Exhibit 10.1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
THE OHIO CASUALTY CORPORATION
AND
DAN R. CARMICHAEL
Effective December 12, 2000, the Ohio Casualty Corporation
("Corporation"), an Ohio corporation, and Dan R. Carmichael
("Executive"), collectively, the "Parties," entered into an
employment agreement ("Prior Agreement") describing the terms and
conditions governing Executive's employment with the Corporation.
Effective December 1, 2005 ("Effective Date"), or as otherwise
provided below, the Parties enter into this successor employment
agreement ("Agreement") to describe the terms and conditions of
the Executive's continued employment, including participation in
the transfer of his leadership position to a successor chosen by
the Corporation. Except as specifically provided in this
Agreement (or as required by applicable law), this Agreement
supersedes the Prior Agreement as of the Effective Date.
Although it is not a direct Party to this Agreement, The Ohio
Casualty Insurance Company ("Company") joins in this Agreement to
the extent needed to enable the Corporation to discharge its
obligations under this Agreement.
ARTICLE 1 TERM OF AGREEMENT
This Agreement will remain in effect from the Effective Date
until December 1, 2010 ("Term"), unless it terminates at an
earlier date as provided below or is extended as described in
this article.
ARTICLE 2 EXECUTIVE'S DUTIES
2.01 During the Term (but subject to Section 5.05), Executive
agrees:
[1] Consistent with implementation of the Transition Plan
described in Section 2.01[2], to serve as President and
Chief Executive Officer of the Corporation and to perform
the services customarily performed by persons in similar
executive capacities.
[2] Subject to Section 5.05, to discharge any other duties
and responsibilities that the Corporation's Board of
Directors ("Board") assigns to him from time to time,
including facilitating a transfer, as appropriate and
consistent with Board guidelines, of his titles and
responsibilities to a successor President and Chief
Executive Officer ("Transition Plan").
[3] To serve as an officer and, if elected, as a director
of the Corporation, the Company and any other entity that is
related through common ownership to the Corporation (all
entities related through common ownership to the Corporation
are called "Affiliates" and the Corporation and all
Affiliates are called "Group").
[4] Except for periods of absence because of illness,
vacations of reasonable duration and any leaves of absence
approved by the Board or during the pendency of any disputes
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arising under Sections 5.04 and 5.05, to:
[a] Devote his full attention and energies to
promoting the Group's business;
[b] Fulfill the obligations described in this
Agreement; and
[c] Exercise the highest degree of loyalty and the
highest standards of conduct in the performance of his
duties.
[5] In addition to the obligations described in Article 6,
not to engage in any other business activity, whether or not
for gain, profit or other pecuniary advantage, that does
not involve promoting the Corporation's, the Group's or any
Group member's business. However, Executive may serve as a
director of companies that are not Group members if that
service:
[a] Does not violate any term or condition of this
Agreement;
[b] Does not injure the Group or any Group member;
[c] Is not prohibited by law or by rules adopted by
any Group member; and
[d] Is approved in advance by the Board.
2.02 The restrictions described in Section 2.01[5] will not be
construed to prevent Executive from:
[1] Investing his personal assets in [a] businesses that do
not compete or do business with any Group member and do not
require Executive to perform any services connected with the
operation or affairs of the businesses in which the
investment is made or [b] stocks or corporate securities
described in Section 6.02 but subject to the limits
described in that section; or
[2] Participating in, or serving as a trustee or director
of, civic and charitable organizations or activities, but
only if this activity does not interfere with the
performance of his duties under this Agreement.
2.03 Consistent with the Transition Plan, Executive will have a
direct reporting relationship to the Board.
ARTICLE 3 EXECUTIVE'S COMPENSATION
3.01 During the Term and subject to this section and to
Article 5:
[1] The Corporation will pay to the Executive a "Base
Salary" at an annualized rate of $700,000, prorated to
reflect partial calendar months and years of employment and
paid in installments that correspond with the Corporation's
normal payroll practices. During the Term, Base Salary will
not be reduced below $700,000 without the
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Executive's written consent but may be increased during the
Term at the discretion of the Board's Executive Compensation
Committee.
[2] Executive may participate in any long-term or short-
term bonus program that the Corporation adopts or maintains
during the Term for its senior executives. The amount of
and conditions placed on Executive's participation in these
programs and on the bonus amount will be established by the
Corporation subject to the terms of the plan or program
through which it may be earned and other related documents
and procedures governing that grant.
