Exhibit 99.1
2006 INCENTIVE COMPENSATION PLAN
Old Republic International Corporation (the "Company"), a Delaware
corporation, hereby establishes and adopts the following 2006 Incentive
Compensation Plan (the "Plan").
1. PURPOSE OF THE PLAN
The purpose of the Plan is to assist the Company and its Subsidiaries in
attracting and retaining selected individuals to serve the Company who are
expected to contribute to the Company's success and to achieve long-term
objectives which will inure to the benefit of all stockholders of the Company
through the additional incentives inherent in the Awards hereunder.
2. DEFINITIONS
2.1. "Award" shall mean any Option, Other Stock Unit Award or any other
right, interest or option relating to Shares, or other property (including cash)
granted pursuant to the provisions of the Plan.
2.2. "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted by the Committee hereunder,
including through an electronic medium.
2.3. "Board" shall mean the Board of Directors of the Company.
2.4. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.5. "Committee" shall mean the Compensation Committee of the Board,
consisting of no fewer than three Directors, each of whom is (i) a "non-employee
director" within the meaning of Rule 16b-3 of the Exchange Act, (ii) an "outside
director" within the meaning of Section 162(m) of the Code, and (iii) an
"independent director" for purpose of the rules and regulations of the New York
Stock Exchange (or such other principal securities market on which the Shares
are traded).
2.6. "Covered Employee" shall mean a "covered employee" within the meaning
of Section 162(m) of the Code.
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2.7. "Director" shall mean a non-employee member of the Board.
2.8. "Employee" shall mean any employee of the Company or any Subsidiary
and any prospective employee conditioned upon, and effective not earlier than,
such person's becoming an employee of the Company or any Subsidiary.
2.9. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.10. "Fair Market Value" of Shares as of any date shall mean the composite
transactions closing price for the Shares on the immediately preceding trading
date of the New York Stock Exchange, as published in The Wall Street Journal (or
if there were no reported prices on such date, on the last preceding date on
which the prices were reported) or, if the Company is not then listed on the New
York Stock Exchange, on such other principal securities exchange on which the
Shares are traded, and if the Company is not listed on the New York Stock
Exchange or any other securities exchange, the Fair Market Value of Shares shall
be an amount, not less than book value, determined by the Committee in its sole
discretion.
2.11. "Option" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.
2.12. "Option Proceeds" shall mean the cash actually received by the
Company for the option price in connection with the exercise of Options or
options granted under the Prior Plans that are exercised after the effective
date of the Plan, plus the maximum tax benefit that could be realized by the
Company as a result of the exercise of such Options or options granted under the
Prior Plans, which tax benefit shall be determined by multiplying (a) the amount
that is deductible for federal income tax purposes as a result of any such
option exercise (currently equal to the amount upon which the Participant's
withholding tax obligation is calculated), times (b) the maximum federal
corporate income tax rate for the year of exercise.
2.13. "Other Stock Unit Award" shall have the meaning set forth in Section
5.1.
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2.14. "Participant" shall mean an individual who is selected by the
Committee to receive an Award under the Plan.
2.15. "Payee" shall have the meaning set forth in Section 9.1 hereof.
2.16. "Performance Award" shall mean any Award granted pursuant to Article
6 hereof.
2.17. "Performance Period" shall mean that period established by the
Committee at the time any Performance Award is granted or at any time thereafter
during which any performance goals specified by the Committee with respect to
such Award are to be measured.
2.18. "Permitted Assignee" shall have the meaning set forth in Section 8.3
hereof.
2.19. "Prior Plan" shall mean the Amended and Restated 2002 Old Republic
International Corporation Non-Qualified Stock Option Plan.
2.20. "Shares" shall mean the shares of Common Stock of the Company, par
value $1.00 per share.
2.21. "Securities Act" shall mean the Securities Act of 1933, as amended.
2.22. "Subsidiary" shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Award, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.
3. ELIGIBILITY AND ADMINISTRATION
3.1. Eligibility. Any individuals who, in the discretion of the Committee,
are in positions to affect the profitability and growth of the Company shall be
eligible to be selected as Participants.
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3.2. Administration.
