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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</Table>
Bancinsurance Corporation
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Bancinsurance Corporation
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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BANCINSURANCE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JUNE 3, 2002
AND
PROXY STATEMENT
================================================================================
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
BANCINSURANCE CORPORATION
250 East Broad Street
Tenth Floor
Columbus, Ohio 43215
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD JUNE 3, 2002
To Our Shareholders:
The Annual Meeting of Shareholders of Bancinsurance Corporation will be
held at the offices of Vorys, Sater, Seymour and Pease LLP, 52 East Gay Street,
Columbus, Ohio 43215, on Monday, June 3, 2002, at 10:30 a.m., local Columbus,
Ohio time, for the following purposes:
1. To elect six directors to serve until the next annual
meeting and until their successors are duly elected
and qualified.
2. To ratify the appointment of Ernst & Young LLP as
independent auditors of the Company for the 2002
fiscal year.
3. To consider and vote upon a proposal to approve the
Bancinsurance Corporation 2002 Stock Incentive Plan,
in the form attached to the accompanying proxy
statement as Appendix I.
4. To transact such other business as may properly be
brought before the meeting or any adjournment
thereof.
Only shareholders of record at the close of business on April 10, 2002
will be entitled to notice of, and to vote at, the Annual Meeting or at any
adjournment thereof.
We hope you can attend the Annual Meeting. Directors and officers of
Bancinsurance Corporation and a representative of our independent auditors will
be present to answer your questions and to discuss our business.
We urge you to execute and return the enclosed proxy card as soon as
possible so that your common shares may be voted in accordance with your wishes.
Proxies are revocable at anytime, and if you attend the meeting, you may vote in
person, and your proxy will not be used.
BY ORDER OF THE BOARD OF DIRECTORS
Columbus, Ohio
April 24, 2002 SALLY J. CRESS, SECRETARY
----------------------------------------------------------
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES
----------------------------------------------------------
BANCINSURANCE CORPORATION
250 East Broad Street
Tenth Floor
Columbus, Ohio 43215
----------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 3, 2002
April 24, 2002
----------
GENERAL
This proxy statement is furnished to the shareholders of Bancinsurance
Corporation (the "Company") in connection with the solicitation of proxies to be
used in voting at the Annual Meeting of Shareholders to be held on June 3, 2002,
at 10:30 a.m., local Columbus, Ohio time, at the offices of Vorys, Sater,
Seymour and Pease LLP, 52 East Gay Street, Columbus, Ohio 43215, and at any
adjournment or postponement thereof (the "Annual Meeting"). The enclosed proxy
is solicited on behalf of the Board of Directors of the Company. This proxy
statement and the enclosed form of proxy will be first sent or given to the
Company's shareholders on or about April 24, 2002.
A proxy may be revoked by a shareholder at any time before it is
exercised by filing with the Company a notice in writing revoking it or by duly
executing and retaining a proxy bearing a later date. Proxies may also be
revoked by any shareholder present at the Annual Meeting who expresses a desire
to vote his or her common shares in person. Subject to such revocation and
except as otherwise stated herein or in the form of proxy, all proxies duly
executed and received prior to, or at the time of, the Annual Meeting will be
voted in accordance with the instructions contained therein. If no instructions
are given, valid proxies received before the Annual Meeting will be voted for
the election as directors of the nominees identified herein, for the
ratification of the appointment of the independent auditors, for the approval of
the Bancinsurance Corporation 2002 Stock Incentive Plan and, at the discretion
of the proxyholders, on any other matters that may properly be brought before
the Annual Meeting or any adjournment or postponement thereof.
A majority of the Company's outstanding common shares, without par
value (the "Common Shares"), will constitute a quorum at the Annual Meeting. A
properly executed form of proxy marked "Withhold Authority" will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. The election of each nominee for director of the Company requires
the favorable vote of a plurality of all votes cast by the holders of the Common
Shares, at a meeting at which a quorum is present. Only Common Shares that are
voted in favor of a particular nominee will be counted towards such nominee's
achievement of a plurality. A properly executed form of proxy marked "Withhold
Authority" will not be counted toward such nominee's achievement of a plurality
and, thus, will have no effect. A properly executed form of proxy marked
"ABSTAIN" with respect to any other proposal will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the same effect as a "NO" vote.
If you hold your Common Shares in "street name" through a broker or
other nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your Common Shares may
not be voted on those matters. Common Shares represented by such "broker
non-votes" will, however, be counted in determining whether there is a quorum.
The entire expense of preparing, assembling, printing and mailing the
form of proxy and other materials used in the solicitation of proxies will be
paid by the Company. Proxies may be solicited personally or by telephone, mail,
facsimile or telegraph. Officers or employees of the Company may assist with
personal or telephone solicitations and will receive no additional compensation.
The Company will also reimburse brokerage houses and other nominees for their
reasonable expenses in forwarding proxy materials to beneficial owners of the
Common Shares.
VOTING SECURITIES
Holders of record of Common Shares at the close of business on April
10, 2002 (the "Record Date") will be entitled to vote at the Annual Meeting. At
the Record Date, the Company had 5,770,185 Common Shares outstanding and
entitled to vote at the Annual Meeting.
Each Common Share held on the Record Date entitles the holder thereof
to one vote upon each matter to be voted upon. The laws of Ohio under which the
Company is incorporated provide for cumulative voting rights in the election of
directors under certain circumstances. A shareholder must give notice in writing
to the President, a Vice President or the Secretary of the Company before 10:30
a.m. on June 1, 2002 if he or she desires cumulative voting for the election of
directors. If an announcement of the giving of such notice is made upon
convening of the Annual Meeting by the Chairman or Secretary, or by, or on
behalf of, such shareholder, each holder of Common Shares will have cumulative
voting rights in the election of directors. Cumulative voting entitles each
shareholder to cumulate the voting power he or she possesses in the election of
directors and give one nominee as many votes as is equal to the number of Common
Shares he or she holds multiplied by the number of directors to be elected, or
to distribute his or her votes on the same principle among two or more of the
nominees, as he or she sees fit.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The number of directors to be elected is six. The Board of Directors
has nominated the persons identified below for election as directors of the
Company at the Annual Meeting. If voting is cumulative as a result of the
request of a shareholder, the enclosed form of proxy would grant discretionary
authority to the proxyholders named therein to distribute the votes of Common
Shares subject to proxies they hold so as to elect the maximum number of
nominees for director set forth herein.
It is intended that, unless otherwise directed in your form of proxy,
the Common Shares voted pursuant thereto will be voted FOR the election of the
nominees identified below as directors. In the event that any of the nominees
for director should become unavailable to serve, the Common Shares represented
by proxies received will be voted in accordance with the best judgment of the
proxyholders for the election of the remaining nominees and for the election of
any substitute nominee(s) designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.
2
The following table sets forth certain information concerning each
nominee for director.
Current Position Director
Name Age with Company Since
---- --- ------------ -----
Si Sokol 74 Chief Executive Officer, Director 1970
(Chairman), member of Executive
Committee (Chairman)
John S. Sokol 39 President, Director 1990
Daniel D. Harkins 72 Director, member of Executive 1981
Committee, member of Audit
Committee (Chairman), member
of Compensation Committee
Saul Sokol 82 Director, member of Executive Committee 1982
William S. Sheley 40 Director, member of Audit Committee, 2000
member of Compensation Committee
Matthew D. Walter 33 Director, member of Compensation 2001
Committee (Chairman), member of
Audit Committee
Si Sokol has been Chairman of the Board of Directors of the Company
since 1970 and Chief Executive Officer since December 1980. He is also Chairman
of the Board and Chief Executive Officer of Ohio Indemnity Company, a
wholly-owned subsidiary of the Company ("Ohio Indemnity"). Mr. Sokol served as
President of the Company and Ohio Indemnity from December 1980 to June 1999. Mr.
Sokol is also Chairman of American Legal Publishing Corporation, a wholly-owned
subsidiary of the Company ("American Legal Publishing"). Mr. Sokol is a former
Director of Fifth Third Bank of Columbus, Ohio and has previously served on the
boards of a number of corporations including several national banks and a
federally chartered savings and loan association located in the State of Ohio.
He currently serves on the Fifth Third Bank Community Advisory Forum. Mr. Sokol
is John S. Sokol's father and Saul Sokol's brother.
John S. Sokol has been President of the Company and Ohio Indemnity
since June 1999. He was Executive Vice President of the Company and Ohio
Indemnity from June 1996 to June 1999 and Vice President from 1993 to 1996. From
1989 to 1993, he served as an officer for what is now JP Morgan Chase Bank of
New York (formally Manufacturers Hanover and Chemical Bank). Mr. Sokol is also
Chairman of Paul Boardway and Associates, Inc., a wholly-owned subsidiary of the
Company. He previously served on the Board of Trustees of the Central Ohio
Transit Authority (COTA). He holds a B.A. degree in Economics from Denison
University and a M.B.A. in Finance from Vanderbilt University. Mr. Sokol is the
son of Si Sokol and the nephew of Saul Sokol.