[3] Executive may participate in the employee and
retirement benefit programs (whether or not tax-qualified)
provided to the Corporation's senior executives (subject to
the terms and conditions of the programs, a description of
each of which has been given to the Executive), as these
programs may from time to time be amended or modified by the
Board or the Board's Executive Compensation Committee.
[4] Executive will receive the perquisites that are made
available to the Corporation's other senior executives and
also will receive an additional allowance (not to exceed
$15,000 for any calendar year) to be applied against the
cost of the Executive's financial, tax and estate planning.
[5] To the extent possible without generating excise tax
and other penalties and interest under Section 409A of the
Internal Revenue Code of 1986 ("Code"), the Executive may
elect to receive any benefits accrued under The Ohio
Casualty Insurance Company Benefit Equalization Plan
("Benefit Equalization Plan") in installments (or other
distribution schedule he may elect under the terms of the
Benefit Equalization Plan) under procedures (and subject to
reasonable terms, including terms relating to the payment of
"earnings" on deferred distributions) that may be adopted
without generating excise tax and other penalties and
interest under Code Section 409A.
Any items of compensation (including equity grants) that were
accrued under the Prior Agreement but which have not been fully
earned (or, in the case of equity grants, are not exercisable or
are exercisable but have not been exercised) on the Effective
Date will continue to be subject to the terms of the Prior
Agreement and the plans (and other related documents and
procedures) through which that compensation (including equity
grants) were provided or granted.
3.02 Subject to the terms of this section, Article 5 of this
Agreement, the terms of the Ohio Casualty Corporation 2005
Incentive Plan ("2005 Incentive Plan") and a separate Award
Agreement issued under the 2005 Incentive Plan:
[1] At the Effective Date or as soon as possible after the
Effective Date, the Company will grant to the Executive
stock appreciation rights ("SARs") with respect to 250,000
shares of the Company's common stock, subject to the terms
of the Award Agreement which is attached to and made part of
this Agreement. As soon as practicable after the Board's
first regular meeting in 2006, the Company will grant to the
Executive SARs with respect to 100,000 shares of the
Company's stock subject to the terms of the Award
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Agreement prepared in connection with that grant (which, other
than the number of SARs specified, will be substantially
similar to the attached Award Agreement). The Award Agreements
will specify the number of SARs issued on each Grant Date, the
Grant Date, the exercise price associated with the SARs granted.
Each Award Agreement also will provide that the SARs will be
exercisable three years after the Grant Date specified in each
Award Agreement.
[2] At the Effective Date or as soon as possible after the
Effective Date, the Company will grant to the Executive
75,000 shares of restricted stock through the 2005 Incentive
Plan, subject to the terms of the Award Agreement which is
attached to and made a part of this Agreement. The Award
Agreement will specify the number of shares of restricted
stock issued on each Grant Date, the Grant Date and the
percentage of the restricted shares that will vest annually.
Also, the Award Agreement will provide that, at any time,
the Corporation may (but is not required to) accelerate the
vesting of all or a portion of these restricted shares to
the extent that it concludes that the Transition Plan has
been successfully implemented. This award is made in the
expectation that the Executive will prepare for the Board's
approval the Transition Plan described in Section 2.01[2] no
later than December 31, 2008 and will fully cooperate in the
implementation of that Transition Plans during the remainder
of the Term of this Agreement.
3.03 All payments due under this section will be:
[1] Paid in accordance with the Corporation's payroll
procedures (in the case of Base Salary) or on the date
payable under the terms relating to terminations of
employment for similar reasons contained in the program on
which they are based; but
[2] Except in the circumstances contemplated under
Section 5.06, if the Corporation reasonably anticipates that
its deduction of any amount payable under this section will
be limited or eliminated by application of Code Section
162(m), the amount subject to that reduction or elimination
will be paid as soon as administratively feasible after the
January 15 of the first calendar year beginning after the
Executive terminates or, if later, as soon as
administratively feasible after the earliest date permitted
under Code Section 409A(a)(2)(B)(i).
ARTICLE 4 EXPENSES
The Corporation will pay or reimburse the Executive for all
reasonable, ordinary and necessary expenses that he incurs to
perform his duties under this Agreement. Reimbursement will be
made within 30 days after the date Executive submits appropriate
evidence of the expenditure (and all other information required
under the Corporation's business expense reimbursement policy) to
the Corporation and otherwise complies with reimbursement
procedures the Corporation applies to its other senior
executives.