(a) The Plan shall be administered by the Committee. The Committee
shall have full power and authority, subject to the provisions of the Plan
and subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be adopted by the Board,
to: (i) select the Participants to whom Awards may from time to time be
granted hereunder; (ii) determine the type or types of Awards, not
inconsistent with the provisions of the Plan, to be granted to each
Participant hereunder; (iii) determine the number of Shares to be covered
by each Award granted hereunder; (iv) determine the terms and conditions,
not inconsistent with the provisions of the Plan, of any Award granted
hereunder; (v) determine whether, to what extent, and under what
circumstances cash Awards made under the Plan shall be deferred; (vi)
determine whether, to what extent and under what circumstances any Award
shall be canceled or suspended; (vii) interpret and administer the Plan and
any instrument or agreement entered into under or in connection with the
Plan, including any Award Agreement; (viii) correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the
manner and to the extent that the Committee shall deem desirable to carry
it into effect; (ix) establish such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the
Plan; and (x) make any other determination and take any other action that
the Committee deems necessary or desirable for administration of the Plan.
(b) Decisions of the Committee shall be final, conclusive and binding
on all persons or entities, including the Company, any Participant, and any
Subsidiary. A majority of the members of the Committee may determine its
actions and fix the time and place of its meetings.
(c) To the extent not inconsistent with applicable law, including
Section 162(m) of the Code, or the rules and regulations of the New York
Stock Exchange (or such other principal securities market on which the
Shares are traded), the Committee may delegate to a committee of one or
more Directors of the Company or, to the extent permitted by law, to one or
more executive officers or a committee of executive officers of the Company
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or its Subsidiaries the right to grant Awards to Employees who are not
executive officers of the Company and the authority to take action on
behalf of the Committee pursuant to the Plan to cancel or suspend Awards to
Employees who are not executive officers of the Company.
4. OPTIONS
4.1. Number of Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 8.2 hereof, the
aggregate number of Shares subject to Awards issued pursuant to this Plan
shall not exceed nine percent (9%) of the Shares issued and outstanding
(excluding Shares held by the Company and any of its Subsidiaries) as of
the end of the month immediately preceding the granting of an Award
hereunder, less the aggregate number of Shares subject to options then
outstanding under the Company's Prior Plan.
(b) If any Shares subject to an Award or to an award under the Prior
Plan are forfeited, expire or terminate without issuance of all or a
portion of the Shares subject to such Award, the Shares shall, to the
extent of such forfeiture, expiration, termination or non-issuance, again
be available for Awards under the Plan.
(c) In the event that (i) any Option granted hereunder is exercisable
through the tendering of Shares (either actually or by attestation) or by
the withholding of Shares by the Company, or (ii) withholding tax
liabilities arising from such Option or Prior Plan award are satisfied by
the tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, then only the number of Shares issued
net of the Shares tendered or withheld shall be counted for purposes of
determining the maximum number of Shares available for grant under the
Plan, and the Shares so tendered or withheld shall again be available for
Awards under the Plan.
(d) Shares reacquired by the Company on the open market using Option
Proceeds shall be available for Awards under the Plan.
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(e) In the event that a company acquired by the Company or any
Subsidiary or with which the Company or any Subsidiary combines has shares
available under a pre-existing plan approved by shareholders and not
adopted in contemplation of such acquisition or combination, the shares
available for grant pursuant to the terms of such pre-existing plan (as
adjusted, to the extent appropriate, using the exchange ratio or other
adjustment or valuation ratio or formula used in such acquisition or
combination to determine the consideration payable to the holders of common
stock of the entities party to such acquisition or combination) may be used
for Awards under the Plan and shall not reduce the Shares authorized for
grant under the Plan; provided that Awards using such available shares
shall not be made after the date awards or grants could have been made
under the terms of the pre-existing plan, absent the acquisition or
combination, and shall only be made to individuals who were not Employees
prior to such acquisition or combination.
4.2. Character of Shares. Any Shares issued hereunder may consist, in whole
or in part, of authorized and unissued shares, Treasury shares or shares
purchased in the open market or otherwise.
4.3. Grant of Options. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
shall be subject to the terms and conditions of this Article 4 and to such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall deem desirable.
4.4. Award Agreements. All Options granted pursuant to this Article 4 shall
be evidenced by a written Award Agreement in such form and containing such terms
and conditions as the Committee shall determine which are not inconsistent with
the provisions of the Plan. The terms of Options need not be the same with
respect to each Participant. Granting of an Option pursuant to the Plan shall
impose no obligation on the recipient to exercise such Option. Any individual
who is granted an Option pursuant to this Article 4 may hold more than one
Option granted pursuant to the Plan at the same time.