Daniel D. Harkins is a private investor. Prior to 1987, Mr. Harkins was
the owner and President of Ace Beverage Distributing Company. From 1973 to 1978,
he served as General Sales Manager and International Sales Manager for several
divisions of Ashland Chemical Company. From 1978 to 1980, he served as a
consultant for A. T. Kearney Inc., a management consulting firm.
Saul Sokol is the owner of Sokol Insurance Agency. He is a chartered
life underwriter (CLU) and a chartered property/casualty insurance underwriter
(CPCU). He is the past President of the Columbus Life Underwriter's Association
and the Columbus Chapter of Chartered Property/Casualty Underwriters. Mr. Sokol
is a member of several local, state and national insurance associations. In
addition, he has published a book for consumers dealing with insurance. Mr.
Sokol is the brother of Si Sokol and the uncle of John S. Sokol.
3
William S. Sheley has served as Senior Vice President of Marketing
since January 2001 for Bank One Retail Group where from 1999 to 2001, he served
as Chief Technology Officer. From 1996 to 1999, Mr. Sheley was Vice President
and Division Manager of Bank One's Transaction Processing Services Group. From
1986 to 1996, he was a Senior Manager within the financial services industry
team at Anderson Consulting. He holds B.S and M.B.A. degrees in Finance and
Computer Science from Purdue University.
Matthew D. Walter has served as Managing Partner of Talisman Capital
Partners, LLC, an investment partnership that makes private investments in
established operating companies, since 2000. He has served as President of
Talisman Capital Partners, LLC since 1999. Mr. Walter has also served as the
Chief Executive Officer of Bound Tree Medical, LLC, a supplier of medical
equipment and supplies to the emergency care market, since 2000. From 1995 to
2000, Mr. Walter was an executive with Cardinal Health, Inc., where he had
responsibility for Cardinal's pharmaceutical packaging subsidiary with annual
revenues in excess of $1.3 billion. Mr. Walter serves on the Board of Trustees
of the Columbus Academy and I Know I Can. He is a graduate of Williams College
with a degree in Economics and holds an M.B.A. from The Wharton School at the
University of Pennsylvania.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held five meetings during the 2001 fiscal year.
Except for William S. Sheley, each of the directors attended at least 75% or
more of the total number of meetings of the Board of Directors and of the
committees on which he served during the 2001 fiscal year. The Board does not
have a Nominating Committee. The full Board selects the nominees for directors.
In October 1982, the Board of Directors established an Executive
Committee. The Executive Committee has, to the extent permitted by law, all of
the powers and duties of the Board of Directors. Si Sokol, Daniel D. Harkins and
Saul Sokol currently serve as members of the Executive Committee. The Executive
Committee did not meet during the 2001 fiscal year but did take action by
written consent on one occasion.
In November 1992, the Company established an Audit Committee. The Audit
Committee recommends the annual appointment of the Company's independent
auditors, with whom the Audit Committee reviews the scope of the audit and
nonaudit assignments and related fees, the accounting principles used by the
Company in financial reporting, internal financial auditing procedures and the
adequacy of the Company's internal control procedures. Daniel D. Harkins,
William S. Sheley and Matthew D. Walter currently serve as members of the Audit
Committee. John S. Sokol served as a member of the Audit Committee from November
20, 1992 until May 30, 2001. Currently, no member of the Audit Committee is an
employee of the Company. The Audit Committee acts pursuant to the Audit
Committee Charter that was adopted by the Board of Directors on May 1, 2000.
Each of the members of the Audit Committee qualifies as an independent director
under the current listing standards of the National Association of Securities
Dealers. The Audit Committee's report relating to the 2001 fiscal year appears
on page 21. The Audit Committee held five meetings during the 2001 fiscal year.
In June 1994, the Company established a Stock Option Committee to
administer the Bancinsurance Corporation 1994 Stock Option Plan (the "1994 Stock
Option Plan"). The Stock Option Committee consisted solely of directors who are
not, and have never been, employees of, or paid consultants or advisors to, the
Company. The Stock Option Committee did not meet during the 2001 fiscal year but
did take action by written consent on one occasion. The members of the Stock
Option Committee during the 2001 fiscal year were Matthew D. Walter, Daniel D.
Harkins and William S. Sheley. On March 13, 2002 the Board approved a resolution
to reorganize the Stock Option Committee to (i) expand the duties and scope of
the authority of the Stock Option Committee and (ii) rename the Stock Option
Committee as the Compensation Committee. In connection with such reorganization
of the Stock Option Committee, the Board removed each then current member of the
Stock Option Committee and appointed Daniel D. Harkins, Matthew D. Walter and
William S. Sheley as members of the Compensation Committee. The Compensation
Committee is authorized to (i) administer the Company's 1984 Stock Option Plan,
1994 Stock Option Plan and the proposed 2002 Stock Incentive Plan; (ii) review,
consider and act upon and determine all matters concerning salary and other
compensation and benefits for the Executive
4
Officers; and (iii) review, consider and make recommendations to the Board of
Directors concerning executive officer organizational issues and succession
plans.
COMPENSATION OF DIRECTORS
As payment for serving on the Board of Directors and any of its
committees, each non-employee director receives a $1,000 retainer plus $500 for
each Board meeting attended and $500 for each committee meeting attended. In
addition, under the 1994 Stock Option Plan, each non-employee director
automatically receives an option to purchase 2,000 Common Shares on the first
business day after each annual meeting of shareholders. Such options are not
exercisable until one year after the date of grant and terminate on the earlier
of the tenth anniversary of the date of grant or three months following the date
the director ceases to be a director of the Company or becomes disabled or dies.
Employee directors receive no additional compensation from the Company or Ohio
Indemnity for serving as directors. Each director of the Company also serves as
a director of Ohio Indemnity and receives no additional compensation therefor.
PROPOSAL NO. 2
INDEPENDENT PUBLIC AUDITORS
Upon the recommendation of the Audit Committee, the Company has
appointed Ernst & Young LLP as its auditors for 2002. Ernst & Young LLP has
served as auditors for the Company since 2000. A representative of the auditors
will be present at the Annual Meeting and will be available to answer questions.
The representative will have the opportunity to make a statement at the Annual
Meeting.
The affirmative vote of the holders of a majority of the Common Shares
entitled to vote and present, in person or by properly executed proxy, at the
Annual Meeting is required to ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for fiscal year 2002. In the event that the
shareholders do not ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal year 2002, the Board will consider other
independent auditors upon the recommendation of the Audit Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 2002.
PROPOSAL NO. 3
APPROVAL OF THE 2002 STOCK INCENTIVE PLAN
GENERAL
On March 13, 2002, the Board of Directors adopted, subject to
shareholder approval, the Bancinsurance Corporation 2002 Stock Incentive Plan
(the "2002 Stock Plan") for employees of the Company and its subsidiaries and
non-employee directors of the Company and its subsidiaries (collectively,
"Participants"). The Board of Directors believes that approval of the 2002 Stock
Plan will foster and promote the Company's long-term financial success, increase
shareholder value by providing participants in the 2002 Stock Plan with an
opportunity to acquire or increase an ownership interest in the Company, and
attract and retain the services of outstanding individuals upon whose judgment,
interest and dedication the success of the Company is largely dependent. The
2002 Stock Plan authorizes the granting of (i) incentive stock options ("ISOs")
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) non-qualified stock options ("NQSOs"), (iii) stock appreciation
rights ("SARs") and (iv) restricted shares. In addition, each non-employee
director will have the opportunity to elect to receive all or a portion of his
or her annual retainer fees in stock units ("Director Stock Units"). In the
following discussion, ISOs, NQSOs, SARs, restricted shares and Director Stock
Units are referred to as "Awards."
Subject to adjustment as discussed below, there will be 600,000 Common
Shares available for issuance under the 2002 Stock Plan. The Company estimates
that this number will satisfy its stock-based compensation needs for the next
five years.
5
The Company also maintains the 1984 Stock Option Plan and the 1994
Stock Option Plan, both of which will remain in effect. Although the 1984 Stock
Option Plan is still maintained by the Company, no further options may be
granted under it. There are, however, options outstanding covering 40,000 Common
Shares. As of April 10, 2002, options covering 284,500 Common Shares remained
outstanding under the 1994 Stock Option Plan and 119,000 Common Shares were
available for future grants. These Common Shares will continue to be available
for future grants even if the shareholders approve the 2002 Stock Plan.
Common Shares subject to the 2002 Stock Plan may either be authorized
but unissued Common Shares or Common Shares held in treasury. If any Award
(other than restricted shares) granted under the 2002 Stock Plan is cancelled,
terminated, forfeited or otherwise settled without the payment of cash or the
issuance of any Common Shares, such Common Shares may be the subject of future
Awards under the 2002 Stock Plan.