ARTICLE 5 TERMINATION OF EMPLOYMENT DURING TERM OF AGREEMENT
5.01 Termination of Employment Due to Death or Disability.
Except as otherwise provided in this Agreement and subject to any
restrictions imposed under Code Section 409A, the terms
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of this section will apply if Executive dies or becomes Disabled
during the Term and before a written notice of termination is given
under any other section of this Agreement. However, if the
Executive dies or becomes Disabled after a written notice of
termination has been given under Section 5.03, 5.05 or 5.06 (and
while that notice is still in effect), he or his beneficiary will
receive the amounts calculated under the section of this
Agreement under which that written notice of termination was
given but only if the payments described in the appropriate
section would have been due if the Executive had not died or
become Disabled, determined as if any "cure period" had expired on
the day before the date the Executive dies or becomes Disabled.
[1] This Agreement will terminate as of the date Executive
dies or becomes Disabled and Corporation will pay or cause
to be paid to Executive (or to his beneficiary if Executive
is dead):
[a] Any unpaid installments of his Base Salary,
calculated to the end of the payroll period during
which he terminates employment because of death or
Disability;
[b] The value of any accrued but unused vacation,
calculated to the end of the payroll period during
which he terminates employment because of death or
Disability (this value will be calculated by dividing
the Base Salary by 365 and multiplying by the number of
accrued but unused vacation days); and
[c] Any amounts Executive is entitled to receive under
the terms of any employee benefit plan described in
Section 3.01[3].
[2] All the Executive's outstanding stock options and other
cash and equity incentive grants (including the awards
described in Section 3.02) will be exercisable (and the
restrictions imposed on the award described in
Section 3.02[2] will lapse) to the extent provided under the
terms relating to terminations of employment for similar
reasons contained in the plan and the award agreement
through which they were granted.
[3] For purposes of this section, Executive will be deemed
to have terminated employment on the date of his death or
the date he is determined to have become Disabled.
[4] "Disability" has the same meaning given to the term
under the Corporation's long-term disability plan as in
effect on the Effective Date, whether or not Executive
participates in that plan on the Effective Date and whether
or not that plan has been amended or terminated before
Executive's Disability arises. However, if the event that
results in the Executive's Disability arises before the end
of the Term but is established after the end of the Term,
the Executive will be entitled to the benefits provided
under this section as if the Disability had been established
before the end of the Term.
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[5] Except as otherwise provided in the program through
which they are paid or in the Agreement, all amounts payable
under this section will be:
[a] Paid in accordance with the Corporation's payroll
procedures (in the case of Base Salary) or on the date
payable under the terms relating to terminations of
employment for similar reasons contained in the program
on which they are based; and
[b] If Executive terminates on account of Disability
but dies before all payments due under this section
have been paid, the unpaid amount will be paid to
Executive's beneficiary under the procedures described
in Section 10.07 but
[c] Except in the circumstances contemplated under
Section 5.06, if the Corporation reasonably anticipates
that its deduction of any amount payable under this
section will be limited or eliminated by application of
Code Section 162(m), the amount subject to that
reduction or elimination will be paid as soon as
administratively feasible after the January 15 of the
first calendar year beginning after the Executive
terminates or, if later, as soon as administratively
feasible after the earliest date permitted under
Code Section 409A(a)(2)(B)(i).
5.02 Voluntary Termination of Employment Without Good Reason.
Executive may voluntarily terminate his employment at any time
during the Term without Good Reason (as defined in Section
5.05[7]) by giving the Corporation written notice of his
intention to do so. This notice will be effective 180 days after
it is given unless the Parties mutually agree to accelerate this
termination date ("Voluntary Termination Date"). If Executive
voluntarily terminates his employment without Good Reason and
subject to Section 5.06 and to any restrictions imposed under
Code Section 409A, the terms of this section will apply
regardless of any other event (other than as provided in
Section 5.06) that occurs after the delivery of the notice of
intent to terminate without Good Reason.
[1] This Agreement will terminate on the Voluntary
Termination Date and Corporation will pay or cause to be
paid to Executive the sum of:
[a] Any unpaid installments of his Base Salary,
calculated to the end of the payroll period during
which his Voluntary Termination Date occurs;
[b] The value of any accrued but unused vacation,
calculated to the end of the payroll period during
which his Voluntary Termination Date occurs (this value
will be calculated by dividing the Base Salary by 365
and multiplying by the number of accrued but unused
vacation days); and
[c] Any amounts Executive is entitled to receive under
the terms of any employee benefit plan described in
Section 3.01[3].