4.5. Option Price. The option price per each Share purchasable under any
Option granted pursuant to this Article 4 shall not be less than 100% of the
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Fair Market Value of such Share, as defined in Section 2.10 above. Other than
pursuant to Section 8.2 hereof, the Committee shall not without the approval of
the Company's stockholders (a) lower the option price per Share of an Option
after it is granted, (b) cancel an Option when the option price per Share
exceeds the Fair Market Value of the underlying Shares in exchange for another
Award, or (c) take any other action with respect to an Option that may be
treated as a repricing under the rules and regulations of the New York Stock
Exchange (or such other principal securities market on which the Shares are
traded).
4.6. Option Term. The term of each Option shall be fixed by the Committee
in its sole discretion; provided that no Option shall be exercisable after the
expiration of ten (10) years from the date the Option is granted, except in the
event of death or disability.
4.7. Exercise of Options. Vested Options granted under the Plan shall be
exercised by the Participant or by a Permitted Assignee thereof (or by the
Participant's executors, administrators, guardian or legal representative, as
may be provided in an Award Agreement) as to all or part of the Shares covered
thereby, by the giving of written notice of exercise to the Company or its
designated agent, specifying the number of Shares to be purchased, accompanied
by payment of the full purchase price for the Shares being purchased, together
with the amount required to be withheld by the then current Internal Revenue
Code and Regulations and applicable state income taxes. Unless otherwise
provided in an Award Agreement, full payment of such purchase price shall be
made at the time of exercise and shall be made in cash or cash equivalents
(including certified check or bank check or wire transfer of immediately
available funds). The notice of exercise, accompanied by such payment, shall be
delivered to the Company at its principal business office or such other office
as the Committee may from time to time direct, and shall be in such form,
containing such further provisions consistent with the provisions of the Plan,
as the Committee may from time to time prescribe. In no event may any Option
granted hereunder be exercised for a fraction of a Share. No adjustment shall be
made for cash dividends or other rights for which the record date is prior to
the date of such issuance.
4.8. Amount Exercisable. Each Option may be exercised, so long as it is
valid and outstanding, from time to time in part or as a whole, subject to the
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following percentage limitations and any limitations with respect to the number
of Shares for which the Option may be exercised at a particular time and to such
other conditions as the Committee in its discretion may specify upon granting
the Option.
(a) Options may be exercised in accordance with the following schedule
of vesting:
Annual Cumulative
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10% as of December 31st of the year of the grant 10%
15% as of the second December 31st following the 25%
date of the grant
20% as of the third December 31st following the 45%
date of the grant
25% as of the fourth December 31st following the 70%
date of the grant
30% as of the fifth December 31st following the 100%
date of the grant;
(b) If the Participant (i) dies while in the employ of the Company or
any Subsidiary, or (ii) retires in good standing from the employ of the
Company or any Subsidiary after attaining age 57, or (iii) retires as a
result of disability under the then established rules of the Company or the
Subsidiary, then options shall vest to the extent of the higher of:
(1) 10% of the number of Shares covered by the Option for each
year that the Participant has been employed by the Company or any
Subsidiary; or
(2) the actual vested percentage determined pursuant to the
schedule in subparagraph (a) above, plus 50% of the unvested remaining
Shares;
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determined as of the date of the Participant's death or retirement,
with no additional vesting thereafter; or
(c) If there is any Change of Control of the Company, as defined
below, regardless of the resulting price per Share of stock, then options
shall vest in accordance with the vesting provisions set forth in the
preceding subparagraph (b) hereof, and any Shares remaining unvested
thereafter shall vest in accordance with the vesting schedule in
subparagraph (a) above.
The right to purchase shall be cumulative and may be exercised as to any
Shares not previously purchased during the remainder of the term of the Option.