As of the date of this proxy statement, except in respect of Director
Stock Units which may be elected by non-employee directors of the Company
(currently four individuals) for their annual retainer fees, no determination
has been made regarding the identity of the Participants to whom Awards may be
granted under the 2002 Stock Plan or the kinds of Awards or numbers of Common
Shares to be subject to Awards that will be granted to such Participants. The
Company estimates that approximately 59 employees of the Company and its
subsidiaries will be eligible to be granted Awards under the 2002 Stock Plan,
including the executive officers named in the Summary Compensation Table, as
well as the non-employee directors of the Company and its subsidiaries. The
table included under "Option Grants in Last Fiscal Year" at page 16 shows the
options granted to the named executive officers during the 2001 fiscal year.
During the 2001 fiscal year, options covering an aggregate of 30,000 Common
Shares were granted to all current executive officers of the Company, options
covering an aggregate of 41,000 Common Shares were granted to all employees,
including all current officers who are not executive officers of the Company,
and an option covering 2,000 Common Shares was granted to each of the four
non-employee directors of the Company. Because the granting of Awards under the
2002 Stock Plan (other than Director Stock Units) will be made by the
Compensation Committee of the Board of Directors or, in the case of Awards to
non-employee directors, the full Board, based on a subjective determination of
the relative current and future contribution that each Participant has made or
may make to the long-term welfare of the Company, past grants may not be
reflective of future grants of Awards under the 2002 Stock Plan.
The following is a brief summary of the material features of the 2002
Stock Plan. This summary is qualified in its entirety by reference to the full
text of the 2002 Stock Plan, a copy of which is included herewith as Appendix I
and made a part hereof.
SUMMARY OF OPERATION OF THE 2002 STOCK PLAN
Administration
The 2002 Stock Plan will be administered by a committee. The committee
will be the Compensation Committee of the Board of Directors or, in the case of
Awards to non-employee directors, the full Board. The applicable committee has
the authority to determine, among other things, the Participants to whom Awards
will be granted under the 2002 Stock Plan, the time or times of the grant, the
number of Common Shares subject to each Award and the terms and conditions of
each Award. The Compensation Committee consists of not less than three members
of the Board of Directors of the Company (i) who are "outside directors" within
the meaning of Section 162(m) of the Code and the regulations and rulings
thereunder; (ii) who are "non-employee directors" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934; and (iii) none of whom receive
payment from the Company in any capacity other than as a director.
Options
Both ISOs and NQSOs (together, "Options") may be granted under the 2002
Stock Plan. ISOs may be granted for terms of up to, but not exceeding, ten years
from the date of grant. In the discretion of the applicable committee, NQSOs may
be granted for terms in excess of ten years as specified in the Participant's
Award agreement. Any ISO which is granted to an individual who, on the effective
date of
6
the grant, owns of record and beneficially more than 10% of the total combined
voting power of all classes of stock of the Company then outstanding and
entitled to vote, will not be exercisable more than five years after it is
granted. No person may be granted ISOs under the 2002 Stock Plan if it would
cause the aggregate fair market value (determined as of the date an ISO is
granted) of the Common Shares with respect to which all ISOs held by such person
are exercisable for the first time during any calendar year, under the 2002
Stock Plan and all other stock option plans maintained by the Company, to exceed
$100,000. In addition, during the period in which the 2002 Stock Plan remains in
effect, no person may, in one year, be granted Options or SARs under the 2002
Stock Plan covering more than 100,000 Common Shares, subject to adjustments upon
changes in capitalization. ISOs may only be granted to employees of the Company.
Option Exercise Price
The exercise price of each Option will be determined by the applicable
committee and may not be less than the fair market value of a Common Share on
the grant date. For purposes of the 2002 Stock Plan, the fair market value of
the Company's common shares on a particular date will be the closing sale price
of the Common Shares as shown on the NASDAQ National Market System on that date.
On April 10, 2002, the fair market value of the Company's Common Shares was
$4.80. However, in the case of any ISO granted to an individual who, on the
grant date, owns of record and beneficially more than 10% of the total combined
voting power of all classes of stock of the Company then outstanding and
entitled to vote, the exercise price per share must be at least 110% of the fair
market value of a Common Share on the grant date of the ISO.
Payment of Option Exercise Price
Payment of the exercise price of an Option may be made in cash or by
check and, if permitted by the applicable committee, by delivery of Common
Shares already owned for at least six months and having a fair market value
equal to the exercise price of the Option, or a combination of Common Shares and
cash or check, equal in the aggregate to the exercise price for the Common
Shares being purchased. Each Option and other Award will provide for appropriate
arrangements for the satisfaction of all tax withholding requirements applicable
to the Award, exercise or cancellation of the Award or purchase of Common
Shares. If the Participant has not paid to the Company any required taxes, then
the Company may withhold from the value of the Awards any amount required to
comply with applicable tax withholding laws. If permitted by the applicable
committee, a Participant may elect to satisfy applicable withholding obligations
by having Common Shares otherwise issuable under the 2002 Stock Plan withheld by
the Company or delivering already owned Common Shares.
Stock Appreciation Rights
The applicable committee may, in its discretion, grant an SAR to a
Participant either alone or in tandem with any Option granted under the 2002
Stock Plan. An SAR granted in tandem with an Option may be granted at the time
the Option is granted or at a later date with respect to an existing Option. In
the event of the exercise of an SAR granted in tandem with an Option, the Option
to which the SAR relates (or the corresponding portion thereof) will be
forfeited upon payment of the SAR so exercised. The exercise price of an SAR
granted in tandem with an Option may not be less than the exercise price of the
related Option. A tandem SAR related to an ISO may only be exercised if the fair
market value of the Common Shares subject to the ISO is greater than the
exercise price of the ISO. The value of the payout of such a tandem SAR may not
be more than 100% of the difference between the exercise price of the ISO and
the fair market value of the Common Shares subject to the ISO on the exercise
date. An SAR granted in tandem with an Option will expire, unless previously
exercised, no later than the expiration of the related Option. SARs may also be
issued on a stand-alone basis subject to the terms specified in the Award
agreement. Stand-alone SARs are not tied to a specific Option, and the exercise
of a stand-alone SAR does not result in the forfeiture of any Options. The
exercise price of a stand-alone SAR may not be less than 100% of the fair market
value of the Company's Common Shares on the grant date. The applicable committee
may provide for the payment of an SAR in cash or in Common Shares valued at fair
market value as of the date of exercise, or in any combination thereof.
7
Restricted Shares
Restricted share Awards consist of Common Shares transferred to
eligible Participants, without other payment therefor (other than the payment of
the par value of such Common Shares if required by applicable law), as
additional compensation for the services to the Company or one of its
subsidiaries. Restricted share Awards will be subject to such terms and
conditions as the applicable committee determines, including, without
limitation, restrictions on the sale, transfer, pledge, assignment, alienation
or hypothecation of such Common Shares and rights of the Company to acquire such
restricted shares upon termination of service to the Company and its
subsidiaries. The applicable committee may place objective restrictions on the
restricted shares and establish conditions that must be met before those
restrictions are released (e.g., conditions related to Company-wide, divisional
or individual performance or growth in earnings per share, revenues or profits)
and the related period over which the conditions must be met. Any
performance-related restrictions must be established before 25% of the related
restriction period has expired.
Subject to such other restrictions as are imposed by the applicable
committee, the Common Shares covered by a restricted share Award may either be
held by the Company in escrow during the restricted period (together with any
dividends or other distributions made with respect to the escrowed restricted
shares) or issued to the recipient with a legend evidencing the applicable
restrictions. Unless the Award agreement provides otherwise, the recipient of
restricted shares will be entitled to exercise the voting rights associated with
the restricted shares and receive dividends and other distributions paid in
respect of the restricted shares. Dividends or other distributions paid in
Common Shares will be subject to the same restrictions on transferability and
forfeitability as the restricted shares in respect of which they were issued.
Exercise of Awards; Expiration and Termination
Except as otherwise discussed below or specified in the applicable
Award agreement (other than an Award agreement relating to an ISO), exercisable
Awards must generally be exercised before the earlier of the date of termination
of service or the fixed expiration date. In the event of the death or disability
(as such term is defined in the 2002 Stock Plan) of a Participant while in
service to the Company, each of the Participant's unexercised Awards will expire
on the earlier of (i) the fixed expiration date or (ii) twelve months after the
date of termination due to death or disability.
If the Company enters into a plan or agreement that results in the
merger or consolidation of the Company (other than a merger or consolidation to
effect a reincorporation of the Company under the laws of another jurisdiction)
or the reclassification of Common Shares or the exchange of Common Shares for
the securities of another entity (other than a subsidiary of the Company) that
has acquired the Company's assets or which is in control of an entity that has
acquired the Company's assets and the terms of that plan or agreement are
binding on all holders of Common Shares (except to the extent that dissenting
shareholders are entitled to relief under applicable law), all outstanding
Awards will become fully exercisable, all restrictions will lapse and each
affected Participant will receive, upon payment of the exercise price, if
applicable, securities or cash, or both, equal to those the Participant would
have been entitled to receive under the plan or agreement if the Participant had
already exercised the Award.
