Exhibit 10.1
The Ohio Casualty Insurance Company
2007 Senior Officer Annual Incentive Program
Program Details
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Eligibility to Participate
To be a participant, an employee must be a Strategy Team Member
or a named Executive Officer ("eligible position") on or after
January 1, 2007 and on or before December 15, 2007 ("eligible
employee"). An eligible employee will become a participant on
the earliest date on or after January 1, 2007 on which he/she
becomes an eligible employee.
Program Design
A target bonus amount has been defined for each participant based
on his or her position. The target bonus amount is stated as a
percent of base salary; however, the final bonus payment could be
modified (either increased or decreased) at the discretion of the
Strategy Team based on individual performance on objectives and
the pool of money available for individual awards. Annual base
salary as of December 31, 2007 (or such other date as determined
by the Executive Management Team ("Team")) will be used to
calculate the bonus.
Corporate performance, or a combination of corporate and business
unit performance, determines the majority of each participant's
award. Individual performance against objectives determines the
remainder of the award.
- For Executive Vice President (EVP) and Senior Vice President
(SVP) participants, 20% will be based on individual performance.
For Vice President (VP) participants, 30% will be based on
individual performance.
- For support area participants, the remaining portion (80%
for EVPs; and SVPs; 70% for VPs) will be based on corporate
performance.
- For business unit participants, half (40% for EVPs and SVPs;
35% for VPs) of the remaining portion will based on corporate
performance and half (40% for EVPs and SVPs; 35% for VPs) on
business unit performance.
Corporate performance determines the amount paid under the
corporate portion of the bonus, and also serves as a modifier of
the amounts available for individual awards (for both support and
business unit participants).
The pool of money available for individual awards will be the sum
of the target individual awards multiplied by the corporate
modifier.
Strategy Team Members will allocate the available pool for
individual awards based on individual performance on objectives
within established parameters, with the intent of rewarding
exceptional performance against objectives. The sum of the
individual awards for all participants should not exceed the
available pool.
Corporate Performance will be measured by corporate after-tax
operating income and All Lines Direct Written Premium. Corporate
Performance will be used for both business and support units.
Corporate Operating Income will be measured by Ohio Casualty
Corporation ("OCC") 2007 after-tax operating income.
A minimum trigger for the corporate after-tax operating income
must be achieved for any bonus to be paid. This applies to both
support and business units. For Business Units, no component of
the bonus will be paid under this Program unless the corporate
operating income trigger is achieved.
Results on measures in the Corporate and Business Unit Matrix may
be adjusted to account for an extraordinary event(s), but only if
approved by the Team.
The appropriate matrix is shown on the personalized sheet.
Miscellaneous
If a participant has a job change in 2007 that does not affect
eligibility for participation in this Program but does affect the
bonus amount or bonus structure (for example, due to transfer
from Support Unit to Business Unit), the bonus will be prorated
for the portion of the year that was spent in each eligible
position. For example, if the participant spends part of the
year in a Support Unit and part of the year in a Business Unit,
he/she is eligible for a prorated Support Unit bonus and a
prorated Business Unit bonus. The bonus amounts would be
prorated based on the number of months the participant spent in
the Support Unit or Business Unit.
Any questions about the Annual Incentive Program should be
directed to Deb Hounshell (extension 2039 in the Home Office) or
any other member of the Compensation Department.
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The Ohio Casualty Insurance Company
2007 Senior Officer Annual Incentive Program
Overview
The 2007 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 the Program Details
Eligibility for Participation
To be a participant, the employee must satisfy the eligibility
requirements specified in the Program Details.
Eligibility for Bonus Payment
Unless otherwise provided in the Program Details, 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 2007 (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 the Program Details) in 2007, he/she is eligible for a
prorated bonus if the participant is an employee on December 31,
2007 (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 2007, he/she is not eligible for the
bonus. If a participant demotes out of an eligible position
after December 31, 2007 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 2007 (except for any
leave of absence covered under the Family Medical Leave Act or
except when otherwise required by law).
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Participants must be in good standing at the time of payout to be
eligible for any bonus under this Program.
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 2007, 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, 2007.