For purposes of subparagraphs (b) and (c) above, years of employment shall
be measured from the date an Employee was first employed by the Company or any
Subsidiary and shall include periods of employment prior to the time when the
Subsidiary or division of the Company was acquired by the Company. As used in
subparagraph (c) above, the term "Change of Control" of the Company refers to:
(i) the date of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which Shares of
the Company's stock would be converted into cash, securities or other property;
or (ii) the date of any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, other than any sale, lease, exchange or other
transfer to any corporation where the Company owns, directly or indirectly, at
least 80% of the outstanding voting securities of such corporation after any
such transfer; or (iii) the date of any plan or proposal for the liquidation or
dissolution of the Company; or (iv) the date any person (as such term is used in
Section 13(d) of the Securities Exchange Act of 1934), other than the Old
Republic International Corporation Employees Savings and Stock Ownership Trust
or any other trust established by or contributed to by the Company or any of its
Subsidiaries for the benefit of Employees of the Company or its Subsidiaries,
shall become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of 20% or more of the Company's outstanding stock; or (v) the
date, during any period of twenty-four (24) consecutive months, on which
individuals who at the beginning of such period constitute the entire Board
shall cease for any reason to constitute a majority thereof.
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4.9. Termination of Options Upon Severance of Employment. Except as
otherwise expressly provided herein, Options shall terminate immediately upon
severance of the employment relationship between the Company and its
Subsidiaries and the Participant for any reason, for or without cause, other
than death or retirement in good standing from the employ of the Company or its
Subsidiaries for reasons of age or disability under the then established rules
of the Company or the Subsidiary. Whether authorized leave of absence, or
absence on military or government service, shall constitute severance of the
employment relationship between the Company and the Subsidiary and the
Participant shall be determined by the Committee at the time thereof.
(a) Death. In the event of the death of a Participant while in the
employ of the Company or any Subsidiary and before the date of expiration
of an Option held by such Participant, such Option shall terminate on the
earlier of its date of expiration or four (4) years following the date of
such death. After the death of the Participant, the Participant's
executors, administrators, or any person or persons to whom the
Participant's Option may be transferred by will, by the laws of descent and
distribution or by beneficiary designation shall have the right, at any
time prior to such termination, to exercise the Option, in whole or in
part. The number of Shares vested and exercisable, however, shall be
determined as of the date of death, with no further vesting thereafter.
(b) Retirement. If, before the date of expiration of an Option, the
Participant holding the Option shall be retired in good standing from the
employ of the Company or any Subsidiary for reasons of age or disability
under the then established rules of the Company or the Subsidiary, the
Option shall terminate on the earlier of the normal date of expiration or
four (4) years after the date of such retirement. In the event of such
retirement, the Option shall be exercisable prior to the termination of
such Option to the extent to which the Participant was entitled to exercise
such Option immediately prior to such retirement unless the provisions of
Section 4.8(b) hereof concerning accelerated vesting apply. An employment
relationship between the Company and the Participant shall be deemed to
exist during any period in which the Participant is employed by the Company
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or any Subsidiary. If the Participant dies after retirement, but prior to
the expiration date of the Option, the Option period shall not be extended
but shall terminate on the earlier of the date of expiration or four (4)
years after the date of retirement. The number of Shares vested and
exercisable, however, shall be determined as of the date of retirement,
with no further vesting thereafter.
(c) Change of Control of the Company. In the event of any involuntary
severance of the employment relationship between the Participant and the
Company or its Subsidiaries occurring within eighteen (18) months after any
Change of Control of the Company, as defined in Section 4.8 hereof, such
Option shall terminate on the earlier of its scheduled date of expiration
or six (6) months following severance of the employment relationship.
4.10.Requirements of Law. The Company shall not be required to sell or
issue any Shares under any Option if the issuance of such Shares shall
constitute a violation by the holder or the Company of any provisions of any law
or regulation of any governmental authority. In addition, in connection with the
Securities Act, upon exercise of any Option, the Company shall not be required
to issue such Shares unless the Committee has received evidence satisfactory to
it to the effect that the holder of such Option will not transfer such Shares
except pursuant to a registration statement in effect under the Securities Act
or unless an opinion of counsel to the Company has been received by the Company
to the effect that such registration is not required. Any determination in this
connection by the Committee shall be final, binding and conclusive. At the
request of the Company to enable it to comply with the Securities Act, the
person exercising the Option shall also represent in writing that the Shares
acquired upon exercise of the Option are being acquired for the holder's own
account for investment and not with a view to resale. In the event the Shares
issuable on exercise of an Option are not registered under the Securities Act,
the Company may imprint the following legend or any other legend which counsel
for the Company considers necessary or advisable to comply with the Securities
Act.