A Participant's unexercised Awards will be forfeited if (i) without the
applicable committee's consent, the Participant serves as an officer, director
or employee of any proprietorship, partnership or corporation, or the owner of a
business, or a member of a partnership, which conducts business in competition
with the Company or one of its subsidiaries or renders any service (including
business consulting) to competitors with any business of the Company or one of
its subsidiaries, (ii) refuses, if so requested by the Company, to consult with,
supply information to, or otherwise cooperate with the Company or (iii)
deliberately engages in any action which the applicable committee determines has
caused substantial harm to the Company's interests.
Limitations on Transfer of Awards
With the permission of the applicable committee, a Participant who has
been granted an Award under the 2002 Stock Plan may transfer such Award (other
than an ISO) to a revocable inter vivos trust as to which the Participant is the
settlor or may transfer such Award to a "Permissible Transferee." A
8
Permissible Transferee is any member of the immediate family of the Participant,
any trust, whether revocable or irrevocable, established solely for the benefit
of members of the Participant's immediate family, or any partnership or limited
liability company whose only partners or members are members of the
Participant's immediate family. Any such transferee of an Award will remain
subject to all of the terms and conditions applicable to such Award and the
rules and regulations prescribed by the applicable committee. An Award may not
be retransferred by a Permissible Transferee except to another Permissible
Transferee under the same terms and conditions. Other than as described above,
an Award may not be transferred except by will or the laws of descent and
distribution and, during the lifetime of the Participant to whom granted, may be
exercised only by the Participant or the Participant's guardian or legal
representative.
Adjustments Upon Changes in Capitalization
The number of Common Shares available for Awards under the 2002 Stock
Plan and subject to outstanding Awards as well as any share-based limits imposed
under the 2002 Stock Plan will be adjusted upward or downward by the applicable
committee, as the case may be, in the event of any merger, consolidation,
recapitalization, spin-off, combination of shares, stock dividend or other
similar transaction affecting Common Shares of the Company. The respective
prices and/or limitations applicable to outstanding Awards will also be
appropriately adjusted.
Director Stock Units
Each non-employee director will have the opportunity to elect to
receive all or a portion (in 25% increments) of the non-employee director's
annual retainer fees (annual retainer and committee fees) in Director Stock
Units. Elections are to be made on an annual basis, at least two weeks in
advance of the first meeting of the Board of Directors during the fiscal year
for which the annual retainer fees are to be paid. If no election is made for an
annual period, the applicable non-employee director's annual retainer fees will
be paid consistent with the Company's then regular procedures and policies for
paying annual retainer fees.
If a non-employee director elects to receive Director Stock Units
instead of all or a portion of the non-employee director's annual retainer fees,
the non-employee director will receive a number of Director Stock Units
(including fractional Director Stock Units) equal to the amount of the annual
retainer fees that such non-employee director has elected to receive in Director
Stock Units divided by the fair market value of the Common Shares on the date
that the deferred annual retainer fees would have been paid had the election not
been made.
All payments in respect of Director Stock Units will be settled as soon
as practicable after the earlier of the non-employee director's cessation of
service on the Board of Directors or the date specified on the non-employee
director's election form. However, if a non-employee director has so elected on
the appropriate form at least one year before payment of the value of the
Director Stock Units begins, that payment may be made over a period of up to ten
years. On their election forms, the non-employee directors will elect the form
in which their Director Stock Units will be settled (cash or Common Shares). If
settlement is to be made in cash, the amount of the distribution will be
determined based on the fair market value of the Common Shares on the most
recent trading date preceding the settlement date. Upon the death of a
non-employee director, the value of any unpaid Director Stock Units will be paid
in a lump sum in cash to the appropriate beneficiary. If settlement is to be
made in Common Shares, the number of Common Shares to be distributed will be
equal to the number of Director Stock Units held for the applicable non-employee
director's account under the 2002 Stock Plan.
Amendment and Termination
The Board of Directors of the Company or the Compensation Committee may
terminate, amend or suspend the 2002 Stock Plan in whole or in part. However,
the 2002 Stock Plan may not be amended without shareholder approval if such
shareholder approval is required to satisfy (i) the requirements of Rule 16b-3
under the Exchange Act; (ii) applicable requirements of the Code; or (iii)
applicable requirements of any securities exchange, market or other quotation
system on or through which the Company's securities are listed or traded. In
addition, no amendment may result in the loss of a Compensation Committee
9
member's status as a "non-employee director" or, without the consent of the
Participant, adversely affect any Award issued before the termination, amendment
or suspension.
The 2002 Stock Plan will expire by its terms on March 12, 2012.
Buy Out of Awards
In its discretion, the applicable committee may, at any time and
without the consent of a Participant, cancel any or all outstanding Awards by
giving written notice to the Participant of the intent to buy out the Award. In
the event of such a buy out, the Company will pay to the Participant the
difference between the fair market value of each Award (or portion thereof) to
be cancelled and the exercise price associated with the cancelled Award.
However, unless otherwise specified in the Award agreement, no payment will be
made with respect to any Awards that are not exercisable when cancelled in
connection with a buy out. Payment of the buy out amount may be made in cash,
Common Shares or a combination thereof, at the applicable committee's option.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options
A Participant does not realize income on the grant of an ISO. If a
Participant exercises an ISO in accordance with the terms of the ISO and does
not dispose of the Common Shares acquired within two years from the date of the
grant of the ISO or within one year from the date of exercise, the Participant
will not realize any ordinary income by reason of the exercise and neither the
Company nor its subsidiaries will be allowed a deduction by reason of the grant
or exercise. The Participant's basis in the Common Shares acquired upon exercise
will be the amount paid upon exercise. (See the discussion below for the tax
consequences of the exercise of an Option by payment with Common Shares already
owned by the Participant and taxes imposed on tax preference items). Provided
the Participant holds the Common Shares as a capital asset at the time of sale
or other disposition of the Common Shares, the gain or loss, if any, recognized
on the sale or other disposition will be capital gain or loss. The amount of
gain or loss will be the difference between the amount realized on the
disposition of the Common Shares and the Participant's basis in the Common
Shares. If a Participant disposes of the Common Shares within two years from the
date of grant of an ISO or within one year from the date of exercise (an "Early
Disposition"), the Participant will realize ordinary income at the time of
disposition which will equal the excess, if any, of the lesser of (i) the amount
realized on the disposition or (ii) the fair market value of the Common Shares
on the date of exercise, over the Participant's basis in the Common Shares. Also
in this case, the Company or one of its subsidiaries will be entitled to a
deduction in an amount equal to the income realized by the Participant. If the
Participant holds the Common Shares as a capital asset at the time of
disposition, the excess, if any, of the amount realized on disposition of such
Common Shares over the fair market value of the Common Shares on the date of
exercise will be long- or short-term capital gain, depending upon the holding
period of the Common Shares.
If a Participant disposes of such Common Shares for less than his or
her basis in the Common Shares, the difference between the amount realized and
such basis will be a long-term or short-term capital loss, depending upon the
holding period of the Common Shares, provided the Participant holds the Common
Shares as a capital asset at the time of disposition. The excess of the fair
market value of the Common Shares at the time the ISO is exercised over the
exercise price for the Common Shares is treated as a "tax preference" item (as
such term is used in the Code) and may be subject to an alternative minimum tax,
unless the Participant makes an Early Disposition of such Common Shares.
Non-Qualified Stock Options
NQSOs do not receive the special tax treatment afforded to ISOs under
the Code. Although a Participant does not recognize income at the time of the
grant of an NQSO, he or she recognizes ordinary income upon the exercise of the
NQSO in an amount equal to the difference between the fair market value of the
Common Shares on the date of exercise of the NQSO and the amount paid for the
Common Shares. The Company or one of its subsidiaries will be entitled to a
corresponding deduction.
10
The excess of the fair market value of the Common Shares on the date of
exercise of an NQSO over the exercise price is not treated as a "tax preference"
item (as such term is used in the Code) and is not subject to an alternative
minimum tax.
Restricted Share Awards
A Participant who is granted a restricted share award will not be taxed
upon the acquisition of such Common Shares so long as the interest in such
Common Shares is subject to a substantial risk of forfeiture. Upon lapse or
release of the restrictions, the Participant will be taxed at ordinary income
tax rates on an amount equal to either the current fair market value of the
Common Shares (in the case of lapse or termination) or the sale price (in the
case of an immediate sale of the underlying Common Shares), less any
consideration paid for the Common Shares. The Company or one of its subsidiaries
will be entitled to a corresponding deduction. The basis of restricted shares
held after lapse or termination of restrictions will be equal to their fair
market value on the date of lapse or termination of restrictions, and upon
subsequent disposition, any further gain or loss will be long-term or short-term
capital gain or loss, depending upon the length of time the Common Shares are
held.
