock Units may constitute
Performance-Based Awards, as described in Section 11.00. The Award
Agreement will state the form in which the Stock Unit is to be settled and
when the Stock Unit will be settled. Shares of Stock issued through a Stock
Unit Award may be issued with or without payment by the Participant as
required by applicable law or any other consideration specified by the
Committee. The Award Agreement will specify if the Participant granted a
Stock Unit also will be entitled to a Dividend Equivalent Right.
9.02 Settling of Stock Units. One share of Stock will be issued for each
Stock Unit to be settled in shares of Stock unless the Award Agreement
provides for settlement in cash or partially in cash and partially in shares
of Stock. If all or part of any Stock Unit Award is to be settled in cash,
the amount distributed will be the Fair Market Value of the number of shares
of Stock that otherwise would have been distributed to settle the Stock
Unit.
9.03 Disposition of Dividend Equivalent Rights. The right to receive the
amount of any Dividend Equivalent Right will be forfeited or paid in cash or
in the form of additional Stock Units (as provided in the Award Agreement)
when the associated Stock Unit is forfeited or settled.
10.00 CASH AWARDS
The Committee may, in its discretion, grant Cash Awards. Cash Awards
[1] will be subject to the terms and conditions, including vesting, that the
Committee specifies in the Award Agreement and to the terms of the Plan and
[2] may constitute Performance-Based Awards under Section 11.00. The
maximum annual Cash Award that may be paid to any Participant in any single
Plan Year is not more than $5,000,000.
11.00 PERFORMANCE-BASED AWARDS
11.01 Generally. Any Restricted Stock, Restricted Stock Units, Stock
Units or Cash Awards granted under the Plan may be granted in a manner that
qualifies as "performance-based compensation" under Code Section 162(m). As
determined by the Committee in its sole discretion, either the granting or
vesting of Performance-Based Awards will be based on achieving performance
objectives derived from one or more of the Business Criteria over the
Performance Period established by the Committee.
11.02 Business Criteria.
[1] The Business Criteria imposed on Performance-Based Awards will
be one of more of the following and may be applied solely with
reference to the Company (or Subsidiary) or relatively between the
Company (or Subsidiary) and one or more unrelated entities:
[a] Operating income (pre- or post-tax);
[b] Total return to shareholders;
[c] Return on equity;
[d] Premiums;
[e] Share price;
[f] Book Value;
[g] Surplus;
[h] Underwriting profit, underwriting ratio;
[i] Expense or expense ratio;
[j] Combined ratio;
[k] Income, net income (pre- or post-tax); and
[l] Performance relative to peer companies.
[2] Different Business Criteria may be applied to individual
Participants or to groups of Participants and, as specified by the
Committee, may be based on the results achieved [a] separately by
Company or any Subsidiary, [b] any combination of the Company and
Subsidiaries or [c] any combination of segments, products or
divisions of the Company and Subsidiaries.
11.03 Establishment of Performance Goals. With respect to Performance-
Based Awards, the Committee will establish in writing [1] the performance
objectives to be applied and the Performance Period over which their
achievement will be measured, [2] the method for computing the Cash Award or
other Award that will be granted or earned if (and to the extent that) those
performance objectives are met and [3] the Participants or class of
Participants to which the performance objectives apply. Performance
objectives will be established in writing no later than 90 days after the
beginning of the applicable Performance Period (but in no event after 25
percent of the Performance Period has elapsed).
11.04 Certification of Performance. No Performance-Based Award will be
paid to any Participant for any Performance Period until the Committee
certifies in writing that the associated objective performance objectives
(and all other material conditions) imposed as a condition of receiving that
Award have been met.
11.05 Modification of Performance-Based Awards. Once established, the
Committee may not revise any performance objectives associated with a
Performance-Based Award or increase the amount of the Cash Award or other
Award that may be paid or earned if those performance objectives are met.
However, the Committee may reduce or eliminate the Cash Award or other Award
that may be paid or earned if those performance objectives are met.
12.00 TERMINATION OF SERVICE/LIMITS ON EXERCISABILITY/BUYOUTS
12.01 Effect of Termination of Service on Awards Other than Performance-
Based Awards. Unless otherwise specified in the Award Agreement and subject
to Sections 12.03 and 12.04, all Awards (other than Performance-Based
Awards) will be exercisable or forfeited upon a Termination of Service as
provided in this section:
[1] Death. If a Participant's Service Terminates because of
death, [a] all outstanding Restricted Stock, Restricted Stock Units,
Freestanding SARs, Stock, Stock Units or Cash Awards (whether or not
then vested) will be settled as provided in the Plan and the Award
Agreement and [b] all Options and Tandem SARs (whether or not then
exercisable) may be exercised by the Participant's Beneficiary
anytime before the earlier of the expiration date specified in the
Award Agreement or 15 months after the Participant's death.