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
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laws of any state and may not be sold or transferred except upon such
registration or upon receipt by the Company of an opinion of counsel
satisfactory to the Company, in form and substance satisfactory to the
Company, that registration is not required for such sale or transfer."
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act (as now in effect or as
hereafter amended); and in the event any Shares are so registered the Company
may remove any legend on certificates representing such Shares. The Company
shall make reasonable efforts to cause the exercise of an Option or the issuance
of Shares pursuant thereto to comply with any law or regulation of any
governmental authority.
4.11.No Rights as Shareholder. No Option holder shall have rights as a
shareholder with respect to Shares covered by the Option until the date of
issuance of a stock certificate for such Shares; and, except as otherwise
provided in Section 8.2 hereof, no adjustment for dividends, or otherwise, shall
be made if the record date thereof is prior to the date of issuance of such
certificate.
5. OTHER STOCK UNIT AWARDS
5.1. Grants. Stock appreciation rights, restricted stock or other Awards of
units having a value equal to an identical number of Shares ("Other Stock Unit
Awards") may be granted hereunder to Participants, in addition to other Awards
granted under the Plan. Other Stock Unit Awards shall also be available as a
form of payment of other Awards granted under the Plan and other earned
cash-based incentive compensation.
5.2. Award Agreements. The terms of Other Stock Unit Awards granted
hereunder shall be set forth in a written Award Agreement which shall contain
provisions determined by the Committee and not inconsistent with the Plan. The
terms of such Awards need not be the same with respect to each Participant.
5.3. Payment. Except as provided in Article 7 or as may be provided in an
Award Agreement, Other Stock Unit Awards may be paid in Shares, cash or other
property, or any combination thereof, in the sole discretion of the Committee at
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the time of payment. Other Stock Unit Awards may be paid in a lump sum or in
installments or, in accordance with procedures established by the Committee, on
a deferred basis subject to the requirements of Section 409A of the Code.
6. PERFORMANCE AWARDS
6.1. Grants. Performance Awards in the form of cash may be granted
hereunder to Participants, either alone or in addition to other Awards granted
under the Plan. The performance goals to be achieved for each Performance Period
shall be conclusively determined by the Committee and shall be based upon the
criteria set forth in Section 7.2 hereof.
6.2. Award Agreements. The terms of any Performance Award granted under the
Plan shall be set forth in a written Award Agreement which shall contain
provisions determined by the Committee and not inconsistent with the Plan. The
terms of Performance Awards need not be the same with respect to each
Participant.
6.3. Terms and Conditions. The performance criteria to be achieved during
any Performance Period and the length of the Performance Period shall be
determined by the Committee; provided, however, that a Performance Period shall
not be shorter than twelve (12) months. The amount of the Award to be
distributed shall be conclusively determined by the Committee.
6.4. Payment. Except as may otherwise be provided in an Award Agreement,
Performance Awards will be distributed only after the end of the relevant
Performance Period. Performance Awards shall be paid in cash and may be paid in
a lump sum or in installments following the close of the Performance Period or,
in accordance with procedures established by the Committee, on a deferred basis
subject to the requirements of Section 409A of the Code.
7. CODE SECTION 162(m) PROVISIONS
7.1. Covered Employees. Notwithstanding any other provision of the Plan, if
the Committee determines at the time an Award is granted to a Participant who
is, or is likely to be, as of the end of the tax year in which the Company would
claim a tax deduction in connection with such Award, a Covered Employee, then
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the Committee may provide that this Article 7 is applicable to such Award.