[2] All the Executive's outstanding stock options and other
cash and equity incentive grants will be exercisable to the
extent provided under the terms relating to terminations of
employment for similar reasons contained in the plan and the
award agreement through which they were granted.
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[3] Except as otherwise provided in the program through
which they are paid or in the Agreement, all amounts payable
under this section will be:
[a] Paid in accordance with the Corporation's payroll
procedures (in the case of Base Salary) or on the date
payable under the terms relating to comparable
terminations of employment for similar reasons
contained in the program on which they are based; and
[b] If Executive dies before all payments due under
this section have been paid, the unpaid amount will be
paid to Executive's beneficiary under the procedures
described in Section 10.07; but
[c] Except in the circumstances contemplated under
Section 5.06, if the Corporation reasonably anticipates
that its deduction of any amount payable under this
section will be limited or eliminated by application of
Code Section 162(m), the amount subject to that
reduction or elimination will be paid as soon as
administratively feasible after the January 15 of the
first calendar year beginning after the Executive
terminates or, if later, as soon as administratively
feasible after the earliest date permitted under
Code Section 409A(a)(2)(B)(i).
5.03 Termination of Employment by Corporation Without Cause. The
Corporation may terminate Executive's employment without Cause
(as defined in Section 5.04[4]) at any time during the Term by
giving Executive written notice of its intention to do so. This
notice will be effective 90 days after it is given unless the
Parties mutually agree to accelerate this termination date
("Involuntary Termination Date") or the Corporation withdraws its
notice of termination without Cause and, subject to Section 5.06
and to any restrictions imposed under Code Section 409A, the
terms of this section will apply regardless of any other event
(other than as provided in Section 5.06) that occurs after the
delivery of the notice of intent to terminate the Executive
without Cause.
[1] This Agreement will terminate as of the Involuntary
Termination Date;
[2] Corporation will pay or cause to be paid or made
available to the Executive:
[a] Any unpaid installments of his Base Salary,
calculated to the end of the payroll period during
which his Involuntary Termination Date occurs;
[b] The value of any accrued but unused vacation,
calculated to the end of the payroll period during
which his Involuntary Termination Date occurs (this
value will be calculated by dividing the Base Salary by
365 and multiplying by the number of accrued but unused
vacation days);
[c] The Base Salary at the rate then in effect for the
shorter of [i] the duration of the Term or [ii[ 24
months;
[d] 200 percent of the "target" bonus the Executive
would have received under the Corporation's Annual
Incentive Plan if his employment had continued through
the end of the measurement period during which his
Involuntary
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Termination Date occurs, whether or not the performance
objectives associated with that bonus are met at the end
of the measurement period; and
[e] Medical, dental and life insurance coverage
comparable to that in effect on the Involuntary
Termination Date for 18 months under the terms
(including the allocation of premium amounts between
the Executive and the Corporation) in effect on the
Involuntary Termination Date.
[3] All the Executive's outstanding stock options and other
cash and equity incentive grants will be exercisable to the
extent provided under the terms relating to terminations for
similar reasons contained in the plan and the award
agreements through which they were granted.
[4] Executive will receive any other benefits he is
entitled to receive under the terms of any benefit program
described in Section 3.01[3].
[5] Executive will receive the difference between [a] the
amount he would have received at the end of any performance
cycle established under Section 11.00 of the 2005 Incentive
Plan had his employment continued until December 1, 2010 and
assuming that the applicable performance goals established
for that performance cycle are met on or before December 1,
2010 minus [b] the amount distributed under Section 5.03[3]
on account of the same performance cycle. This amount will
be paid at the same time other distributions are made on
account of that performance cycle and in the form specified
in the associated award agreement.
[6] Except as otherwise provided in the program through
which they are paid or in the Agreement, all amounts payable
under this section will be:
[a] Paid in accordance with the Corporation's payroll
procedures (in the case of Base Salary) or on the date
payable under the terms relating to comparable
terminations of employment for similar reasons
contained in the program on which they are based; and
[b] If Executive dies before all payments due under
this section have been paid, the unpaid amounts will be
paid to Executive's beneficiary under the procedures
described in Section 10.07; but
[c] Except in the circumstances contemplated under
Section 5.06, if the Corporation reasonably anticipates
that its deduction of any amount payable under this
section will be limited or eliminated by application of
Code Section 162(m), the amount subject to that
reduction or elimination will be paid as soon as
administratively feasible after the January 15 of the
first calendar year beginning after the Executive
terminates or, if later, as soon as administratively
feasible after the earliest date permitted under
Code Section 409A(a)(2)(B)(i).