Bonus Payments
The bonus amount will be calculated after all necessary data is
available in accordance with the Program Details. It is expected
that the bonus will be paid by March 15, 2008.
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 the Program Details
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 Compensation and Development
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, and applicable law.
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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 (collectively "Group Member") 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.
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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
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.
For purposes of the following paragraphs, "Change in Control"
means:
(a) Any event that is defined as a "change in control" (or
analogous term) under any other written agreement with OCC
or any other Group Member, but only to the extent specified
in that other agreement; or
(b) Any transaction (or series of related transactions) that
results in the merger or consolidation of OCC or the
exchange of common shares of OCC for the securities of
another entity (other than a Group Member) that has acquired
OCC's assets or which is in control (as defined in Section
368 (c) of the Code) of an entity that has acquired OCC's
assets but only if (i) immediately after the transaction (or
the end of a series of related transactions) the persons who
owned a majority of the voting power of OCC immediately
before the transaction (or the beginning of a series of
related transactions) own less than a majority of the voting
power of OCC and (ii) the terms of the transaction (or
series of related transactions) are binding on all holders
of the common shares of OCC (except to the extent that
dissenting shareholders are entitled to relief under
applicable law.)
Unless otherwise specified in a separate agreement between OCC
(or any other Group Member) and the participant, including the agreement
Program establishing the terms of a participant's Corporate Performance
award or Individual Performance award, if a Change in Control occurs
during the Program, each participant shall be eligible to receive
a pro-rata portion of the bonus that could have been earned by such
participant under the Program during which the Change in Control occurs,
which shall be determined and paid as follows:
(a) As soon as practicable following the Change in Control, the
Compensation Committee will determine the extent to which the
performance objectives applicable to the participant's
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Corporate Performance and/or business unit performance criteria have
been satisfied through the date of the Change in Control and, on that
basis, will determine the amount of the bonus that would have
been paid to the participant for the full Program. The extent to
which the performance objectives have been met will be based, to
the extent applicable, on the most recently disclosed financial
statements of OCC preceding the date on which the Change in
Control occurred.
(b) As soon as practicable following the Change in Control, the
Compensation Committee will determine the extent to which the
Individual Performance criteria applicable to the participant's
Individual Performance criteria have been satisfied through the
date of the Change in Control and, on that basis, will determine
the amount of the Individual Performance component that would
have been paid to the participant for the full Program.
(c) The Committee will then multiply the sum of the amounts
determined in accordance with Sections (a) and (b) by a fraction,
the numerator of which is the number of whole calendar months
during the period beginning on the first day of the Program and
ending on the last day of the month during which the Change in
Control occurs and the denominator of which is the number of
whole calendar months in the full Program.
(d) Such resulting bonus if any, shall be paid as soon as
administratively feasible following the date on which the Change
in Control occurs; provided, however, that such bonus shall be
paid no later than the later of (i) the 15th day of the third
month following the participant's first taxable year in which
such bonus is no longer subject to a substantial risk of
forfeiture or (ii) the 15th day of the third month following the
end of the first taxable year of the service recipient (within
the meaning of Section 409A of the Code) in which such bonus is
no longer subject to a substantial risk of forfeiture.
Subject to any other written agreement to the contrary between
OCC (or any other Group Member) and the participant which
implicitly or explicitly encompasses this Program, including any
agreement establishing the terms of a participant's Corporate
Performance criteria or Individual Performance criteria, if the
sum of the amounts payable under this criteria and those provided
under all other plans, programs, or agreements between the
participant and OCC or any other Group Member generate a loss of
deduction under Section 280G of the Internal Revenue Code
("Code") or an excise tax under Section 4999 of the Code, OCC
will reduce the amounts paid to the participant under this
Program, so that his or her total "parachute payment" as defined
in Section 280G(b)(2)(A) of the Code under this and any and all
other plans, programs or agreements between the participant and
the Company or any other Group Member will be $1.00 less than the
amount that would generate a loss of deduction under Section 280G
of the Code and an excise tax under Section 4999 of the Code. If
the reduction in the preceding sentence applies, the participant
may be permitted to specify how (and against which plans,
programs and agreements) the reduction is to be applied.
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