Exhibit (10)(iii)(b)
As Amended and restated effective 12/23/96
THE HARTFORD STEAM BOILER INSPECTION
AND INSURANCE COMPANY
LONG-TERM INCENTIVE PLAN
1. Purposes of Plan
The purposes of this Plan are: (a) to provide an additional incentive
for Senior Officers and other selected key employees to increase the
earnings of the Company on a long-term basis; (b) to attract and retain
in the employ of the Company and its subsidiaries persons of
outstanding abilities; and (c) to more closely align the interests of
the Senior Officers and other selected key employees with those of the
shareholders of the Company.
2. Definitions
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(b) "Base Salary" shall mean the annual base salary of a Participant
in effect as of the December 31 of the year immediately preceding
the Performance Period for which a Performance Contingent Award
is made (as adjusted for any promotional increases during the
Performance Period), unless otherwise determined pursuant to
Section 5(a) hereof.
(c) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Change in Control" shall be deemed to have occurred if the
events set forth in any one of the following paragraphs shall
have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially
owned by such Person any securities acquired directly
from the Company or its affiliates) representing 25%
or more of the combined voting power of the Company's
then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a
transaction described in clause (i) of paragraph
(III) below; or
(II) the following individuals cease for
any reason to constitute a majority of the number of
directors then serving: individuals who, on December
23, 1996, constitute the Board and any new director
(other than a director whose initial assumption of
office is in connection with an actual or threatened
election contest, including but not limited to a
consent solicitation, relating to the election of
directors of the Company) whose appointment or
election by the Board or nomination for election by
the Company's shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of
the directors then still in office who either were
directors on December 23, 1996 or whose appointment,
election or nomination for election was previously so
approved or recommended; or
(III) there is consummated a merger or
consolidation of the Company or any direct or
indirect subsidiary 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 to such merger
or consolidation continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity or any
parent thereof), in combination with the ownership of
any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any
subsidiary of the Company, at least 60% of the
combined voting power of the securities of the
Company or such surviving entity or any parent
thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of the
Company (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not
including in the securities Beneficially Owned by
such Person any securities acquired directly from the
Company or its Affiliates) representing 25% or more
of the combined voting power of the Company's then
outstanding securities; or
(IV) the shareholders of the Company approve a plan
of complete liquidation or dissolution of the Company
or there is consummated an agreement for the sale or
disposition by the Company of all or substantially
all of the Company's assets, other than a sale or
disposition by the Company of all or substantially
all of the Company's assets to an entity, at least
60% of the combined voting power of the voting
securities of which are owned by shareholders of the
Company in substantially the same proportions as
their ownership of the Company immediately prior to
such sale.
Notwithstanding the foregoing, a "Change in Control"
shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated
transactions immediately following which the record holders of
the common stock of the Company immediately prior to such
transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the
Company immediately following such transaction or series of
transactions.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Human Resource Committee of the Board
or any future committee of the Board performing similar
functions.
(h) "Company" shall mean The Hartford Steam Boiler Inspection and
Insurance Company, and, except in determining under this Plan
whether or not any Change in Control of the Company has occurred,
shall include any successor to its business and/or assets which
assumes this Plan by operation of law, or otherwise.
(i) "Disability" shall mean any condition which would entitle an
employee of the Company to receive benefits under the Company's
Long-Term Disability Plan.
(j) "Dividend Equivalent" shall mean an amount equal to the cash
dividends that would have been paid with respect to an award of
Performance Contingent Units paid hereunder if the award
constituted Stock, duly issued and outstanding on the date on
which a dividend is payable on the Stock.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "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.
(m) "Participant" shall mean an employee of the Company to whom an
award has been made under the Plan.
(o) "Performance Contingent Award" shall mean an award of Performance
Contingent Units.
(p) "Performance Contingent Unit" shall mean the right to receive up
to 100% of the value of shares of Stock, which value may be paid
in cash or shares of Stock, which may be Restricted Stock, as
determined by the Committee, contingent upon the achievement of
Performance Goals established by the Committee.
(q) "Performance Goals" shall mean specific levels of one or more
Performance Measures at a corporate and/or business unit level
established in writing by the Committee for a particular
Performance Period.