5.04 Termination of Employment by Corporation for Cause. The
Corporation may terminate Executive's employment for Cause at any
time during the Term by giving Executive written notice of its
intention to do so. This notice will be effective on the date it
is given ("For
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Cause Termination Date"). If this notice is given, subject to any
restrictions imposed under Code Section 409A, the terms of this
section will apply regardless of any other event that may occur
after the delivery of the written notice of termination for Cause.
[1] This Agreement will terminate as of the For Cause
Termination Date;
[2] Subject to any restrictions imposed under Code Section
409A, Corporation will pay or cause to be paid or made
available to the Executive:
[a] Any unpaid installments of his Base Salary,
calculated to the end of the payroll period during
which the For Cause Termination Date occurs;
[b] The value of any accrued but unused vacation,
calculated to the end of the payroll period during
which the For Cause Termination Date occurs (this value
will be calculated by dividing the Base Salary by 365
and multiplying by the number of accrued but unused
vacation days); and
[c] Any amounts Executive is entitled to receive under
the terms of any employee benefit plan described in
Section 3.01[3].
[3] All the Executive's outstanding stock options and other
cash and equity incentive grants will be exercisable to the
extent provided under the terms relating to terminations of
employment for similar reasons contained in the plan and the
award agreements through which they were granted.
[4] "Cause" includes any violation of applicable securities
laws (including the Sarbanes-Oxley Act of 2002), any act of
fraud, intentional misrepresentation, embezzlement,
misappropriation or conversion of any asset or business
opportunity of the Company, the Corporation or any Group
member; conviction of, or entering into a plea of nolo
contendere to, a felony; intentional, repeated or continuing
violation of any of the Company's or the Corporation's
policies or procedures that occurs or continues after notice
to the Executive that he has materially violated a Company
or Corporation policy or procedure; or any breach of a
written covenant or agreement with the Company, the
Corporation or any Group member, including the terms of this
Agreement (other than failure to perform the duties
described in Section 2.01 because of death, Disability,
termination of employment, in connection with implementation
of the Transition Plan or in connection with an event
alleged to constitute Good Reason).
[5] This section also will apply if, after a notice of
intent to terminate has been delivered under any other
section of this Agreement (whether delivered by the
Corporation or the Executive), the Corporation discovers an
event or act that [a] if known would have constituted a
basis for a termination for Cause and [b] the Executive
actively concealed or could not have been discovered earlier
through application by the Corporation of reasonable
diligence.
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[6] Except as otherwise provided in the program through
which they are paid or in the Agreement, all amounts payable
under this section will be:
[a] Paid in accordance with the Corporation's payroll
procedures (in the case of Base Salary) or on the date
payable under the terms relating to comparable
terminations of employment for similar reasons
contained in the program on which they are based; and
[b] If Executive dies before all payments due under
this section have been paid, the unpaid amount will be
paid to Executive's beneficiary under the procedures
described in Section 10.07; but
[c] Except in the circumstances contemplated under
Section 5.06, if the Corporation reasonably anticipates
that its deduction of any amount payable under this
section will be limited or eliminated by application of
Code Section 162(m), the amount subject to that
reduction or elimination will be paid as soon as
administratively feasible after the January 15 of the
first calendar year beginning after the Executive
terminates or, if later, as soon as administratively
feasible after the earliest date permitted under
Code Section 409A(a)(2)(B)(i).
5.05 Termination of Employment by Executive for Good Reason.
Executive may terminate his employment at any time during the
Term for Good Reason by giving the Corporation written notice of
his intention to do so. This notice must describe, in reasonable
detail, the reasons for which Executive believes he has Good
Reason to terminate this Agreement. If, during the ensuing 60
days ("Cure Period"), the Corporation cures the condition cited
by Executive, no termination will occur under this section.
However, if the Corporation does not cure the condition cited by
Executive during the Cure Period, this Agreement will terminate
at the end of the Cure Period ("Good Reason Termination Date")
and, subject to Section 5.06 and to any restrictions imposed
under Code Section 409A, the terms of this section will apply
regardless of any other event (other than as provided in
Section 5.06) that occurs after the delivery of the written
notice of intent to terminate for Good Reason.
