Exhibit 10.1
The Ohio Casualty Insurance Company
2006 Senior Officer Annual Incentive Program
Overview
The 2006 Senior Officer Annual Incentive Program ("Program") is designed to
give participants the opportunity to be eligible to receive a bonus based
on criteria defined in
Exhibit 1.
Eligibility for Participation
To be a participant, the employee must satisfy the eligibility requirements
specified in Exhibit 1.
Eligibility for Bonus Payment
Unless otherwise provided in Exhibit 1, the following rules shall govern a
participant's ability to receive a bonus payment under the Program.
Participants must meet the eligibility criteria as of the 15th day of the
month to be considered eligible in that month. Bonuses for participants
who are eligible for a bonus will be prorated (as described below) based on
the months in which the participant is considered eligible.
If a participant retires, dies, or becomes Disabled (i.e., is eligible to
receive payments under The Ohio Casualty Insurance Company's Long Term
Disability Plan ("LTD Plan") at the end of the long term disability
elimination period, as determined under the LTD Plan) prior to the bonus
payment date, he/she will be eligible for a prorated bonus only if (i)
he/she met the eligibility criteria during any three-month period in 2006
(or full bonus if he/she meets the eligibility criteria for all twelve
months) and (ii) to the extent the condition described in clause (i) is not
inconsistent with any applicable law, rule, or regulation.
Participants who have been placed on disciplinary probation within the 12-
month period preceding the bonus payment date are not eligible for the
bonus.
If a participant is displaced out of an eligible position (as defined in
Exhibit 1) in 2006, he/she is eligible for a prorated bonus if the
participant is an employee on December 31, 2006 (or full bonus if he/she
meets the eligibility criteria for all twelve months).
If a participant demotes (not as a result of a displacement) out of an
eligible position in 2006, he/she is not eligible for the bonus. If a
participant demotes out of an eligible position after December 31, 2006 but
before the bonus payment date, he/she is eligible for a bonus.
Any bonus will be prorated for the period of time that a participant is on
a leave of absence in 2006 (except for any leave of absence covered under
the Family Medical Leave Act or except when otherwise required by law).
Participants must be in good standing at the time of payout to be eligible
for any bonus under this Program.
March 1, 2006
Participants must be employed at the time of payout to be eligible for any
bonus under this Program unless (i) the employee retires, dies, or becomes
Disabled prior to the bonus payment date and the employee met the
eligibility criteria during any three-month period in 2006, to the extent
such three-month condition is not inconsistent with any applicable law,
rule, or regulation, or (ii) the employee is displaced out of an eligible
position prior to the bonus payment date and was an employee on December
31, 2006.
Bonus Payments
The bonus amount will be calculated after all necessary data is available
in accordance with Exhibit 1. It is expected that the bonus will be paid
in the spring of 2007.
A participant's prorated bonus shall be determined by multiplying the bonus
amount by x/12, with x being the number of whole months in the year during
which the person was "eligible for the bonus." A person is considered
"eligible for the bonus" for each month in which he/she meets the
eligibility requirements as of the 15th day of the month.
If a participant dies prior to payment of a bonus to which he/she is
eligible, any such bonus will be payable to the participant's estate.
Payment of a bonus to an employee on a leave of absence will not be made
until the employee returns from the leave of absence unless otherwise
provided under the Program.
The bonus payments will be considered a part of Final Average Compensation
(as defined in The Ohio Casualty Insurance Company Employees Retirement
Plan) if paid to the employee prior to his/her termination date.
The bonus payment will be included in a participant's Compensation (as
defined in The Ohio Casualty Insurance Company Employee Savings Plan
("ESP")) if paid to the employee before his/her termination date to the
extent permitted under the ESP. If the employee is contributing to the ESP
at the time a bonus is paid and such bonus is included in his/her
Compensation for such purposes of the ESP, contributions to the ESP will be
deducted from any amount payable to the employee under this Program.
The Ohio Casualty Insurance Company ("OC") shall deduct from any amount
payable to the employee under this Program any taxes required to be
withheld under federal, state and local law.
Notwithstanding anything in this Program or Exhibit 1 to the contrary, but
subject to the terms of a written Change in Control Agreement and the sixth
paragraph under the Miscellaneous section of this document, the Executive
Compensation Committee of the Board of Directors of Ohio Casualty
Corporation (the "Compensation Committee") shall have the discretion to
alter the amount of payment of any bonus for any participant(s) under this
Program in accordance with the guidelines established by the Compensation
Committee for such purpose.