7.2. Performance Criteria. If the Committee determines that an Award is
subject to this Article 7, the distribution of cash, Shares or other property
pursuant thereto, as applicable, shall be subject to the achievement of one or
more objective performance goals established by the Committee, which shall be
based on the attainment of specified levels of one or any combination of the
following: net sales; revenue; revenue growth; operating income; pre- or
after-tax income (before or after allocation of corporate overhead and bonus);
net earnings; earnings per share; net income; division, group or corporate
financial goals; return on equity; total shareholder return; return on assets or
net assets; attainment of strategic and operational initiatives; appreciation in
and/or maintenance of the price of the Shares or any other publicly-traded
securities of the Company; market share; gross profits; earnings (including
earnings before taxes, earnings before interest and taxes or earnings before
interest, taxes, depreciation and amortization); economic value-added models;
comparisons with various stock market indices; reductions in costs; cash flow
(before or after dividends); cash flow per share (before or after dividends);
return on capital (including return on total capital or return on invested
capital; cash flow return on investment; improvement in or attainment of expense
levels or working capital levels; and cash margins. Such performance goals also
may be based solely by reference to the Company's performance or the performance
of a Subsidiary, division, business segment or business unit of the Company, or
based upon the relative performance of other companies or upon comparisons of
any of the indicators of performance relative to other companies. The Committee
may also exclude charges related to an event or occurrence which the Committee
determines should appropriately be excluded, including (a) restructurings,
discontinued operations, extraordinary items, and other unusual or non-recurring
charges, (b) an event either not directly related to the operations of the
Company or not within the reasonable control of the Company's management, or (c)
the cumulative effects of tax or accounting changes in accordance with generally
accepted accounting principles. Such performance goals shall be set by the
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m) of the Code, and the regulations thereunder.
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7.3. Adjustments. Notwithstanding any provision of the Plan (other than
Section 7.5 hereof), with respect to any Award that is subject to this Article
7, the Committee may adjust downwards, but not upwards, the amount payable
pursuant to such Award, and the Committee may not waive the achievement of the
applicable performance goals, except in the case of the death or disability of
the Participant or as otherwise determined by the Committee in special
circumstances.
7.4. Restrictions. The Committee shall have the power to impose such other
restrictions on Awards subject to this Article as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
"performance-based compensation" within the meaning of Section 162(m) of the
Code.
7.5. Impact of Change of Control. The terms of any Performance Award may
provide in the Award Agreement evidencing the Award that, upon a "Change of
Control" of the Company (as that term may be defined therein), all Performance
Awards shall be considered to be earned and payable (either in full or pro rata
based on the portion of Performance Period completed as of the date of the
Change of Control), and any deferral or other restriction shall lapse and such
Performance Awards shall be immediately settled or distributed. For purposes
hereof, a "Change of Control" shall mean an event described in an Award
Agreement evidencing the Award or such other event as determined in the sole
discretion of the Board.
7.6. Termination of Employment. The Committee shall determine and set forth
in each Award Agreement whether any Performance Awards granted in such Award
Agreement will continue to be exercisable, and the terms of such exercise, on
and after the date that a Participant ceases to be employed by or to provide
services to the Company or any Subsidiary, whether by reason of death,
disability, voluntary or involuntary termination of employment or services, or
otherwise. The date of termination of a Participant's employment or services
will be determined by the Committee, which determination will be final.
7.7. Limitations on Grants to Individual Participant. Subject to adjustment
as provided in Section 8.2, no Participant may be granted (i) Options during any
thirty-six month period with respect to more than 2,000,000 Shares, or (ii)
Other Stock Unit Awards that are denominated in Shares in any thirty-six month
period with respect to more than 400,000 Shares. In addition to the foregoing,
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the maximum dollar value payable to any Participant in any twelve-month period
with respect to Performance Awards is $3,000,000.
8. GENERALLY APPLICABLE PROVISIONS
8.1. Amendment and Termination of the Plan. The Board may, from time to
time, alter, amend, suspend or terminate the Plan as it shall deem advisable,
subject to any requirement for stockholder approval imposed by applicable law,
including the rules and regulations of the New York Stock Exchange (or such
other principal securities market on which the Shares are traded) provided that
the Board may not amend the Plan in any manner that would result in
noncompliance with Rule 16b-3 of the Exchange Act. In addition, no amendments
to, or termination of, the Plan shall in any way impair the rights of a
Participant under any Award previously granted without such Participant's
consent.
8.2. Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, dividend or distribution (whether in cash,
shares or other property, other than a regular cash dividend), stock split,
reverse stock split, spin-off or similar transaction or other change in
corporate structure affecting the Shares or the value thereof, such adjustments
and other substitutions shall be made to the Plan and to Awards as the
Committee, in its sole discretion, deems equitable or appropriate taking into
consideration the accounting and tax consequences, including such adjustments in
the aggregate number, class and kind of securities that may be delivered under
the Plan and, in the aggregate or to any one Participant, in the number, class,
kind and option or exercise price of securities subject to outstanding Awards
granted under the Plan (including, if the Committee deems appropriate, the
substitution of similar options to purchase the shares of, or other awards
denominated in the shares of, another company) as the Committee may determine to
be appropriate in its sole discretion; provided, however, that the number of
Shares subject to any Award shall always be a whole number.