[1] This Agreement will terminate as of the Good Reason
Termination Date;
[2] Corporation will pay or make available:
[a] Any unpaid installments of his Base Salary,
calculated to the end of the payroll period during
which his Good Reason Termination Date occurs;
[b] The value of any accrued but unused vacation,
calculated to the end of the payroll period during
which his Good Reason Termination Date occurs (this
value will be calculated by dividing the Base Salary by
365 and multiplying by the number of accrued but unused
vacation days);
[c] The Base Salary at the rate then in effect for the
shorter of [i] the duration of the Term or [ii] 24
months;
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[d] 200 percent of the "target" bonus the Executive
would have received under the Corporation's Annual
Incentive Plan if his employment had continued through
the end of the measurement period during which his Good
Reason Termination Date occurs, whether or not the
performance objectives associated with that bonus are
met at the end of the measurement period; and
[e] Medical, dental and life insurance coverage
comparable to that in effect on the Involuntary
Termination Date for 18 months under the terms
(including the allocation of premium amounts between
the Executive and the Corporation) in effect on the
Good Reason Termination Date.
[3] All the Executive's stock outstanding options and other
cash and equity incentive grants will be exercisable to the
extent provided under the terms relating to terminations of
employment for similar reasons contained in the plan and the
award agreement through which they were granted.
[4] Executive will receive any other benefits he is
entitled to receive under the terms of any benefit program
described in Section 3.01[3].
[5] Executive will receive the difference between [a] the
amount he would have received at the end of any performance
cycle established under Section 11.00 of the 2005 Incentive
Plan had his employment continued until December 1, 2010 and
assuming that the applicable performance goals established
for that performance cycle are met on or before December 1,
2010 minus [b] the amount distributed under Section 5.05[3]
on account of the same performance cycle. This amount will
be paid at the same time other distributions are made on
account of that performance cycle and in the form specified
in the associated award agreement.
[6] Except as otherwise provided in the program through
which they are paid or in the Agreement, all amounts payable
under this section will be:
[a] Paid in accordance with the Corporation's payroll
procedures (in the case of Base Salary) or on the date
payable under the terms relating to comparable
terminations of employment for similar reasons
contained in the program on which they are based; and
[b] If Executive dies before all payments due under
this section have been paid, the unpaid amounts will be
paid to Executive's beneficiary under the procedures
described in Section 10.07; but
[c] Except in the circumstances contemplated under
Section 5.06, if the Corporation reasonably anticipates
that its deduction of any amount payable under this
section will be limited or eliminated by application of
Code Section 162(m), the amount subject to that
reduction or elimination will be paid as soon as
administratively feasible after the January 15 of the
first calendar year beginning after the Executive
terminates or, if later, as soon as administratively
feasible after the earliest date permitted under
Code Section 409A(a)(2)(B)(i).
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[7] The term "Good Reason" means, without Executive's
express prior written consent, the occurrence of any one or
more of the following events (Executive will be deemed to
have given his written consent to any of these events if, in
his capacity as a senior executive officer, he participates,
or is entitled to participate, in the decision making
process that leads to the occurrence of any of the following
events):
[a] Other than as part of any Transition Plan
unrelated to a Change in Control, [i] a material
reduction in Executive's duties, responsibilities or
status with respect to the Corporation, as compared to
those in effect on the Effective Date or any more
senior duties to which he is promoted after the
Effective Date; [ii] deprivation of Executive of both
the titles of President and CEO of the Corporation;
[iii] the permanent assignment to Executive of duties
materially inconsistent with Executive's office on the
Effective Date.
[b] A requirement that Executive relocate his
principal office or worksite (or the indefinite
assignment of Executive) to a location more than 50
miles distant from [i] the principal office or worksite
to which he was permanently assigned as of the
Effective Date or [ii] any location to which Executive
is permanently assigned, with his consent, after the
Effective Date.
[c] The failure of the Corporation to maintain
Executive's relative level of coverage under the
employee benefit or retirement plans, policies,
practices or arrangements described in Section 3.01 as
in effect on the Effective Date, both in terms of the
amount of benefits provided and the relative level of
the Executive's participation. However, Good Reason
will not arise under this subsection if the Corporation
eliminates and/or modifies any of the programs
described in Section 3.01 if (except as required by law
or as needed to preserve the tax-character of the plan,
policy, practice or arrangement) Executive's level of
coverage under all the programs described in
Sections 3.01[3] and 3.01[4] is at least as great as
the coverage provided to other senior executives of the
Corporation.
[d] A reduction in the Executive's "target" bonus
opportunity under the Corporation's Annual Incentive
Plan to a level that is less than 80% percent of the
"target" bonus opportunity available for the last bonus
cycle ending before the Effective Date. However, this
event will not constitute "Good Reason" if an
equivalent reduction is uniformly applied to other of
the Corporation's senior executives.