(r) "Performance Measures" shall mean any of the following:
- Combined Ratio
- Expense Ratio
- Net Income Per Share
- Return on Equity
- Total Shareholder Return
- Return on Assets
- Revenues
- Operating Margin
- Increase in Book Value
- Market Share
(s) "Performance Period" shall mean a three consecutive year period
beginning each January 1st.
(t) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company
or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
(u) "Plan" shall mean the Long-Term Incentive Plan.
(v) "Restricted Stock" shall mean one or more shares of Stock issued
in payment of a Performance Contingent Award and subject to the
terms and conditions established by the Committee pursuant to
Section 7.
(w) "Retirement" shall mean the termination of employment under
circumstances which entitle an employee to receive retirement
benefits under the Company's Employees' Retirement Plan.
(x) "Stock" shall mean the Common Stock of the Company.
3. Administration of the Plan
The Plan shall be administered by the Committee as defined herein. Each
member of the Committee shall be a "disinterested director" within the
meaning of Rule 16b-3 of the General Rules and Regulations promulgated
under the Exchange Act and an "outside director" within the meaning of
Section 162(m) of the Code. The Committee is authorized to interpret
the Plan and shall adopt guidelines for carrying out the Plan as it may
deem appropriate. Such guidelines shall be consistent with the Plan and
may include, but need not be limited to, the size and terms of awards
to be made and the conditions for payment of such awards. Decisions of
the Committee shall be final, conclusive and binding upon all parties
concerned, unless otherwise determined by a vote of a majority of the
disinterested members of the Board of Directors.
4. Stock Subject To the Plan
Subject to the provisions of Section 9 of the Plan, the maximum number
of shares which may be issued under the Plan shall be 150,000 shares of
Stock.
5. Eligibility
(a) All Senior Officers of the Company (presently defined as Chief
Executive Officer, President, Executive Vice President, Senior
Vice President, Corporate Secretary and Treasurer) other than any
individual expressly excluded by the Committee, are eligible to
participate in this Plan. An individual who is elected by the
Board as a Senior Officer following the commencement of a
Performance Period shall, unless otherwise determined by the
Committee, be eligible for an award for such Performance
Period(s) based on such individual's Base Salary in effect at the
time of such election, and prorated for the number of full months
within such Performance Period that such individual was a Senior
Officer.
(b) The Committee, in its sole discretion, may designate from time to
time certain other officers or key employees of the Company, its
affiliates and subsidiaries who may participate in this Plan.
6. Establishment of Performance Goals and Performance Contingent Awards
(a) Prior to or within ninety days (or such shorter period as is
required under Section 162(m) of the Code) following the
commencement of each Performance Period, the Committee shall
establish in writing for each Participant, or all Participants as
a group, specific Performance Goals based on one or more
Performance Measures. For each Performance Goal an award schedule
of Performance Contingent Units shall be established for minimum,
target and maximum attainment of such goal. The actual
Performance Contingent Award to be paid to a Participant at the
conclusion of the Performance Period shall be based on the level
of attainment of the Performance Goals established for such
period. The Committee may designate that Performance Contingent
Awards shall be credited with Dividend Equivalents during the
Performance Period which shall be paid when and if such awards
are paid.
(b) The maximum award of Performance Contingent Units for any
Participant for a Performance Period cannot exceed 60% of such
Participant's Base Salary divided by the Fair Market Value of the
Stock on the first trading date of the Performance Period.
(c) After Performance Goals have been established, they shall not be
modified in respect to the Performance Period to which they
relate.
7. Payment of Performance Contingent Awards and Dividend Equivalents
(a) Following the end of a Performance Period, the Committee shall
ascertain and certify in writing whether and the degree to which
the Performance Goals for such period have been met. A
Participant shall be entitled to receive payment of an amount not
exceeding the Fair Market Value of the maximum award of
Performance Contingent Units established by the Committee
pursuant to Section 6 hereof based upon the level of attainment
of the Performance Goals determined by the Committee. The
Committee shall have the authority to reduce the award of any
Participant even if the Performance Goals attributable to such
award have been met. The Committee shall have no authority
hereunder to increase any award calculated under this Plan.
