Exhibit 10(iii)(j)
THE HARTFORD STEAM BOILER INSPECTION AND INSURANCE COMPANY DIRECTORS STOCK AND
DEFERRED COMPENSATION PLAN
1. Purposes of the Plan.
The purposes of The Hartford Steam Boiler Inspection and Insurance Company
Directors Stock and Deferred Compensation Plan are: (a) to attract and retain
persons of ability as directors of the Company; (b) to more closely align
directors' interests with those of shareholders; and (c) to encourage the
highest level of contribution by directors to the financial success of the
Company by providing a significant portion of their compensation in the form of
equity in the Company.
2. Definitions.
"Board" shall mean the Board of Directors of the Company.
"Cash Compensation" shall mean the total of the annual cash retainer and fees
for attending and/or chairing any meeting of the Board or a committee of the
Board payable to a Director for any Plan Year.
"Change in Control" shall have occurred for purposes of this Plan if :
(a) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty-five (25%)
or more of the Company's then outstanding securities;
(b) during any period within two (2) consecutive years there shall
cease to bea majority of the Board of Directors comprised as follows:
individuals who at the beginning of such period constitute the Board of
Directors and any new director(s) whose election by the Board of
Directors or nomination for election by the Company's shareholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved; or
(c) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined
voting power of voting securities after such merger or consolidation or
(ii) a merger orconsolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
hereinabove defined) acquires more than 25% of the combined voting
power of the Company's then outstanding securities; or
(d) the shareholders of the Company approve (i) a plan of complete
liquidation of the Company or (ii) the sale or other disposition of
all or substantially all the Company assets.
"Committee" shall mean the Governance Committee of the Board or any future
committee of the Board performing similar functions.
"Company" shall mean The Hartford Steam Boiler Inspection and Insurance Company.
"Deferred Account" shall mean the account established and maintained for a
Director under the Plan pursuant to an election made pursuant to Section 7.
"Deferral Election" shall mean the election to defer receipt of Cash
Compensation in accordance with Section 7.
"Director" shall mean a non-employee director of the Company.
"Dividend Equivalent" shall mean an amount equal to the dividend that would have
been paid with respect to a Stock Equivalent Unit if such unit had constituted a
share of Stock, duly issued and outstanding on the date a dividend is payable on
the Stock.
"Effective Date" shall mean September 23, 1996.
"Fair Market Value" shall mean the average of the high and low prices per share
of the Company's Stock as reported by the New York Stock Exchange Composite
Transaction Reporting System (NYSE) on the date for which the Fair Market Value
is being determined, or if no quotations are available for the Company's Stock,
for the next preceding date for which such a quotation is available. If shares
of Company Stock are not then listed on the NYSE, Fair Market Value shall be
reasonably determined by the Committee in its sole discretion.
"Plan" shall mean The Hartford Steam Boiler Inspection and Insurance Company
Directors Stock and Deferred Compensation Plan.
"Plan Year" shall mean the calendar year. The first Plan Year shall begin
January 1, 1997.
"Restricted Stock" shall mean Restricted Stock issued under the 1989 Restricted
Stock Plan for Non-Employee Directors.
"Stock" shall mean the common stock of the Company.
"Stock Equivalent Unit" shall mean the right to receive the Fair Market Value of
a share of Stock in the form of cash or Stock as elected in accordance with
Section 9 hereof and subject to the conditions set forth in the Plan.
3. Administration of the Plan.
The Plan shall be administered by the Committee as defined herein. The Committee
is authorized to interpret the Plan and shall adopt guidelines for carrying out
the Plan as it may deem appropriate. Decisions of the Committee shall be final,
conclusive and binding upon all parties concerned, unless otherwise determined
by the Board of Directors.
4. Stock Subject to the Plan.
Subject to the provisions of Section 11 of the Plan, the maximum number of
shares of Stock which may be issued under the Plan shall be 100,000.
5. Annual Award of Stock Equivalent Units.
As of the last day of each Plan Year, each individual who served as a Director
at any point during such Plan Year shall be granted an award of Stock Equivalent
Units equal to 550 multiplied by a fraction where the numerator is the number of
full or partial months within such Plan Year that such individual served as a
Director and the denominator is 12. In the event that a Director's service on
the Board terminates for any reason prior to the end of the Plan Year, as soon
as practicable following such termination such Director will be credited with
the number of Stock Equivalent Units determined in accordance with the formula
in the preceding sentence but as of the date of such Director's termination.
6. Conversion of Benefits Payable under Other Plans.
(a) As of the Effective Date, participation by current Directors in the
Retirement Plan for Outside Directors is being terminated. In connection with
such termination, the Retirement Plan is being amended to provide that the
present value of benefits payable to individuals who are serving as Directors as
of the Effective Date shall be converted into Stock Equivalent Units based on
the average of the closing prices of shares of Stock on the Effective Date and
the four successive trading days thereafter as reported by the New York Stock
Exchange Composite Transaction Reporting System and such units will be credited
to such Directors' accounts hereunder.