8.3. Transferability of Awards. Except as provided below, and except as
otherwise authorized by the Committee in an Award Agreement, no Award and no
Shares subject to Awards that have not been issued or as to which any applicable
restriction, performance or deferral period has not lapsed, may be sold,
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assigned, transferred, pledged or otherwise encumbered, other than by will,
living trust or the laws of descent and distribution, and such Award may be
exercised during the life of the Participant only by the Participant or the
Participant's guardian or legal representative. Notwithstanding the foregoing,
an Award may be assigned to a beneficiary pursuant to a written designation
filed with the Company during the Participant's lifetime (each transferee
thereof, a "Permitted Assignee"); provided that such Permitted Assignee shall be
bound by and subject to all of the terms and conditions of the Plan and the
Award Agreement relating to the transferred Award and shall execute an agreement
satisfactory to the Company evidencing such obligations; and provided further
that the Participant shall remain bound by the terms and conditions of the Plan.
The Company shall cooperate with any Permitted Assignee and the Company's
transfer agent in effectuating any transfer permitted under this Section 8.3.
9. MISCELLANEOUS
9.1. Tax Withholding. The Company shall have the right to make all payments
or distributions pursuant to the Plan to a Participant or a Permitted Assignee
thereof (any such Participant or Permitted Assignee hereafter referred to as a
"Payee") net of any applicable federal, state and local taxes required to be
paid or withheld as a result of the grant of any Performance Award or the
exercise of an Option. The Company or any Subsidiary shall have the right to
withhold from wages or other amounts otherwise payable to such Payee such
withholding taxes as may be required by law, or to otherwise require the Payee
to pay such withholding taxes. If the Payee shall fail to make such tax payments
as are required, the Company or its Subsidiaries shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to such Payee or to take such other action as may be necessary to
satisfy such withholding obligations.
9.2. Right of Discharge Reserved; Claims to Awards. Nothing in the Plan nor
the grant of an Award hereunder shall confer upon any Employee the right to
continue in the employment or service of the Company or any Subsidiary or affect
any right that the Company or any Subsidiary may have to terminate the
employment or service of (or to demote or to exclude from future Awards under
the Plan) any such Employee at any time for any reason. Except as specifically
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provided by the Committee, the Company shall not be liable for the loss of
existing or potential profit from an Award granted in the event of termination
of an employment or other relationship. No Employee or Participant shall have
any claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Employees or Participants under the Plan.
9.3. Prospective Recipient. The prospective recipient of any Award under
the Plan shall not, with respect to such Award, be deemed to have become a
Participant, or to have any rights with respect to such Award, until and unless
such recipient shall have executed an agreement or other instrument evidencing
the Award and delivered a copy thereof to the Company, and otherwise complied
with the then applicable terms and conditions.
9.4. Substitute Awards. Notwithstanding any other provision of the Plan,
the terms of Substitute Awards may vary from the terms set forth in the Plan to
the extent the Committee deems appropriate to conform, in whole or in part, to
the provisions of the awards in substitution for which they are granted.
9.5. Cancellation of Award. Notwithstanding anything to the contrary
contained herein, all outstanding Awards granted to any Participant shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or any Subsidiary or after termination of such employment or
service, establishes a relationship with a competitor of the Company or any
Subsidiary or engages in activity that is in conflict with or adverse to the
interest of the Company or any Subsidiary, as determined by the Committee in its
sole discretion. The Committee may provide in an Award Agreement that if within
the time period specified in the Agreement the Participant establishes a
relationship with a competitor or engages in an activity referred to in the
preceding sentence, the Participant will forfeit any gain realized on the
vesting or exercise of the Award and must repay such gain to the Company.
9.6. Stop Transfer Orders. All certificates for Shares delivered under the
Plan pursuant to any Award shall be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Shares are then listed, and any applicable
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applicable federal or state securities law, and the Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.