Payment in Common Shares
If a Participant exercises an Option by surrendering Common Shares
already owned by the Participant ("Old Shares"), the following rules apply:
1. To the extent the number of Common Shares acquired ("New Shares")
exceeds the number of Old Shares exchanged, the Participant will recognize
ordinary income on the receipt of such additional Common Shares (provided the
Option is not an ISO) in an amount equal to the fair market value of such
additional Common Shares less any amount paid for them and the Company or one of
its subsidiaries will be entitled to a deduction in an amount equal to the
income recognized. The basis of such additional Common Shares will be equal to
the fair market value of such Common Shares (or, in the case of an ISO, the
amount, if any, paid for additional Common Shares) on the date of exercise, and
the holding period for such additional Common Shares will commence on the date
the Option is exercised.
2. Except as provided below, to the extent the number of New Shares
acquired does not exceed the number of Old Shares exchanged, no gain or loss
will be recognized on such exchange, the basis of the New Shares received will
be equal to the basis of the Old Shares surrendered, and the holding period of
the New Shares received will include the holding period of the Old Shares
surrendered. However, if the Participant exercises an ISO by surrendering Old
Shares which were acquired through the exercise of an ISO and if the surrender
occurs prior to the expiration of the holding period applicable to ISOs, the
surrender will be deemed to be an Early Disposition of the Old Shares. The
federal income tax consequences of an Early Disposition are discussed above.
3. If the Old Shares surrendered were acquired by the Participant by
exercise of an ISO, then the exchange will not constitute an Early Disposition
of the Old Shares unless the Option being exercised is an ISO and the holding
period applicable to an ISO has not been met at the time of the surrender.
Stock Appreciation Rights
Although the recipient of an SAR does not recognize income at the time
the SAR is granted, in the year the SAR is exercised, he or she recognizes
ordinary income in an amount equal to the cash and the fair market value of the
property received. The Company or one of its subsidiaries will be entitled to
deduct as compensation an amount equal to the income recognized by the
recipient, and such deduction will be claimed in the Company's or subsidiary's
taxable year in which the SAR is exercised. If an SAR is paid in Common Shares,
the recipient's basis will be equal to the fair market value of the Common
Shares when received, and the holding period will begin on that date.
11
Director Stock Units
If a non-employee director elects to receive all or a portion of his or
her annual retainer fees in Director Stock Units, the portion of the fee
attributable to such Director Stock Units will not be recognized as income in
the year that the annual retainer fees would have otherwise been paid to the
non-employee director. At the time that the non-employee director receives a
distribution of the Director Stock Units, either in cash or in Common Shares,
the non-employee director will recognize ordinary income equal to the value of
the distribution. If a non-employee director receives the distribution in Common
Shares, the amount that the non-employee director will recognize as ordinary
income will equal the then fair market value of the Common Shares multiplied by
the number of Common Shares received; no part of this value will be taxed as
capital gains, although appreciation in the value of the Common Shares occurring
after their distribution may be taxed as capital gains. If a non-employee
director receives the distribution in cash, the amount that the non-employee
director will recognize as ordinary income will equal the then fair market value
of the Common Shares multiplied by the number of Director Stock Units being
liquidated.
The Company is not entitled to a tax deduction at the time that a
non-employee director elects to receive a portion of the non-employee director's
annual retainer fees in Director Stock Units. The Company will receive a tax
deduction at the time that the non-employee director receives a distribution of
such Director Stock Units. The amount of the Company's deduction will be equal
to the amount of income that the non-employee director recognizes upon receipt
of the distribution.
Taxation of Long-Term Capital Gains
For capital assets held for more than 12 months, the maximum rate of
tax on net capital gains is 20%. A 10% rate applies to taxpayers in the 15%
ordinary income tax bracket. Gains on capital assets held for more than five
years are subject to a reduced rate. The 20% and 10% rates discussed above are
reduced to 18% and 8%, respectively, in such case.
The foregoing is a summary of the federal income tax consequences to
the Participants in the 2002 Stock Plan and to the Company, based upon current
income tax laws, regulations and rulings.
Other Matters
The 2002 Stock Plan is intended to comply with Section 162(m) of the
Code with respect to Awards granted thereunder. Section 162(m) prohibits a
publicly-held corporation, such as the Company, from claiming a deduction on its
federal income tax return for compensation in excess of $1 million paid for a
given fiscal year to the chief executive officer (or person acting in that
capacity) at the close of the corporation's fiscal year and the four most highly
compensated officers of the corporation, other than the chief executive officer,
at the end of the corporation's fiscal year (collectively, the "Section 162(m)
Officers"). The $1 million compensation deduction limitation does not apply to
"performance-based compensation." The final regulations issued by the Internal
Revenue Service under Section 162(m) (the "IRS Regulations") set forth a number
of provisions which compensatory plans must contain if the compensation paid
thereunder is to qualify as "performance-based" for purposes of Section 162(m).
The 2002 Stock Plan is intended to satisfy the requirements of the IRS
Regulations with respect to Awards granted to Participants thereunder. The
Company is seeking shareholder approval of the 2002 Stock Plan in a good faith
effort to qualify compensation received thereunder as a result of Awards granted
under the 2002 Stock Plan as "performance-based" for purposes of Section 162(m).
If such shareholder approval is not obtained, the 2002 Stock Plan and any Awards
previously granted thereunder will be null and void.
RECOMMENDATION AND VOTE
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE BANCINSURANCE CORPORATION 2002 STOCK INCENTIVE PLAN.
12
The affirmative vote of the holders of a majority of the Company's
Common Shares entitled to vote and present, in person or by properly executed
proxy, at the Annual Meeting is required to approve the Bancinsurance
Corporation 2002 Stock Incentive Plan. Abstentions and broker non-votes will
have the same effect as a "NO" vote.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of Common
Shares as of March 31, 2002 (except as otherwise noted) by: (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Shares; (ii) each of the Company's directors and nominees for
director and the executive officers named in the Summary Compensation Table; and
(iii) the directors and executive officers as a group.
Name Number of Common Percent
of Beneficial Shares Beneficially of
Owner Owned(1) Class(2)
- ------------ --------------------- --------
Si Sokol 2,954,001(3,6) 50.84%
Chairman and Chief Executive Officer
Barbara K. Sokol 2,954,001(3) 50.84%
John S. Sokol 121,252(3,4,6) 2.07%
Director and President
Daniel D. Harkins 64,825(6) 1.12%
Director
Saul Sokol 293,012(5,6) 5.06%
Director
William S. Sheley 2,000(6) (7)
Director
Matthew D. Walter 27,000(6) (7)
Director
Daniel J. Stephan 7,000(6) (7)
Vice President of Marketing of Ohio Indemnity
Stephen J. Toth 27,000(6) (7)
Vice President of Operations of Ohio Indemnity
Sally J. Cress 75,850(6) 1.31%
Treasurer and Secretary
Milton O. Lustnauer, Sr. and Family 369,608(8) 6.41%
250 East Broad Street, Tenth Floor
Columbus, Ohio 43215
All directors, nominees and
executive officers as a group(10 persons) 3,572,940 59.73%
- ----------
(1) Except as otherwise noted, the beneficial owners have sole voting and
investment power over the Common Shares shown.
(2) Calculated on the basis of the number of outstanding Common Shares as
of March 31, 2002 plus the number of Common Shares a person has the
right to acquire upon exercise of options exercisable within 60 days of
March 31, 2002.
(3) Si Sokol owns of record 599,976 Common Shares.
13
Barbara K. Sokol, Si Sokol's wife, owns of record 1,568,192 Common
Shares. As trustee of trusts for the benefit of her three children
(John S. Sokol (248,611 Common Shares), James K. Sokol (248,611 Common
Shares) and Carla A. Sokol (248,611 Common Shares)), Mrs. Sokol
beneficially owns 745,833 Common Shares. As trustee, she is empowered
to exercise all rights with regard to such Common Shares. The rules and
regulations of the Securities and Exchange Commission (the
"Commission") require that Common Shares owned by Mr. and Mrs. Sokol be
aggregated for purposes of this disclosure; however, Mr. and Mrs. Sokol
each disclaim beneficial ownership of Common Shares owned by the other.
(4) Of such Common Shares, John S. Sokol owns of record or through a broker
32,130 Common Shares and 2,100 Common Shares are owned by his wife as
to which he disclaims beneficial ownership. In addition, as custodian
for his minor child, he beneficially owns 6,022 Common Shares.
(5) Saul Sokol and his wife, Phyllis D. Sokol, are co-trustees of The Saul
Sokol and Phyllis D. Sokol Family Trust, which trust holds 277,012
Common Shares and is for the benefit of their children. As trustees,
Mr. and Mrs. Sokol are each empowered to exercise all rights with
regard to such Common Shares, revoke the trust and amend the trust.
(6) Includes 40,000, 81,000, 16,000, 16,000, 2,000, 2,000, 7,000, 19,500,
and 27,000 Common Shares that underlie options exercisable within 60
days of March 31, 2002 held by Si Sokol, John S. Sokol, Daniel D.