(b) As of the Effective Date, the shares of Restricted Stock granted under the
1989 Restricted Stock Plan for Non-Employee Directors and listed on Exhibit A
hereto shall be canceled. Each Director who holds shares immediately prior to
the Effective Date which are listed on Exhibit A shall receive in consideration
for such cancellation an award of Stock Equivalent Units equal to the number of
shares of Restricted Stock so canceled and such units will be credited to such
Directors' accounts hereunder.
7. Election to Defer Receipt of Cash Compensation.
(a) Effective for the Plan Year beginning on January 1, 1997 and for ensuing
Plan Years, a Director shall have the right to make on an annual basis an
election to defer payment of all or a percentage of the total Cash Compensation
to be earned during the ensuing Plan Year (a "Deferral Election"). In order to
make a Deferral Election pursuant to this Section 7, a Director shall deliver to
the Corporate Secretary of the Company no later than the last business day prior
to the commencement of the first Plan Year to which such election relates a
written notice setting forth the percentage of Cash Compensation to be deferred
and whether such cash should be converted into Stock Equivalent Units in
accordance with subsection (b) below or credited as cash to a Deferred Account
maintained for such Director on the date such compensation would otherwise be
paid. Individuals who become Directors during a Plan Year shall have thirty days
following their election or appointment to make a Deferral Election for the
remainder of the Plan Year. Any Deferral Election made pursuant to this Section
7 shall remain in effect for subsequent Plan Years until a new election form is
delivered to the Corporate Secretary in accordance with this section.
(b) As soon as practicable following the end of a Plan Year, each Director who
made a Deferral Election in the form of Stock Equivalent Units will be credited
with the number of units, including fractional units, equal to the amount of the
Cash Compensation, the payment of which has been deferred, divided by the Fair
Market Value of shares of Stock on the date such compensation would otherwise
have been paid. In the event that a Director's service on the Board terminates
prior to the end of a Plan Year, the calculation referred to in the preceding
sentence shall be made as soon as practicable following such Director's date of
termination.
8. Dividend Equivalents Payable on Stock Equivalent Units and Interest Paid on
Deferred Accounts.
(a) Dividend Equivalents shall be credited on Stock Equivalent Units held by
Directors based upon dividends paid on shares of Stock between the date such
Stock Equivalent Units are credited to Directors and the date they are
ultimately paid out in accordance with the Plan. Dividend Equivalents shall be
paid in the form of cash as soon as practicable following the end of a Plan Year
based on the number of Stock Equivalent Units credited to a Director's account
as of the dividend record dates falling within such Plan Year multiplied by the
cash dividends (or the fair market value of any property other than cash paid as
a dividend) per share of Stock payable during such Plan Year.
(b) Dividend Equivalents will be payable on Stock Equivalents Units granted
under Section 5 for the Plan Year for which a grant is made in accordance with
subsection (a) above as though such Stock Equivalent Units had been granted as
of the first day of such Plan Year, provided however, such Dividend Equivalents
shall not be credited to a Director until the Stock Equivalent Units to which
they relate are credited to the Director in accordance with Section 5.
(c) Dividend Equivalents will be payable on Stock Equivalent Units credited
pursuant to a Deferral Election pursuant to Section 7 in accordance with
subsection (a) above as though such Stock Equivalent Units had been credited to
a Director on the date the Cash Compensation to which the Deferral Election
relates would otherwise have been paid, provided however, such Dividend
Equivalents shall not be credited to a Director's account until the Stock
Equivalent Units to which they relate are credited to the Director in accordance
with Section 7.
(d) At the end of each Plan Year, and at the time of payment of any amounts held
in a Deferred Account, interest at the rate of the average of the yields at
issuance of five-year Treasury Notes issued during the prior twelve-month period
plus 1% shall be credited to each Deferred Account on the average daily balance
held in such accounts for the preceding Plan Year or portion thereof.
9. Time and Form of Payment.
(a) Payment in settlement of Stock Equivalent Units and any amounts held in a
Deferred Account will commence as soon as practicable after the date the
Director ceases to be a member of the Board, unless, with respect to amounts
held in a Deferred Account, a Director has specified an alternate date in his or
her Deferral Election.
(b) Payment in settlement of Stock Equivalent Units and any amounts held in a
Deferred Account will be made in a lump sum or, if elected by a Director at
least one year prior to the date such Director ceases to be a member of the
Board, in a specified number (not to exceed ten) of annual installments. Such
election may be modified or revoked by the Director, provided that no such
modification or revocation will be given effect unless it is made prior to the
date specified in the preceding sentence.