However, if the Award Agreement under which an Incentive Stock Option
was granted to the deceased Participant specifies an expiration date
that is more than 12 months after the Participant's death and that
Incentive Stock Option is not exercised within 12 months after the
Participant's death, the Option will be treated as a Nonqualified
Stock Option for the balance of the period described in the preceding
sentence.
[2] Disability. If a Participant's Service Terminates because
of Disability, [a] all outstanding Restricted Stock, Restricted
Stock Units, Freestanding SARs,
Stock, Stock Units or Cash Awards (whether or not then vested) will
be settled as provided in the Plan and the Award Agreement and [b]
all Options and Tandem SARs (whether or not then exercisable) may be
exercised by the Participant (or his or her Beneficiary) anytime
before the earlier of the expiration date specified in the Award
Agreement or 15 months after the Participant Terminates. However, if
the Award Agreement under which an Incentive Stock Option was granted
to the Disabled Participant specifies an expiration date that is more
than 12 months after the Participant's Termination because of
Disability and that Incentive Stock Option is not exercised within 12
months after the Participant's Termination because of Disability, the
Option will be treated as a Nonqualified Stock Option for the balance
of the period described in the preceding sentence.
[3] Retirement. If a Participant's Service Terminates because
of Retirement, [a] all outstanding Restricted Stock, Restricted
Stock Units, Freestanding SARs, Stock, Stock Units or Cash Awards
(whether or not then vested) will be settled as provided in the Plan
and the Award Agreement and [b] all Options and Tandem SARs (whether
or not then exercisable) may be exercised by the Participant (or the
Participant's Beneficiary) anytime before the earlier of the
expiration date specified in the Award Agreement or 15 months after
the Participant Retires. However, if the Award Agreement under
which an Incentive Stock Option was granted to the Retired
Participant specifies an expiration date that is more than three
months after the Participant's Retirement and that Incentive Stock
Option is not exercised within three months after the Participant's
Retirement, the Option will be treated as a Nonqualified Stock
Option for the balance of the period described in the preceding
sentence.
[4] Voluntary Termination of Service By Participant. If a
Participant who is an Employee voluntarily Terminates Service,
[a] all vested Restricted Stock, Restricted Stock Units,
Freestanding SARs, Stock, Stock Units or Cash Awards will be settled
as provided in the Plan and the Award Agreement, [b] all exercisable
Options and Tandem SARs may be exercised by the Participant (or the
Participant's Beneficiary) anytime before the earlier of the
expiration date specified in the Award Agreement or three months
after the Participant's voluntary Termination of Service and [c] all
Awards that are not vested or exercisable on the date the
Participant voluntarily Terminates Service will be forfeited.
[5] Involuntary Termination of Service Without Cause. If the
Service of a Participant who is an Employee is Terminated
involuntarily without Cause, [a] all vested Restricted Stock,
Restricted Stock Units, Freestanding SARs, Stock, Stock Units or
Cash Awards will be settled as provided in the Plan and the Award
Agreement, [b] all exercisable Options and Tandem SARs may be
exercised by the Participant (or the Participant's Beneficiary)
anytime before the earlier of the expiration date specified in the
Award Agreement or three months after the Participant's Service is
involuntarily Terminated without Cause and [c] all Awards that are
not vested or excisable on the date the Participant's Service is
involuntarily Terminated without Cause will be forfeited.
[6] Involuntary Termination of Service With Cause. If the
Service of a Participant who is an Employee is Terminated
involuntarily for Cause, all
outstanding Awards (whether or not then exercisable) will be
forfeited as of the date the Participant's Service is Terminated for
Cause.
12.02 Effect of Termination of Service on Performance-Based Awards.
Unless the Committee provides otherwise in the Award Agreement or
subsequently, a Participant will forfeit all Performance-Based Awards if,
before the end of a Performance Period:
[1] His or her Service is Terminated involuntarily for Cause; or
[2] He or she Terminates Service voluntarily.
However, if, before the end of a Performance Period, a Participant dies,
becomes Disabled, Retires or his or her Service is involuntarily Terminated
without Cause and the Committee determines (under Section 11.04) that the
performance objectives established for that period are met, such Participant
or the Beneficiary of such Participant will receive a partial award equal to:
[3] The Cash Award and/or other Award that would have been paid to
that Participant at the end of the Performance Period during which the
Participant dies, becomes Disabled, Retired or was involuntarily
Terminated without Cause; multiplied by
[4] The number of whole months between the beginning of the
Performance Period and the date the Participant dies, became Disabled,
Retired or was involuntarily Terminated without Cause; and divided by
[5] The number of whole months included in the Performance Period.