March 1, 2006 -2-
Confidential Information
At all times during employment with OC or any of its subsidiaries and
thereafter, employees shall not disclose, divulge, use or publish any
Confidential Information (as defined below) except in connection with the
employee's job responsibilities for OC or its subsidiaries or with the
written permission by an authorized senior officer of The Ohio Casualty
Insurance Company. For purposes of this section, Confidential Information
means any and all confidential and/or proprietary information, data or
knowledge of the Ohio Casualty Corporation ("OCC") or any of its
subsidiaries including but not limited to (i) information regarding
research, development, new products, marketing and selling strategies,
operating plans and procedures, reinsurance, policyholders and agents, (ii)
information regarding business plans and strategies, budgets, litigation
and governmental proceedings, prices, costs and expenses and premium data,
(iii) skills and compensation of other employees, and (iv) trade secrets,
ideas, processes, source and object codes, data, computer programs and
software, and other intellectual property. Confidential Information does
not include information that is or becomes generally available to the
public other than as a result of a disclosure by an employee in violation
of this Program.
When an employee leaves the employ of OC (or at OC's earlier request), he
or she will deliver to OC any and all computer disks and tapes, notes,
memoranda and other documents, together with all copies thereof, and any
other material containing or disclosing any Confidential Information.
Breach of this section will result in appropriate disciplinary action by OC
up to and including termination of employment. OCC and OC shall have the
right to enforce this section by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights
and remedies that OCC or OC may have for breach of this provision.
Miscellaneous
Full power and authority to construe, interpret and administer this
Program, including determining the eligibility and the amount of any bonus
payments hereunder will be vested in the Compensation Committee. The
Compensation Committee shall have the sole and exclusive discretion in
making any and all decisions regarding the Program's operation and such
decisions shall be final and binding upon all interested parties. In no
circumstances may the Program be construed or interpreted as guaranteeing
bonus payments being made to any eligible employee or be treated as
creating any rights to bonus payments in this Program with respect to any
eligible employee.
Since no employee has a guaranteed right to any bonus amount under this
Program, any attempt by such an employee to sell, transfer, assign, pledge,
or otherwise encumber any anticipated bonus amount shall be void and
neither OCC nor any of its subsidiaries shall be liable in any manner for,
or subject to, the debts, contracts, liabilities, engagements or torts of
any such employee who might anticipate a bonus under this Program.
Nothing in this Program shall confer upon any employee any right to
continue in the employment of OC or any subsidiary or limit in any way the
right of OC or any subsidiary to terminate the employment of the employee
at any time.
This Program shall at all times be entirely unfunded, and no provision
shall at any time be made with respect to segregating assets of OCC or any
of its subsidiaries for payment of any bonus
March 1, 2006 -3-
amount under this Program. No employee or any other person shall have any
interest in any particular assets of OCC or any of its subsidiaries by reason
of the right to receive a bonus payment under this Program and any such
employee or any such other person shall have only the rights of a general
unsecured creditor of OC or its applicable subsidiary regarding his or her
rights under this Program.
OC reserves the right to amend or terminate the Program (in its sole
discretion) by action of the Compensation Committee. A termination of the
Program shall cause a discontinuance or ineligibility of any bonus amounts
for which the eligibility requirements have not been met at the time of
termination. Any amendment made to the Program shall be effective as of
the date such amendment is adopted and no such amendment shall adversely
affect the rights of any employee to bonus amounts for which the
eligibility requirements have been met prior to the adoption of such
amendment unless otherwise specified in such amendment.
If a Change in Control (as defined herein) occurs, OC shall (i) treat the
date on which the Change in Control occurred as the date of payout for
purposes of determining a participant's eligibility for a bonus under this
Program, (ii) treat participants who are employed on the date on which the
Change in Control occurred as being eligible for a bonus payment if the
payout date was the date on which the Change in Control occurred, (iii)
calculate the bonus payment to participants under this Program based on the
prorated bonus calculation provided that a participant will be considered
"eligible for the bonus" for the month in which the Change in Control
occurred unless the participant would not have otherwise been considered
"eligible for the bonus" for such month, (iv) determine the bonus amount
based on the most recently disclosed financial statements of OCC preceding
the date on which the Change in Control occurred, and (v) pay such bonus to
eligible participants as soon as administratively feasible following the
date on which the Change in Control occurred.
For purposes of the preceding paragraph, "Change in Control" means:
[1] Subject to the rules of application described in paragraph below,
the date on which the earliest of the following events occurs:
[a] After January 1, 2006 (the "Effective Date"), an event that
would be required to be reported as a change in control for
purposes of the Securities Exchange Act of 1934, as amended
("Exchange Act").
[b] During any 24-consecutive-calendar-month period ending after
the Effective Date, there is a change in a majority of the
Board of Directors of OCC ("OCC Board"); provided, however,
that any new director whose nomination for election by OCC's
shareholders was approved, or who was appointed or elected to
the OCC Board, by the vote of two-thirds of the directors then
still in office who were in office at the beginning of the 24-
consecutive-calendar-month period will be disregarded in
determining if there has been a change in the majority of the
OCC Board.