Harkins, Saul Sokol, William S. Sheley, Matthew D. Walter, Daniel J.
Stephan, Stephen J. Toth and Sally J. Cress, respectively.
(7) Represents ownership of less than 1% of the outstanding Common Shares.
(8) Based on information set forth in a Schedule 13G dated January 31,
2002, which was filed by certain members of the Milton O. Lustnauer,
Sr. family to report beneficial ownership of Common Shares as of
December 31, 2001. 311,278 of such Common Shares are held by the Milton
O. Lustnauer Living Trust. Milton O. Lustnauer, Sr. is the settlor of
such trust and has the authority to revoke the trust. Milton O.
Lustnauer, Jr. is the trustee of such trust and is empowered to
exercise all rights with regard to such Common Shares, revoke the trust
and amend the trust. Milton O. Lustnauer, Sr. also owns of record and
beneficially 58,330 Common Shares.
The address of Si Sokol, Barbara K. Sokol, Saul Sokol and Milton O.
Lustnauer, Sr. is 250 East Broad Street, Tenth Floor, Columbus, Ohio
43215.
EXECUTIVE OFFICERS OF THE COMPANY
Executive officers are elected annually by the Board of Directors and
serve at the pleasure of the Board and, in the case of Daniel J. Stephan,
pursuant to an employment agreement. In addition to Si Sokol, Chairman of the
Board and Chief Executive Officer, and John S. Sokol, President, the following
persons are executive officers of the Company.
Daniel J. Stephan, age 41, has served as Vice President of Marketing
for Ohio Indemnity since May 2000. Mr. Stephan directs sales and marketing of
insurance products and services for banks and lender/dealers. From 1999 to 2000,
he owned and operated Promark Specialty Insurance, an independent insurance
agency and consulting firm. From 1997 to 1999, he served as the General Manager
of the Lender Products Division of Markel American Insurance Company. From 1993
to 1997, he served as the Product Manager for Progressive Corporation where he
directed sales and marketing for insurance products and services.
Stephen J. Toth, age 38, has served as Vice President of Operations of
Ohio Indemnity since 1999. He joined Ohio Indemnity in 1989 and served as
Assistant Vice President of Ohio Indemnity from 1991 to 1998 and as
Administrator of Ohio Indemnity's Bonded Service program from 1989 to 1991. From
1986 to 1989, he was employed by the Rockwood Insurance Group. Mr. Toth began
his employment with Rockwood Holding Company as a Management Trainee-Operations
Department and was promoted to Accountant III in 1987 and to Accounting/Data
Processing Manager for Rockwood Insurance Company of Indiana and Secretary and a
Director of National Compensation Control Systems, Inc., Rockwood's unemployment
cost control subsidiary, in 1988.
14
Stephen G. Wolf, age 49, has served as President of American Legal
Publishing since 1984. American Legal Publishing was acquired by the Company as
a wholly-owned subsidiary in February, 2000. Mr. Wolf has a B.B.A. in Management
from the University of Cincinnati, and a J.D. from the University of Cincinnati
College of Law. Mr. Wolf has a variety of experience in local government and has
been an elected local government official for 20 years, having served as
Councilman and Mayor of the City of Mount Healthy, Ohio. Currently, he serves as
City Attorney for the City of Mount Healthy. He is a frequent speaker on aspects
of local government and municipal law.
Sally J. Cress, age 46, has served as the Treasurer and Secretary of
the Company and Ohio Indemnity since March 1985. She also serves as a Director
of Ohio Indemnity.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE The following table sets forth the compensation paid
or accrued by the Company and its principal subsidiaries to or for (i) the
Company's Chief Executive Officer and (ii) the other four most highly
compensated executive officers of the Company in fiscal year 2001, for the
fiscal years ended December 31, 2001, 2000 and 1999, respectively. Long-Term
Annual Compensation
Compensation Awards
----------------------- -----------
Securities All Other
Name and Principal Salary Bonus Underlying Compensation
Position Year ($) ($) Options (#) ($)(1)
-------- ---- --------- --------- ----------- ---------------
Si Sokol 2001 301,154 68,250 - 82,069
Chairman and 2000 275,000 85,000 - 81,757
Chief Executive Officer 1999 250,000 100,000 - 81,495
John S. Sokol 2001 208,115 68,250 - 22,350
President 2000 165,000 63,750 - 20,202
1999 130,000 75,000 40,000 8,856
Daniel J. Stephan 2001 124,223 18,955 15,000 5,020
Vice President of 2000 75,230 11,285 10,000 25,900
Marketing of Ohio 1999 - - - -
Indemnity
Stephen J. Toth 2001 87,638 12,915 5,000 5,552
Vice President of 2000 81,937 18,700 - 89,156
Operations of Ohio 1999 73,846 22,000 5,600 49,339
Indemnity
Sally J. Cress 2001 92,330 15,904 5,000 6,648
Treasurer and Secretary 2000 89,079 18,700 - 6,603
1999 85,812 22,000 5,000 6,289
- -------------
(1) With respect to Si Sokol, "All Other Compensation" includes (i) the
Company's matching contribution under the Ohio Indemnity Company Employee 401(k)
and Profit Sharing Plan (the "401(k) Plan") in the amount of $10,350, $10,038
and $9,776 for the 2001, 2000 and 1999 fiscal years, respectively; (ii) $1,855,
$1,576 and $1,339 for the 2001, 2000 and 1999 fiscal years, respectively, for
the term portion of the premium for a split dollar life insurance policy for the
benefit of Mr. Sokol and his wife; and (iii) $69,864, $70,143 and $70,380 for
the 2001, 2000 and 1999 fiscal years, respectively, for the whole life portion
of the premium for such split dollar life insurance policy. The aggregate whole
life portion of the annual premiums associated with such split dollar life
insurance policy are to be repaid in full, upon the second-to-die of Mr. Sokol
and his wife.
15
With respect to John S. Sokol, "All Other Compensation" includes (i)
the Company's matching contribution under the 401(k) Plan in the amount of
$10,350, $9,202 and $8,856 for the 2001, 2000 and 1999 fiscal years,
respectively; (ii) $480 and $447 for the 2001 and 2000 fiscal years for the term
portion of the premium for a split dollar life insurance policy for the benefit
of Mr. Sokol; and (iii) $11,520 and $10,553 for the 2001 and 2000 fiscal years,
for the whole life portion of the premium for such split dollar life insurance
policy. The aggregate whole life portion of the annual premiums associated with
such split dollar life insurance policy are to be repaid in full, upon the
death, retirement or termination of employment of Mr. Sokol.
With respect to Daniel J. Stephan, "All Other Compensation" includes
the Company's matching contribution under the 401(k) Plan in the amount of
$5,020 and $900 for the 2001 and 2000 fiscal years, respectively and for the
2000 fiscal year a $25,000 signing bonus received pursuant to the terms of an
employment agreement discussed below.
With respect to Stephen J. Toth, "All Other Compensation" includes (i)
the Company's matching contribution under the 401(k) Plan in the amount of
$5,552, $5,406 and $5,589 for the 2001, 2000 and 1999 fiscal years,
respectively; (ii) for the 2000 fiscal year, discharge of indebtedness owed by
Mr. Toth to the Company in the principal amount of $25,000; and (iii) the
purchase of 17,500 and 10,000 Common Shares from Mr. Toth for an aggregate
purchase price of $58,750 and $43,750 in the 2000 and 1999 fiscal years,
respectively. The Company purchased such Common Shares at the closing market
price on the dates of purchase.
With respect to Sally J. Cress, "All Other Compensation" includes the
Company's matching contribution under the 401(k) Plan in the amount of $6,648,
$6,603 and $6,289 for the 2001, 2000 and 1999 fiscal years, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options
granted to the executive officers named in the Summary Compensation Table during
the 2001 fiscal year.
Individual Grants
--------------------------------------------------------- Potential Realizable
Value at Assumed
Number of Annual Rates of
Securities % of Total Stock Price
Underlying Options Granted Exercise Appreciation for
Options to Employees in Price Expiration Option Term(2)
Name Granted(#) Fiscal Year ($/Sh)(1) Date 5%($) 10%($)
- ------------- ---------- ----------- --------- --------- ------ -----------
Si Sokol - - - - - -
John S. Sokol - - - - - -
Daniel J. Stephan 10,000(3) 24.39% 4.38 5-16-11 71,346 113,606
5,000(4) 12.20% 4.65 5-29-11 37,872 60,305
Stephen J. Toth 5,000(4) 12.20% 4.65 5-29-11 37,872 60,305
Sally J. Cress 5,000(4) 12.20% 4.65 5-29-11 37,872 60,305
- ----------
(1) Pursuant to the 1994 Stock Option Plan, the exercise price is the fair
market value of the Common Shares on the date of grant (i.e., the
closing sales price per share on the Nasdaq National Market on that
date).