12.03 Other Limits on Exercisability. Regardless of any other provision of
the Plan, all unexercised Awards granted to a Participant will be forfeited if
that Participant, before his or her Termination of Service or after
Termination of Service but while any Award remains exercisable:
[1] Without the Committee's written consent, which may be withheld
for any reason or for no reason, serves (or agrees to serve) as an
officer, director or employee of any proprietorship, partnership or
corporation or becomes the owner of a business or a member of a
partnership that competes with any portion of the Company's (or a
Subsidiary's) business or renders any service (including business
consulting) to entities that compete with any portion of the Company's
(or a Subsidiary's) business;
[2] Refuses or fails to consult with, supply information to, or
otherwise cooperate with, the Company after having been requested to
do so; or
[3] Deliberately engages in any action that the Committee concludes
harms the Company or any Subsidiary.
12.04 Buy Out of Section 12.00 Awards. At any time, the Committee, in its
sole discretion and without the consent of the Participant, may cancel any or
all outstanding Options, SARs, Restricted Stock, Restricted Stock Units and
Stock Units (collectively, "Section 12.00 Awards") held by that Participant
by providing to that Participant written notice ("Buy Out Notice") of its
intention to exercise the rights reserved in this section. If
a Buy Out Notice is given, the Company also will pay to each affected
Participant the difference between [1] the Fair Market Value of each (or
portion of each) Section 12.00 Awards to be cancelled and [2] the Exercise
Price associated with each cancelled Section 12.00 Award. However, unless
otherwise specified in the Award Agreement, no payment will be made with
respect to any Section 12.00 Award that is not exercisable (or, in the case
of Restricted Stock or Restricted Stock Units, still is subject to a
restriction and not vested) when cancelled under this section. The Company
will complete any buy out made under this section as soon as administratively
possible after the date of the Buy Out Notice. At the Committee's option,
payment of the buy out amount may be made in cash, in whole shares of Stock
or partly in cash and partly in shares of Stock. The number of whole shares
of Stock, if any, included in the buy out amount will be determined by
dividing the amount of the payment to be made in shares of Stock by the Fair
Market Value as of the date of the Buy Out Notice.
13.00 MERGER, CONSOLIDATION OR SIMILAR EVENT
13.01 Definition of Business Combination.
[1] Any event that is defined as a "change in control" (or analogous
term) under any other written agreement with the Company or any
Subsidiary, but only to the extent specified in that other agreement;
or
[2] Any transaction (or series of related transactions) that results
in the merger or consolidation of the Company or the exchange of Stock
for the securities of another entity (other than a Subsidiary) that has
acquired the Company's assets or which is in control [as defined in Code
Section 368(c)] of an entity that has acquired the Company's assets but
only if [a] immediately after the transaction (or the end of a series of
related transitions) the persons who owned a majority of the voting power
of the Company immediately before the transaction (or the beginning of a
series of related transactions) own less than a majority of the voting
power of the Company and [b] the terms of the transaction (or series of
related transactions) are binding on all holders of Stock (except to the
extent that dissenting shareholders are entitled to relief under
applicable law).
13.02 Effect of Business Combination on Options, SAR, Restricted Stock and
Restricted Stock Units. If the Company undergoes a Business Combination,
[1] all Options and SARs that are then outstanding will become fully
exercisable for the remainder of their term (whether or not otherwise
exercisable by the terms of the Award Agreement and whether or not any
associated performance objectives have then been met) and [2] all remaining
restrictions on outstanding Restricted Stock and Restricted Stock Units will
lapse as of the date of the Business Combination.
13.03 Effect of Business Combination on Stock Units, Cash or Performance-
Based Awards. If the Company undergoes a Business Combination, all
restrictions and conditions imposed on Stock Units and Cash Awards will lapse
and all performance objectives imposed on Performance-Based Awards will be
deemed to have been met. The amount paid under this section will be [1] the
value of affected Stock Units or the amount of affected Cash Awards or, in the
case of Performance-Based Awards, the target award or, if higher, the award
level actually achieved immediately before the effective date of the Business
Combination, multiplied [2] by the number of whole months between the
beginning of the period over which time-based restrictions on Stock Units and
Cash
Awards otherwise would have been measured or, in the case of Performance-
Based Awards, the beginning of the period over which Performance Goals were to
be measured and the date of the Business Combination and divided by [3] the
period (expressed in whole months) over which time-based restrictions on Stock
Units and Cash Awards otherwise would have been measured or, in the case of
Performance-Based Awards, the period (expressed in whole months) over which
Performance Goals were to have been measured.