[c] During any 12-consecutive-calendar month period beginning
after the Effective Date, any entity or "person," [including a
"group" as contemplated by Exchange Act Sections 13(d)(3) and
14(d)(2)] is or becomes the "beneficial
March 1, 2006 -4-
owner" [as defined in Rule 13d 3 under the Exchange Act],
through a tender offer or otherwise, of Common Shares
representing more than 20 percent or more of the combined voting
power of OCC's then outstanding Common Shares. However, this
element of this definition will be applied without regard to
the effect of any redemption of Common Shares by OCC or the
acquisition of Common Shares by any Group Member and, solely
for purposes of applying this subparagraph [1][c], after
ignoring any Common Shares acquired:
[i] By any employee benefit plan maintained by any Group
Member;
[ii] Directly, through an equity compensation plan maintained
by any Group Member;
[iii] Directly, through inheritance, gift, bequest or by
operation of law on the death of an individual; or
[iv] By any entity or "person" [including a "group" as
contemplated by Exchange Act Sections 13(d)(3) and
14(d)(2)] with respect to which that acquirer has filed
SEC Schedule 13G indicating that the Common Shares were
not acquired and are not held for the purpose of or with
the effect of changing or influencing, directly or
indirectly, OCC's management or policies, unless and
until that entity or person indicates that its intent has
changed by filing SEC Schedule 13D.
[d] After the Effective Date, any entity or "person," [including a
"group" as contemplated by Exchange Acts Sections 13(d)(3) and
14(d)(2) and, in the aggregate, all employee pension benefit
plans, as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, maintained by any
Group Member] is or becomes the "beneficial owner" [as defined
in Rule 13d 3 under the Exchange Act], through a tender offer
or otherwise, of Common Shares representing more than 50
percent or more of the combined voting power of OCC's then
outstanding Common Shares.
[e] After the Effective Date, OCC's shareholders approve a
definitive agreement to merge or combine OCC with or into
another entity, a majority of the directors of which were not
members of the OCC Board immediately before the merger and in
which OCC's shareholders will hold less than 50 percent of the
voting power of the surviving entity. When applying this
element of this definition, shareholders will be determined
immediately before and immediately after the merger or
combination.
[f] Within any 12-consecutive-calendar-month period ending after
the Effective Date, any entity or "person" [including a
"group" as contemplated by Exchange Act Sections 13(d)(3) and
14(d)(2) and Code Section 280G] acquires, either directly or
as a "beneficial owner" [as defined in Rule 13d 3 under the
Exchange Act] of another entity or person, Group assets having
a total gross fair market value equal to or greater than 50
percent of the book value of the Group's assets. For purposes
of this definition, "book value" will be established on the
basis of the latest consolidated financial statement OCC filed
with the Securities and Exchange Commission before the date
any 12-
March 1, 2006 -5-
consecutive-calendar-month measurement period began.
However, except as otherwise provided in this section, this
element of this definition will be applied after ignoring:
[i] Any transfer of assets to an entity, more than 50 percent
of the total value or voting power of which is owned by
one or more Group Members; or
[ii] Any transfer of assets to any entity or "person"
[including a "group" as contemplated by Sections Exchange
Act 13(d)(3) and 14(d)(2)] that, immediately before the
transfer, owns, directly or as a "beneficial owner" [as
defined in Rule 13d-3 under the Exchange Act], more than
50 percent of the total value or voting power of OCC's
outstanding securities.
[2] For purposes of applying all parts of this definition, [a] Common
Shares owned or acquired by a participant or by any other entity or
"person" [including a "group" as contemplated by Sections Exchange Act
13(d)(3) and 14(d)(2)] acting in concert with such participant
will be disregarded, [b] any transfer of assets to a participant or
to (or merger of OCC with) any other entity or "person" [including a
"group" as contemplated by Exchange Act Sections 13(d)(3) and 14(d)(2)]
acting in concert with such participant will be disregarded, [c] the
constructive ownership rules of Internal Revenue Code Section 318(a)
will be applied to determine share ownership, [d] "Common Shares"
means OCC's common shares or any equity security issued in
substitution, exchange or in place of OCC's common shares, [e]
"Group" means OCC, OC and any other entity to which either is
related through common ownership as defined in Internal Revenue Code
Section 1504 either on the Effective Date or at any time during the
2006, and [f] "Group Member" means each entity that is a member of
the Group either on the Effective Date or at any time during 2006.
Notwithstanding the provisions of the foregoing paragraph, the express
terms of a written Change in Control Agreement with a participant in the
Program shall govern the determination of an occurrence of a Change in
Control, as well as the terms, calculation, form, and payout amount, for
any bonus amount for such participant under the Program to the extent that
such Change in Control Agreement does not violate the provisions of Section
409A of the Internal Revenue Code of 1986, as amended. If revision of this
Program by such a Change in Control Agreement would result in a violation
of Code Section 409A, such revision shall be disregarded in favor of the
terms of this Program.
The provisions of this Program are intended to satisfy the short-term
deferral exemption from the application of Section 409A of the Internal
Revenue Code of 1986, as amended (the "Code"). To the extent that payments
under the Program do not satisfy the short-term deferral exemption, the
Program will make distributions to participants as of the designated date
indicated herein but in no event later than the later of: (1) the December
31st of the calendar year of the designated date of distribution, or (2) as
soon as administratively practicable after the designated date.
March 1, 2006 -6-