(2) The dollar amounts in these columns are the product of (a) the
difference between (i) the product per share market price on the date of
grant and the sum of 1 plus the assumed rate of appreciation (5% and
10%) compounded annually over the term of the option (ten years) and
(ii) the per share
16
exercise price and (b) the number of Common Shares underlying the grant
at the end of fiscal year 2001.
(3) These options were granted on May 17, 2001 and vest 20% per year over
the first five years.
(4) These options were granted on May 30, 2001 and vest 20% per year over
the first five years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information regarding the
year-end values of unexercised options held by the executive officers named in
the Summary Compensation Table. None of these individuals exercised options
during the 2001 fiscal year.
Number of Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Fiscal Options at Fiscal
Year End (#) Year End ($)(2)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----------------- ----------- ------------- ----------- -------------
Si Sokol 40,000 10,000 8,000 2,000
John S. Sokol 81,000 29,000 45,575 0
Daniel J. Stephan 7,000 18,000 4,988 11,082
Stephen J. Toth 19,500 8,000 0 125
Sally J. Cress 27,000 8,000 7,375 125
EMPLOYMENT AGREEMENT
On May 17, 2000, the Company and Daniel J. Stephan entered into a three
year evergreen employment agreement. Under the employment agreement, Mr. Stephan
is to receive (i) an annual salary of at least $120,000; (ii) a $25,000 signing
bonus (which was paid in 2000); (iii) an annual incentive bonus (equal to 15% to
100% of his then current annual salary); and (iv) five annual grants of options
to purchase 10,000 Common Shares. If Mr. Stephan's employment is terminated as a
result of his death or "permanent disability" or for "cause" (each as defined in
the employment agreement), Mr. Stephan will receive certain severance benefits
that may include payment of his then current annual salary and a bonus (capped
at 15% of his then current annual salary) and continued group health insurance
benefits, each for a period for up to the remainder of the term of the
employment agreement, depending on the reason for the termination. Upon the
occurrence of a "change of control" (as defined in the employment agreement),
Mr. Stephan also has the right to terminate the employment agreement and receive
(i) a lump sum payment equal to 230% of his then current annual salary; (ii)
continued group health insurance benefits for a period of 24 months; and (iii)
certain other miscellaneous benefits. In addition, in the event of his
termination for "cause" or upon a "change in control," all options previously
granted to Mr. Stephan will vest, and he will be granted such number of fully
vested options to enable him to acquire 50,000 Common Shares in the aggregate
(taking into account all options that he then holds).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Committee of the Board of Directors performed the
functions of a compensation committee for the Company with respect to the 2001
fiscal year. Si Sokol, Chairman and Chief Executive Officer of the Company,
served as a member of the Executive Committee during the 2001 fiscal year. There
were no interlocking relationships between any executive officers of the Company
and any entity whose directors or executive officers served on the Executive
Committee during the 2001 fiscal year.
17
EXECUTIVE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Board of Directors did not have a compensation committee with
respect to the 2001 fiscal year. The Executive Committee performed the functions
of a compensation committee. The Executive Committee annually reviews and
evaluates the performance of the executive officers and determines the
compensation for each executive officer. In general, the Company's philosophy is
to attract, motivate and retain qualified key executives, reward individual
performance, relate compensation to Company goals and objectives and thereby
enhance shareholder value. The Company's compensation program for the 2001
fiscal year included competitive base salaries, annual bonus opportunities,
benefits and options under the 1994 Stock Option Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The Company's policy is to compensate its executives fairly and
adequately for the responsibility assumed, for the success achieved and for the
effort expended in discharging their responsibilities. Fair and adequate
compensation is established after careful review of:
- The Company's earnings;
- The Company's performance compared to other companies in its
industry and of similar size and market area; and
- Comparison of what the market demands for compensation of
similar situated experienced executives.
Total compensation takes into consideration a mix of base salary, bonus
and options. The particular mix is designed in order to be competitive in
seeking to attract competent professionals, retain those professionals and
reward extraordinary achievement.
1. Base Salary
The level of base salary for any executive position is not tied to any
objective performance formula or standard. However, that is not to say that poor
performance may not result in termination. Superior performance is expected of
all executive officers.
To establish the salary to be paid to any executive, the following
criteria are evaluated:
- Position and responsibility assumed.
- Experience of executive.
- Comparative studies of peer group compensation.
- Competitive level of salary to attract and retain qualified
and experienced professionals.
2. Incentive Compensation
The incentive program is designed to reward executives for their
achievements in maximizing individual and Company performance. For 2001, the
parameters for the incentive program were based primarily on the Company's
performance specifically related to return on shareholders' equity and, to a
lesser extent, on achievement of personal objectives, such as implementing new
products, developing new policy issuance procedures and maintaining the
Company's website.
Under the 2001 incentive program, each executive position is assigned a
percentage of base salary as potential incentive pay. Individual incentives are
weighted for financial performance of the Company and personal objectives. At
the discretion of the President, a bonus for overachievement is available if one
hundred percent of the incentive target has been achieved and additional
extraordinary performance has been exhibited and documented. If the Company's
return on shareholders' equity is below seven and one-half percent and personal
objectives are not achieved, no bonus will be paid under the program.
18
3. Stock Options
In 2001, options were granted under the 1994 Stock Option Plan to
Daniel J. Stephan, Stephen J. Toth, Stephen G. Wolf and Sally J. Cress. The
determination of future grants will be based on each executive's contributions,
performance and perceived ability to impact overall business results.
4. Perquisites
Perks such as leased automobiles, club memberships and other extras
which the Board may approve from time to time are determined and awarded
pursuant to evaluation under the same criteria used to establish the base
salary.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Si Sokol became the Company's Chief Executive Officer in December 1980.
Since August 2000, Mr. Sokol's annual base salary has been fixed at $300,000.
Determination of Mr. Sokol's base salary was primarily based on his experience
and previous performance. In 2001, Mr. Sokol earned an incentive plan bonus of
$68,250. The bonus was based primarily on: the Company's performance
specifically related to return on shareholders' equity and, to a lesser extent,
on achievement of personal objectives. The total that could be earned by the
Chief Executive Officer for 2001 was capped at thirty five percent of his annual
base salary.
Submitted by the Executive Committee of the Board of Directors:
Si Sokol (Chairman)
Daniel D. Harkins
Saul Sokol
19
PERFORMANCE GRAPH
The following indexed graph and table indicate the Company's total
shareholder return for the five-year period ending December 31, 2001 as compared
to the total return for the Nasdaq Stock Market (U.S.) Index and the Standard
and Poor's Insurance (Property-Casualty) Index, assuming a common starting point
of $100 and reinvestment of dividends. Total return indices are weighted using
beginning-period market capitalization for each of the reported time periods.
[GRAPH]
*$100 invested on 12/31/96 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
Cumulative Total Return
----------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
Bancinsurance Corporation 100.00 125.81 138.71 142.26 118.55 134.13
NASDAQ Stock Market (U.S.) 100.00 122.48 172.68 320.89 193.01 153.15
S & P Insurance (Property-Casualty) 100.00 145.47 135.35 100.89 157.14 144.50
20
REPORT OF THE AUDIT COMMITTEE
GENERAL
In accordance with its written charter adopted by the Board of
Directors, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company.
REVIEW AND DISCUSSION WITH INDEPENDENT ACCOUNTANTS AND AUDITORS
In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from Ernst & Young LLP, the Company's independent
auditors, a formal written statement describing all relationships between Ernst
& Young LLP and the Company that might bear on Ernst & Young LLP's independence
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with Ernst & Young LLP any
relationships or services that may impact the objectivity and independence of
Ernst & Young LLP and satisfied itself as to Ernst & Young LLP's independence.
The Audit Committee also discussed with management and Ernst & Young LLP the
adequacy and effectiveness of the Company's internal accounting and financial
controls. In addition, the Audit Committee discussed and reviewed with Ernst &
Young LLP all communications required by auditing standards generally accepted
in the United States of America, including those described in Statement on
Auditing Standards No. 61, Communication with Audit Committees, as amended, and,
with and without management present, discussed and reviewed the results of Ernst
& Young LLP's examination of the financial statements.
REVIEW WITH MANAGEMENT
The Audit Committee reviewed and discussed the audited consolidated
financial statements of the Company as of and for the fiscal year ended December
31, 2001 with management. Management has the responsibility for the preparation
of the Company's consolidated financial statements and Ernst & Young LLP has the
responsibility for the audit of those statements.
AUDIT FEES
The aggregate fees billed for professional services rendered by Ernst &
Young LLP for the audit of the Company's annual consolidated financial
statements for the 2001 fiscal year and the reviews of the consolidated
financial statements included in the Company's Quarterly Reports on Form 10-Q
for the 2001 fiscal year (collectively, the "Audit Services") were $121,087.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Ernst & Young LLP did not render any of the professional services
described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X (17 CFR
210.2-01(c)(4)(ii)) (the "Financial Information Systems Design and
Implementation Services") for the 2001 fiscal year for the Company or its
subsidiaries.