13.04 Application of Code Section 280G. Except as otherwise provided in the
Award Agreement or any other written agreement between the Participant and the
Company or any Subsidiary then in effect, if the sum (or value) due under
Sections 13.02 and 13.03 that are characterizable as parachute payments,
when combined with other parachute payments attributable to the same event
(whether or not that event is a Business Combination), constitute "excess
parachute payments" as defined in Code Section 280G(b)(1), the entity
responsible for making those payments or its successor or successors
(collectively, "Payor") will reduce the Participant's benefits under this
Plan by the smaller of [1] the value of the sum or the value of the payments
due under Sections 13.02 and 13.03 or [2] the amount necessary to ensure that
the Participant's total "parachute payment" as defined in Code Section
280G(b)(2)(A) under this and all other agreements will be $1.00 less than the
amount that otherwise would generate an excise tax under Code Section 4999.
If the reduction described in the preceding sentence applies, within 10
business days of the effective date of the event generating the payments,
the Payor will apprise the Participant of the amount of the reduction
("Notice of Reduction"). Within 10 business days of receiving that
information, the Participant may specify how (and against which benefit or
payment source, including benefits and payment sources other than this Plan)
the reduction is to be applied ("Notice of Allocation"). The Payor will be
required to implement these directions within 10 business days of receiving
the Notice of Allocation. If the Payor has not received a Notice of
Allocation from the Participant within 10 business days of the date of the
Notice of Reduction or if the allocation provided in the Notice of Allocation
is not sufficient to fully implement the reduction described in this section,
the Payor will apply the reduction described in this section proportionately
based on the amounts otherwise payable under Sections 13.02 and 13.03 or, if
a Notice of Allocation has been returned that does not sufficiently implement
the reduction described in this section, on the basis of the reductions
specified in the Notice of Allocation.
14.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board or the Committee may terminate, suspend or amend the Plan at any
time without shareholder approval except to the extent that shareholder
approval is required to satisfy applicable requirements imposed by [1] Rule
16b-3 under the Act, or any successor rule or regulation, [2] applicable
requirements of the Code or [3] any securities exchange, market or other
quotation system on or through which the Company's securities are listed or
traded. Also, no Plan amendment may [4] result in the loss of a Committee
member's status as a "non-employee director" as defined in Rule 16b-3 under
the Act, or any successor rule or regulation, with respect to any employee
benefit plan of the Company, [5] cause the Plan to fail to meet requirements
imposed by Rule 16b-3 or [6] without the consent of the affected
Participant, (except as specifically provided otherwise in the Plan or the
Award Agreement), adversely affect any Award granted before the amendment,
modification or termination. However, nothing in this section, the Plan or
any Award Agreement will restrict the Committee's right to exercise the
discretion retained in Section 12.04 or the Committee's or the Board's right
to amend the Plan and any Award Agreements without any additional
consideration to affected Employees to the extent necessary to avoid
penalties arising under Code Section 409A, even if those amendments reduce,
restrict or eliminate rights granted under the Plan or Award Agreement (or
both) before those amendments.
15.00 MISCELLANEOUS
15.01 Assignability. Except as provided in this section, an Award may not
be transferred except by will or applicable laws of descent and distribution
and, during the Participant's lifetime, may be exercised only by the
Participant or the Participant's guardian or legal representative. However,
with the Committee's written consent (which may be withheld for any reason or
for no reason), a Participant or a specified group of Participants may
transfer Awards (other than Incentive Stock Options) to a revocable inter
vivos trust, of which the Participant is the settlor, or may transfer Awards
(other than Incentive Stock Options) to any member of the Participant's
immediate family, any trust, whether revocable or irrevocable, established
solely for the benefit of the Participant's immediate family, or any
partnership or limited liability company whose only partners or members are
members of the Participant's immediate family ("Permissible Transferees").
Any Award transferred to a Permissible Transferee will continue to be subject
to all of the terms and conditions that applied to the Award before the
transfer and to any other rules prescribed by the Committee. A Permissible
Transferee may subsequently transfer an Award but only to another Permissible
Transferee and only after complying with the terms of this section as if the
Permissible Transferee was a Participant.