(c) Amounts held in a Deferred Account shall be paid in cash and Stock
Equivalent Units held by a Director shall be paid in an equivalent number of
shares of Stock unless prior to the commencement of payment, a Director elects
to receive a cash payment in lieu of shares of Stock. Such cash payment shall be
equal to the Fair Market Value of the shares on the date such Director ceases to
be a member of the Board, or in the case of an installment election made
pursuant to subsection (b) above, on the anniversary date of such date with
respect to the installment then payable.
(d) Whenever a fractional share would otherwise be required to be issued in
accordance with the terms of this Section 9, the Fair Market Value of such
fractional share shall be paid in cash.
10. Payment in the Event of Death.
(a) In the event of a Director's death, payment of amounts credited to such
Director's Deferred Account shall be paid in cash and payment of Stock
Equivalent Units shall be made in the form previously elected by the Director,
provided that if no such election had been made prior to such Director's death,
payment shall be made in shares of Stock except for any fractional share the
Fair Market Value of which shall be paid in cash.
(b) Payment shall be made as soon as practicable following the death of the
Director in a single lump sum to the beneficiary designated in writing by the
Director, of if no designation was made, to the person legally entitled thereto,
as designated under the will of the Director, or to such heir or heirs as
determined under the laws of intestacy of the Director's domicile.
11. Adjustments in the Event of Change in Common Stock of the Company.
In the event that there is any change in the Stock by reason of any stock
dividend, stock split, combination of shares, exchange of shares, warrants or
rights offering to purchase Stock at a price below its fair market value,
reclassification, recapitalization, merger, consolidation, spin-off or other
change in capitalization, appropriate adjustment shall be made in the number and
kind of shares or other property subject to the Plan and the number and kind of
shares or other property credited to the Directors under the Plan, and any other
relevant provisions of the Plan by the Committee, whose determination shall be
binding and conclusive on all persons.
12. Change in Control.
In the event of a Change in Control, the following shall occur on the date
thereof (the "Change in Control Date"): (i) the last day of the then current
Plan Year shall be deemed to occur on the Change in Control Date; (ii) Directors
shall be credited with Stock Equivalent Units pursuant to Sections 5 and 7
above, as if for this purpose Directors' service as Directors ceased on the
Change in Control Date; (iii) Dividend Equivalents on Stock Equivalent Units,
including those credited under clause (ii), and interest on any Deferred
Accounts shall be credited in accordance with Section 8; and (iv) the Company
shall pay a lump sum cash payment in settlement of the amount of cash credited
to each Director's Deferred Account and the number of Stock Equivalent Units
then credited to such Director, including cash and shares credited pursuant to
clauses (ii) and (iii) above. For purposes of the preceding sentence, the amount
of cash delivered in payment of Stock Equivalent Units shall equal such units
multiplied by the greater of (i) the highest Fair Market Value per share of
Stock at any time during the 60-day period preceding the Change in Control and
(ii) if applicable, the price of a share of Stock which is paid or offered to be
paid, by any person or entity, in connection with the transaction constituting
the Change in Control.
13. Rights with respect to Stock Equivalent Units.
Except to the extent otherwise set forth in the Plan, Directors shall not have
any of the rights of a shareholder with respect to the Stock Equivalent Units
credited to them.
14. General Restrictions.
(a) No shares of Stock shall be issued under the Plan prior to compliance by the
Company, to the satisfaction of its counsel, with any applicable law. The
Company shall not be obligated to, but may in its discretion, take any action
under applicable federal or state law (including registration or qualification
of the Plan or the Stock) necessary for compliance therewith in order to permit
the issuance of shares hereunder.
(b) The Company may impose such restrictions on the sale or other disposition of
shares of Stock issued under the Plan as it deems necessary to comply with
applicable securities laws.
15. Withholding.
The Company may defer making payment or delivery of shares of Stock under the
Plan until satisfactory arrangements have been made for the payment of any
Federal, state or local income taxes required to be withheld with respect to
such payment or delivery, including without limitation by the withholding of
shares that would otherwise be so delivered, by withholding from any other
payment due to the Director, or by a cash payment to the Company by a Director.
16. No Right to Nomination for Reelection.
Nothing in the Plan shall be deemed to create any obligation on the part of the
Board to nominate any Director for reelection by the Company's shareholders or
to limit the rights of the shareholders to remove any Director.
17. Amendment and Termination of the Plan.
The Board may at any time amend or terminate the Plan, in whole or in part,
however, no amendment or termination shall without the written consent of a
Director, reduce the Director's rights with respect to awards previously granted
hereunder or any fees previously earned the payment of which has been deferred
pursuant to the terms of the Plan.
18. Governing Law.
The Plan and all actions taken thereunder shall be construed in accordance with
and governed by the laws of the State of Connecticut.