9.7. Nature of Payments. All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
Subsidiary, division or business unit of the Company. Any income or gain
realized pursuant to Awards under the Plan constitutes a special incentive
payment to the Participant and shall not be taken into account, to the extent
permissible under applicable law, as compensation for purposes of any of the
employee benefit plans of the Company or any Subsidiary except as may be
determined by the Committee or by the Board or board of directors of the
applicable Subsidiary.
9.8. Other Plans. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
9.9. Severability. If any provision of the Plan shall be held unlawful or
otherwise invalid or unenforceable in whole or in part by a court of competent
jurisdiction, such provision shall (a) be deemed limited to the extent that such
court of competent jurisdiction deems it lawful, valid and/or enforceable and as
so limited shall remain in full force and effect, and (b) not affect any other
provision of the Plan or part thereof, each of which shall remain in full force
and effect. If the making of any payment or the provision of any other benefit
required under the Plan shall be held unlawful or otherwise invalid or
unenforceable by a court of competent jurisdiction, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the Plan.
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9.10. Construction. As used in the Plan, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
9.11. Unfunded Status of the Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver the Shares or payments in lieu of or with
respect to Awards hereunder; provided, however, that the existence of such
trusts or other arrangements is consistent with the unfunded status of the Plan.
9.12. Governing Law. The Plan and all determinations made and actions taken
thereunder, to the extent not otherwise governed by the Code or the laws of the
United States, shall be governed by the laws of the State of Illinois, without
reference to principles of conflict of laws, and construed accordingly.
9.13. Effective Date of Plan; Termination of Plan. The Plan shall be
effective as of February 23, 2006, subject to its approval by the holders of the
shares entitled to vote at a duly constituted meeting of the stockholders of the
Company within twelve (12) months thereafter. The Plan shall be null and void
and of no effect if the foregoing condition is not fulfilled and in such event
each Award shall, notwithstanding any of the preceding provisions of the Plan,
be null and void and of no effect. Awards may be granted under the Plan at any
time and from time to time on or prior to the tenth anniversary of the effective
date of the Plan, on which date the Plan will expire except as to Awards then
outstanding under the Plan. Such outstanding Awards shall remain in effect until
they have been exercised or terminated, or have expired.
9.14. Foreign Employees. Awards may be granted to Participants who are
foreign nationals or employed outside the United States, or both, on such terms
and conditions different from those applicable to Awards to Employees employed
in the United States as may, in the judgment of the Committee, be necessary or
desirable in order to recognize differences in local law or tax policy. The
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Committee also may impose conditions on the exercise or vesting of Awards in
order to minimize the Company's obligation with respect to tax equalization for
Employees on assignments outside their home country.
9.15. Compliance with Section 409A of the Code. This Plan is intended to
comply and shall be administered in a manner that is intended to comply with
Section 409A of the Code and shall be construed and interpreted in accordance
with such intent. To the extent that an Award or the payment, settlement or
deferral thereof is subject to Section 409A of the Code, the Award shall be
granted, paid, settled or deferred in a manner that will comply with Section
409A of the Code, including regulations or other guidance issued with respect
thereto, except as otherwise determined by the Committee. Any provision of this
Plan that would cause the grant of an Award or the payment, settlement or
deferral thereof to fail to satisfy Section 409A of the Code shall be amended to
comply with Section 409A of the Code on a timely basis, which may be made on a
retroactive basis, in accordance with regulations and other guidance issued
under Section 409A of the Code.
9.16. Captions. The captions in the Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.
9.17. Shareholder Approval and Termination. This Plan shall be effective on
the date it is approved by the affirmative vote of the holders of a majority of
the Company's securities present and entitled to vote at a meeting duly held in
accordance with the applicable laws of Delaware. It shall terminate on February
23, 2016, provided, however, that the Board may at any time amend, suspend or
terminate the Plan. No termination or amendment of the Plan may, without the
consent of the Participant to whom any Award shall have been theretofore
granted, adversely affect the rights of such Participant under such Award.
* * *
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IN WITNESS WHEREOF, the Company has caused its Chairman and Chief Executive
Officer to execute this 2006 Incentive Compensation Plan this 26th day of May,
2006.
OLD REPUBLIC INTERNATIONAL CORPORATION
By: /s/ A.C. Zucaro
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A. C. Zucaro, Chairman and
Chief Executive Officer
ATTEST:
/s/Spencer LeRoy III
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