[e] Any material breach of this Agreement by or on or
in behalf of the Corporation that is not cured by the
Corporation within 60 days of its receipt of written
notice describing the nature of the alleged breach.
5.06 Termination of Employment Following a Change in Control.
Amounts payable to the Executive upon a "Change in Control" will
be governed by a separate "Change in Control
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Agreement." These benefits will be:
[1] Due under the same terms and subject to the same
conditions that are incorporated from time to time in Change
in Control agreements ("Change Agreement") made available to
other of the Corporation's executives (a copy of which has
been given to the Executive); but
[2] Will provide for the payments and benefits specified in
the Change Agreement, although the severance multiple will
be three times Base Salary.
5.07 Termination of Agreement for Any Other Reason. Except as
provided in Section 5.06, this Agreement will terminate on the
last day of the Term and the Executive will be entitled only to
the benefits described in Section 5.02 as if the Executive had
terminated employment voluntarily and without Good Reason on the
date this Agreement terminates.
5.08 Effect of Other Severance Benefits. Regardless of any other
provision of this Agreement, all amounts paid under this
Article 5 will be reduced by any amounts payable to Executive
from any other broad based severance program in which Executive
participates.
5.09 Effect of Code Section 409A. Regardless of any other
section of this Agreement, if the Corporation (or any successor,
including another entity involved in a Change in Control with the
Corporation) unilaterally and without the Executive's specific
written consent takes (or fails to take) any action that
generates an excise tax under Code Section 409A, the Corporation
will distribute an additional amount sufficient to ensure that
the Executive (or the Executive's beneficiary, if appropriate)
retains an amount as large as the amount he would have retained
but for that action. This undertaking applies to the effect of
the excise taxes arising under Code Section 409A as well as any
other excise taxes that might apply as a result of those taxes or
this reimbursement.
ARTICLE 6 NONCOMPETITION
6.01 For a period of 24 full calendar months after Executive's
employment terminates for any reason, he will not directly or
indirectly engage in, assist or have an active interest in
(whether as proprietor, partner, investor, shareholder, officer,
director or any type of principal whatsoever) or enter the
employment of or act as agent for or adviser or consultant to any
person or entity who is (or is about to become) engaged in any
business that competes with the Group anywhere within the United
States.
6.02 Section 6.01 does not prohibit Executive from purchasing,
for investment purposes only, any stock or other corporate
security that is listed on a national securities exchange or
quoted in any national market system (except as otherwise
provided in this Agreement), so long as such stock or other
corporate security owned by Executive does not represent more
than one percent of the market value or voting power of the total
stock or other corporate securities of that class.
6.03 Executive is not obligated to comply with the prohibitions
described in this article if the Corporation defaults in the
payment of any severance compensation or benefits owed under this
Agreement.
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6.04 For a period of 24 full calendar months after Executive's
employment terminates for any reason, he will not, on his own
behalf or on behalf of any other person, partnership,
association, corporation or other entity, solicit or in any
manner attempt to influence or induce any employee of the Group
to leave the Group's employment nor will he use or disclose to
any person, partnership, association, corporation or other entity
any information obtained while an employee of the Corporation
concerning the names and addresses of the Group's employees.
6.05 Executive recognizes that he has access to and knowledge of
certain confidential and proprietary information of the Group
that is essential to the performance of his duties under this
Agreement. Executive agrees that he will not, during or after
the term of his employment by the Corporation, in whole or in
part, disclose this information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever,
nor shall he make use of any such information for his own
purposes.
6.06 The Parties recognize that the Group will have no adequate
remedy at law for breach by Executive of the restrictions imposed
by this article and that the Group could suffer substantial and
irreparable damage if Executive breaches any of these
restrictions. For this reason, Executive agrees that, if
Executive breaches any of the restrictions imposed under this
article, the Group, in addition to the right to seek monetary
damages, may seek a temporary and/or permanent injunction to
restrain any breach or threatened breach of these restrictions or
a decree of specific performance, mandamus or other appropriate
remedy to enforce compliance with the restrictions imposed under
this article.
ARTICLE 7 INDEMNIFICATION
The Corporation will indemnify Executive (including his heirs,
executors and administrators) to the fullest extent permitted
under the Corporation's Regulations and Ohio law.