(b) As soon as practicable following certification by the Committee
pursuant to Section 7(a), payment of awards to Participants shall
be made. Payments shall be made in cash, shares of Stock or in
shares of Restricted Stock as prescribed by the Committee and
shall be subject to such other terms and conditions as the
Committee shall establish.
(c) Any Restricted Stock issued in payment of a Performance
Contingent Award may not be sold, transferred, or otherwise
disposed of by the Participant, except by will or the laws of
descent and distribution, for such period established by the
Committee. The Committee shall have the authority to cancel all
or any portion of any outstanding restrictions on such Restricted
Stock prior to the expiration of such period on such terms and
conditions as it may deem appropriate. During the restricted
period the shares of Restricted Stock shall be registered in the
name of the Participant and deposited with the Company, and the
Participant shall be entitled to vote such shares and receive any
dividends with respect to such shares.
(d) Payment of any award of Dividend Equivalents shall be made at the
same time as payment of the Performance Contingent Award to which
it relates and shall be made in cash or shares of Stock as
prescribed by the Committee.
(e) The maximum aggregate dollar value of Performance Contingent
Units and Dividend Equivalents which may be awarded to any
Participant for any Performance Period shall not exceed $1
million.
8. Election to Defer Payment
(a) A Participant may, with permission of the Committee elect to
defer receipt of all or a specified part of any Performance
Contingent Award and related Dividend Equivalents. Such an
election shall be subject to such terms and conditions as are
prescribed by the Committee. Deferral elections are
irrevocable and must be made during the time period and in the
manner prescribed by the Committee.
(b) The right of a Participant to receive any unpaid portion of
any amount deferred hereunder shall be an unsecured claim
against the general assets of the Company.
9. Adjustments in the Event of Change in Common Stock of the Company
In the event of any change in the Stock of the Company by reason of any
stock dividend, stock split, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, or rights
offering to purchase Stock at a price substantially below Fair Market
Value, or of any similar change affecting the Stock, the number of
Performance Contingent Units awarded which have not been paid and the
number of shares of Stock which may be awarded hereunder shall be
appropriately adjusted consistent with such change in such manner as
the Board in its discretion may deem equitable to prevent substantial
dilution or enlargement of the awards and rights granted to, or
available for Participants hereunder. Any fractional shares resulting
from such adjustments shall be eliminated.
10. No Right to an Award or Continued Employment
(a) Nothing contained in this Plan or in any resolution adopted or
to be adopted by the Board of Directors will constitute the
granting of an award hereunder. The granting of an award
pursuant to the Plan will take place only when authorized by
the Committee. No award and no rights of ownership thereunder
will be transferable otherwise than pursuant to Section 12.
(b) Nothing in the Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any
right to continue in the employ of the Company.
11. Rights on Termination of Employment
(a) If a Participant in this Plan shall terminate employment with
the Company on account of Retirement or Disability or
otherwise terminate employment with the written consent of the
Company prior to the expiration of any Performance Period(s)
in respect of which such Participant may be eligible for an
award, or if a subsidiary at which a Participant is employed
shall cease to be a subsidiary of the Company prior to the
expiration of any Performance Period(s), the award(s) paid to
such Participant shall be prorated according to the number of
months of employment in each such Performance Period.
(b) A Participant whose employment terminates by dismissal with or
without cause, or who voluntarily terminates employment
without consent prior to the expiration of a Performance
Period, shall lose any right to receive payment of such award.
(c) In no event shall an award or a portion thereof the payment of
which has been deferred pursuant to Section 8 be subject to
forfeiture.
12. Death of a Participant
(a) A Participant may file with the Corporate Secretary of the
Company a designation of a beneficiary or beneficiaries on a form
to be provided by such Participant, which designation may be
changed or revoked by the Participant's sole action, provided
that the change or revocation is filed with the Corporate
Secretary on a form provided by such Participant. In case of the
death of the Participant, before or after termination of
employment, any earned but unpaid portion of an award to which he
or she is entitled and any deferred portions of a deceased
Participant's award shall be delivered to the beneficiary or
beneficiaries so designated or, if no beneficiary has been
designated or survives such Participant, shall be delivered to,
or in accordance with the directions of, the executor or
administrator of such Participant's estate.