15.02 Beneficiary Designation. Each Participant may name a Beneficiary or
Beneficiaries (who may be named contingently or successively) to receive or to
exercise any vested Award that is unpaid or unexercised at the Participant's
death. Each designation made will revoke all earlier designations made by the
same Participant, must be made on a form prescribed by the Committee and will
be effective only when filed in writing with the Committee. If a Participant
has not made an effective Beneficiary designation, the deceased Participant's
Beneficiary will be his or her surviving spouse or, if there is no surviving
spouse, the deceased Participant's estate.
15.03 No Guarantee of Continuing Service. Nothing in the Plan may be
construed as:
[1] Interfering with or limiting the right of the Company or any
Subsidiary to Terminate any Participant's employment at any time;
[2] Conferring on any Participant any right to continue as an
Employee or Director;
[3] Guaranteeing that any Employee will be selected to be a
Participant; or
[4] Guaranteeing that any Participant will receive any future
Awards.
15.04 Tax Withholding. The Company will withhold from other amounts owed
to a Participant, or require the Participant to remit to the Company, an
amount sufficient to satisfy federal, state and local withholding tax
requirements on any Award, exercise or cancellation of an Award or purchase
of shares of Stock. If these amounts are not to be withheld from other
payments due to the Participant (or if there are no other payments
due to the Participant), the Company will defer payment of cash or
issuance of shares of Stock until the earlier of:
[1] Thirty days after the settlement date; or
[2] The date the Participant remits the required amount.
If the Participant has not remitted the required amount within 30 days of
the settlement date, the Company will permanently withhold from the value of
the Awards to be distributed the minimum amount required to be withheld to
comply with applicable federal, state and local income, wage and employment
taxes and distribute the balance to the Participant.
In its discretion, the Committee may allow a Participant to elect, subject
to conditions the Committee establishes, to reimburse the Company for this
withholding obligation through one or more of the following methods:
[3] By having shares of Stock otherwise issuable under the Plan
withheld by the Company (but only to the extent of the minimum
amount that must be withheld to comply with applicable state,
federal and local income, employment and wage tax laws);
[4] By delivering, including by attestation, to the Company
previously acquired shares of Stock that the Participant has owned
for at least six months;
[5] By remitting cash to the Company; or
[6] By remitting a personal check immediately payable to the
Company.
15.05 Indemnification. Each individual who is or was a member of the
Committee or of the Board will be indemnified and held harmless by the
Company against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit or proceeding to which he or she may
be made a party or in which he or she may be involved by reason of any
action taken or not taken under the Plan as a Committee or Board member and
against and from any and all amounts paid, with the Company's approval, by
him or her in settlement of any matter related to or arising from the Plan
as a Committee or Board member; or paid by him or her in satisfaction of any
judgment in any action, suit or proceeding relating to or arising from the
Plan against him or her as a Committee or Board member, but only if he or
she gives the Company an opportunity, at its own expense, to handle and
defend the matter before he or she undertakes to handle and defend it in his
or her own behalf. The right of indemnification described in this section
is not exclusive and is independent of any other rights of indemnification
to which the individual may be entitled under the Company's organizational
documents, by contract, as a matter of law, or otherwise.
15.06 No Limitation on Compensation. Nothing in the Plan is to be
construed to limit the right of the Company to establish other plans or to
pay compensation to its employees or Directors in cash or property, in a
manner not expressly authorized by the Plan.
15.07 Requirements of Law. The grant of Awards and the issuance of shares
of Stock will be subject to all applicable laws, rules and regulations and
to all required approvals
of any governmental agencies or national securities exchange, market or other
quotation system. Also, no shares of Stock will be issued under the Plan
unless the Company is satisfied that the issuance of those shares of Stock
will comply with applicable federal and state securities laws. Certificates
for shares of Stock delivered under the Plan may be subject to any stock
transfer orders and other restrictions that the Committee believes to be
advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange or other recognized
market or quotation system upon which the Stock is then listed or traded, or
any other applicable federal or state securities law. The Committee may
cause a legend or legends to be placed on any certificates issued under the
Plan to make appropriate reference to restrictions within the scope of this
section.
15.08 Term of Plan. Subject to Section 14.00, the Plan will continue
until the tenth anniversary of the date it is adopted by the Board or
approved by the Company's shareholders, whichever is earliest.
15.09 Governing Law. The Plan and all related agreements will be
construed in accordance with and governed by the laws (other than laws
governing conflicts of laws) of the United States and of the State of Ohio.
15.10 No Impact on Benefits. Plan Awards are incentives designed to
promote the objectives described in Section 1.00. Also, Awards are not
compensation for purposes of calculating a Participant's rights under any
employee benefit plan or other agreement that does not specifically require
the inclusion of Awards in calculating benefits.