ARTICLE 8 ASSIGNMENT OF AGREEMENT
8.01 Except as specifically provided in this section, the
Corporation may not assign this Agreement to any person or entity
that is not a member of the Group. However, this Agreement may
and will be assigned or transferred to, and will be binding upon
and inure to the benefit of, any successor of the Corporation, in
which case this Agreement will be interpreted and applied by
substituting that successor for the "Corporation" under the terms
of this Agreement. For these purposes, "successor" means any
person, firm, corporation or business entity which at any time,
whether by merger, purchase or otherwise acquires all or
substantially all of the assets or the business of the
Corporation.
8.02 Because the services to be provided by Executive to the
Corporation under this Agreement are personal to him, Executive
may not assign the duties allocated to him under this Agreement
to any other person or entity. However, this Agreement will
inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors and administrators,
successors, heirs, distributees, devisees, and legatees to the
extent of any amounts payable to Executive that are due to
Executive upon his death.
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ARTICLE 9 DISPUTE RESOLUTION
9.01 The Parties agree that arbitration will be the exclusive
means of resolving all disputes or questions arising out of or
relating to this Agreement (except that nothing included in this
Article 9 prevents the Corporation from seeking injunctive or
other equitable relief if there is a breach or threatened breach
of any of the restrictions described in Article 6). Any
arbitration proceeding will be conducted before a panel of three
arbitrators, one appointed by the Corporation, a second appointed
by Executive and a third appointed by those two arbitrators. Any
arbitration may be initiated by either Party by written notice to
the other Party specifying the subject of the requested
arbitration and appointing that Party's arbitrator.
9.02 The arbitration will take place in Cincinnati, Ohio and will
be conducted in accordance with the rules of the American
Arbitration Association in effect when the arbitration begins.
Any determination or award made or approved by at least two of
the arbitrators will be final and binding on the Parties.
Judgment upon any award made in any arbitration may be entered
and enforced in any court having competent jurisdiction.
9.03 The Corporation will bear the arbitrator's fee and other
costs associated with any arbitration, unless the arbitrator,
acting under Federal Rule of Civil Procedure 54(b), elects to
award these fees to the Corporation.
ARTICLE 10 MISCELLANEOUS
10.01 Any notices, consents, requests, demands, approvals or
other communications to be given under this Agreement must be
given in writing and must be sent by registered or certified
mail, return receipt requested, to Executive at the last address
he has filed in writing with the Corporation or, in the case of
the Corporation, to the chairman of the Board at the
Corporation's principal offices.
10.02 This Agreement supersedes any prior agreements or
understandings, oral or written, between the Parties, or between
Executive and the Corporation, with respect to the subject matter
described in this Agreement and constitutes the entire agreement
of the Parties with respect to any matter covered in this
Agreement.
10.03 This Agreement may not be varied, altered, modified,
canceled, changed or in any way amended except by written
agreement of the Parties.
10.04 If any provision or portion of this Agreement is
determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement will remain in full force
and effect.
10.05 This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but
all of which together will constitute one and the same Agreement.
10.06 The Corporation will withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as
required by any applicable law or governmental regulation or
ruling.
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10.07 Executive may designate one or more persons or entities
as the primary and/or contingent beneficiaries of any amounts to
be received under this Agreement that are unpaid when Executive
dies. This designation must be written and presented in a form
acceptable to the Board or the Board's designee, if appropriate,
or in the form required by any affected benefit plan or program.
Subject to any rules prescribed by the Board, its designee or the
affected benefit plan or program, Executive may make or change
his designation at any time.
10.08 Failure to insist upon strict compliance with any of
the terms, covenants or conditions described in this Agreement
will not constitute a waiver of that or any other term, covenant
or condition nor will any such failure constitute a waiver or
relinquishment of the Party's right to insist subsequently on
strict compliance of the affected (and all other) terms,
covenants or conditions of this Agreement.
10.09 To the extent not preempted by federal law, the
provisions of this Agreement will be construed and enforced in
accordance with the laws of the state of Ohio.
10.10 This Agreement may be amended only by mutual written
agreement of the Parties. However, by signing this Agreement,
the Executive agrees, without any further consideration, to
consent to any amendment necessary to avoid penalties under
Code Section 409A.
IN WITNESS WHEREOF, the Parties have executed this Agreement, as
of December 1, 2005.
THE OHIO CASUALTY INSURANCE COMPANY
By:
-------------------------------------
Stanley N. Pontius, Chairman
OHIO CASUALTY CORPORATION
By:
-------------------------------------
Stanley N. Pontius, Lead Director
DAN R. CARMICHAEL
-----------------------------------------
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