(b) If a Participant shall die during a Performance Period, such
Participant's beneficiary shall only be entitled to receive the
award declared for the Performance Period ending in the year of
the Participant's death.
13. Tax Withholding
The Company shall have the right to require Participants to remit to
the Company an amount sufficient to satisfy any tax withholding
requirements or to deduct from any payments made pursuant to the Plan
amounts sufficient to satisfy tax withholding requirements.
14. Termination and Modification
(a) The Committee may at any time terminate or from time to time
modify or suspend, and if suspended, may reinstate any or all
of the provisions of this Plan except that no modification of
this Plan may be made which will adversely affect any rights
or obligations with respect to any awards theretofore made
under the Plan.
(b) No amendment to the Plan shall be made without shareholder
approval if such approval is required in order for the Plan to
continue to meet the requirements of Section 162(m) of the
Code and/or Rule 16b-3 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934.
15. Change in Control
(a) In the event of a Change in Control of the Company, this Plan
shall continue to be binding upon the Company, any successor in
interest to the Company and all persons in control of the Company
or any successor thereto, and no transaction or series of
transactions shall have the effect of reducing or canceling the
award of a Participant that has been declared but not paid unless
consented to in writing by such affected Participant.
(b) As soon as practicable following a Change in Control, a
Participant shall be paid a lump sum amount in cash equal to the
aggregate value of the Performance Contingent Awards payable to
the Participant for each of the Performance Periods within which
the date of the Change in Control occurs, calculated as to each
such Performance Period by multiplying the award that the
Participant would have earned on the last day of such Performance
Period, assuming the achievement of each of the Performance Goals
at the target level established for such Performance Period, by
the fraction obtained by dividing the number of full months and
any fractional portion of a month during such Performance Period
prior to the change in control by the total number of months
contained in such Performance Period. For purposes of the
preceding sentence, the amount of cash delivered in payment of
the value of the Performance Contingent Awards shall equal the
number of Performance Contingent Units constituting such each
such award 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. The amount paid hereunder
shall be in lieu of any other awards payable under this Plan for
the Performance Periods within which the Change in Control
occurs.
(c) In the event of a Change in Control, all restrictions on any
outstanding shares of Restricted Stock issued pursuant to Section
7 hereunder shall lapse as of the date of such Change in Control.
(d) As soon as practicable following a Change in Control, any awards
or Dividend Equivalents previously deferred by a Participant in
accordance with Section 8 hereof, plus interest accrued thereon
up until the date of payment, shall be paid in full.
16. Unfunded Obligations; Trust Agreement
(a) The Company will pay from its general assets all awards to be
made hereunder. However, the Company may in its discretion,
establish a trust, escrow agreement or similar arrangement in
order to aid the Company in meeting its obligations hereunder.
(b) Any assets transferred by the Company into any such
arrangement shall remain at all times assets of the Company
and subject to the claims of the Company's general creditors
in the event of bankruptcy or insolvency of the Company. No
security interest in such assets shall be created in a
Participant's favor and a Participant's rights under this Plan
and under any such arrangement shall be those of a general
unsecured creditor of the Company.
17. Assignment and Alienation
Benefits under this Plan may not be anticipated, assigned (either at
law or in equity), alienated, or subjected to attachment, garnishment,
levy, execution or other legal or equitable process. If any Participant
or beneficiary under this Plan becomes bankrupt or attempts to
anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge any benefit under this Plan, such benefit shall, in the
discretion of the Committee cease and terminate, in which event the
Committee may hold or apply the same or any part thereof for the
benefit of such Participant, his or her beneficiary, spouse, children,
other dependents or any of such individuals, in such manner and in such
proportion as the Committee may deem proper.
18. Effective Date and Termination of the Plan
This Plan shall become effective as of January 1, 1994 subject to the
approval of the shareholders at their annual meeting in 1995. Unless
earlier terminated by the Committee subject to Section 14, the Plan
shall terminate on December 31, 1998. No Performance Contingent Award
shall be made pursuant to this Plan after the termination date, but
awards made prior to its termination date may extend beyond that date.