ALL OTHER FEES
The aggregate fees billed for services rendered by Ernst & Young LLP,
other than Audit Services and Financial Information Systems Design and
Implementation Services, for the 2001 fiscal year (the "Other Services") were
$57,750.
CONCLUSION
Based on the reviews and discussions with management and Ernst & Young
LLP noted above, the Audit Committee recommended to the Board of Directors that
the Company's audited consolidated financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001
filed with the Commission. The Audit Committee also determined that the
provision of the Other Services was compatible with maintaining Ernst & Young
LLP's independence.
21
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS:
Daniel D. Harkins, (Chairman)
William S. Sheley
Matthew D. Walter (from May 30, 2001)
John S. Sokol (until May 30, 2001)
PROPOSALS BY SHAREHOLDERS FOR 2003 ANNUAL MEETING
Any proposals of shareholders which are intended to be represented at
the 2003 Annual Meeting of Shareholders must be received by the Company at its
principal executive offices by December 25, 2002 to be eligible for inclusion in
next year's proxy statement. Such proposals may be included in next year's proxy
statement if they comply with certain rules and regulations promulgated by the
Commission. If a shareholder intends to present a proposal at the 2003 Annual
Meeting of Shareholders, but has not sought the inclusion of such proposal in
the Company's proxy statement, such proposal must be received by the Company at
its principal executive offices by March 10, 2003, or the Company's management
proxies will be entitled to use their discretionary voting authority should such
proposal then be raised without any discussion of the matter in the Company's
proxy statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors, and persons who own more than 10% of
the Common Shares, to file reports of ownership and changes in ownership of the
Common Shares with the Commission. Based solely on its review of such reports
and written representations from reporting persons, the Company believes that,
during fiscal year 2001, its executive officers, directors and greater than 10%
shareholders complied with such filing requirements.
OTHER MATTERS
The Company's 2001 Annual Report was furnished to shareholders prior to
or concurrently with the mailing of this proxy material. Extra copies of the
2001 Annual Report are available upon request.
As of date hereof, management knows of no other business that will come
before the Annual Meeting. Should any other matter requiring a vote of
shareholders arise, the enclosed proxy confers upon the proxyholders
discretionary authority to vote the same with respect to any such other matter
in accordance with their best judgment.
UPON THE WRITTEN REQUEST OF ANY PERSON WHOSE PROXY IS HEREBY SOLICITED,
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM
10-K, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH REQUEST
SHOULD BE ADDRESSED TO SALLY J. CRESS, SECRETARY, BANCINSURANCE CORPORATION, 250
EAST BROAD STREET, TENTH FLOOR, COLUMBUS, OHIO 43215.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN
AND DATE THE ENCLOSED PROXY AND TO MAIL IT PROMPTLY.
BY ORDER OF THE BOARD OF DIRECTORS
Sally J. Cress, Secretary
22
APPENDIX I
BANCINSURANCE CORPORATION
2002 STOCK INCENTIVE PLAN
1.00 PURPOSE
This Plan is intended to foster and promote the Company's long-term financial
success and to increase shareholder value by [1] providing Participants an
opportunity to acquire an ownership interest or to increase an ownership
interest in the Company and [2] enabling the Company to attract and retain the
services of outstanding individuals upon whose judgment, interest and dedication
the successful conduct of the Company's business is largely dependent.
2.00 DEFINITIONS
When used in this Plan, the following terms will have the meanings given to them
in this section unless another meaning is expressly provided elsewhere in this
Plan. When applying these definitions, the form of any term or word will include
any of its other forms.
ACT. The Securities Exchange Act of 1934, as amended.
ANNUAL MEETING. The annual meeting of the Company's shareholders.
ANNUAL RETAINER. The annual retainer and committee fees paid to each Director
for service as a member of the Board and as a member of any Board committees.
AWARD. Any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock,
Stock Appreciation Right, share of Stock issued under Section 7.02[1] and Stock
Unit. The aggregate number of shares of Stock with respect to which Options and
SARs may be issued to any Participant for any Plan Year may not be larger than
100,000 shares of Stock (adjusted as provided in Section 4.03), including
Options and SARs that are cancelled or deemed to have been cancelled under
Treas. Reg. Section 162-27(e)(2)(vi)(B) during the Plan Year issued.
AWARD AGREEMENT. The written agreement between the Company and each Participant
that describes the terms and conditions of each Award.
BENEFICIARY. The individual a Participant designates to receive (or to exercise)
any Plan benefits (or rights) that are unpaid (or unexercised) when the
Participant dies. A Beneficiary may be designated only by following the
procedures described in Section 11.02; neither the Company nor the Committee is
required or permitted to infer a Beneficiary from any other source.
BOARD. The Company's board of directors.
CODE. The Internal Revenue Code of 1986, as in effect on the Effective Date or
as amended or superceded after the Effective Date, and any regulations and
applicable rulings issued under the Code.
COMMITTEE.
[1] In the case of Awards to Directors, the Board; or
[2] In the case of all other Awards, the Board's compensation committee
which also constitutes a "compensation committee" within the meaning of
Treas. Reg. Section 1.162-27(c)(4). The Committee will be comprised of
at least three individuals [A] each of whom must be [I] an outside
director, as defined in Treas. Reg. Section 1.162-27(e)(3)(i) and [ii]
a "non-employee director" within the meaning of Rule 16b-3 under the
Act and [B] none of whom may receive remuneration in any capacity other
than as a director, except as permitted under Treas. Reg. Section
1.162-27(e)(3)(ii).
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COMPANY. Bancinsurance Corporation, a corporation organized under the laws of
Ohio, and any successor to it.
DIRECTOR. Each member of the Board or of the board of directors of any
Subsidiary who is not an Employee.
DIRECTOR OPTION. A Nonqualified Stock Option granted to a Director under Section
5.00.
DISABILITY. A disability as defined in Code Section 22(e)(3).
EFFECTIVE DATE. June 3, 2002.
EMPLOYEE. Any individual who is a common law employee of the Company or of any
Subsidiary. A worker who is classified as other than a common law employee but
who is subsequently reclassified as a common law employee of an Employer for any
reason and on any basis will be treated as a common law employee only from the
date of that determination and will not retroactively be reclassified as an
Employee for any purpose of this Plan.
EXERCISE PRICE. The price at which a Participant may exercise an Award.
FAIR MARKET VALUE. The value of one share of Stock on the relevant date,
determined as follows:
[1] If the shares are traded on an exchange (including the NASDAQ
National Market System), the reported "closing price" on the relevant
date, assuming it is a trading date; otherwise on the next trading day.
[2] If the shares are traded over-the-counter with no reported closing
price, the mean between the lowest bid and the highest asked prices on
that quotation system on the relevant date assuming it is a trading
day; otherwise on the next trading day; and
[3] If neither [1] nor [2] applies, the fair market value as determined
by the Committee in good faith.
FREESTANDING SAR. An SAR that is not associated with an Option and is granted
under Section 7.00.
GRANT DATE. The date an Award is granted.
INCENTIVE STOCK OPTION. Any Option granted under Section 5.00 that meets the
conditions imposed under Code Section 422(b).
NONQUALIFIED STOCK OPTION. Any Option granted under Section 5.00 that is not an
Incentive Stock Option.
OPTION. The right granted under Section 5.00 to purchase a share of Stock at a
stated price for a specified period of time. An Option may be either [1] an
Incentive Stock Option or [2] a Nonqualified Stock Option.
PARTICIPANT. Any Employee or Director to whom the Committee grants an Award.
PLAN. Bancinsurance Corporation 2002 Stock Incentive Plan.
PLAN YEAR. The Company's fiscal year.
RESTRICTED STOCK. An Award granted under Section 6.00.
RESTRICTION PERIOD. The period over which the Committee will determine if
grantee has met conditions placed on Restricted Stock.
STOCK. Common shares issued by the Company.
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STOCK APPRECIATION RIGHT (OR "SAR"). An Award granted under Section 7.00 that is
either a Tandem SAR or a Freestanding SAR.
STOCK UNIT. A right to receive payment of the Fair Market Value of a share of
Stock as provided in Section 7.02.
SUBSIDIARY. Any corporation, partnership or other form of unincorporated entity
of which the Company owns, directly or indirectly, 50 percent or more of the
total combined voting power of all classes of stock, if the entity is a
corporation, or of the capital or profits interest, if the entity is a
partnership or another form of unincorporated entity.
TANDEM SAR. An SAR that is associated with an Option and which expires when that
Option expires or is exercised, as described in Section 7.00.
TERMINATION OF SERVICE. As appropriate, [1] termination of the employee-employer
relationship between a Participant and the Company and all Subsidiaries for any
reason or [2] cessation of a Director's service on the Board (and the boards of
directors of all Subsidiaries) for any reason.
3.00 ADMINISTRATION
3.01 COMMITTEE DUTIES. The Committee is granted all powers appropriate and
necessary to administer the Plan. Consistent with the Plan's purpose, the
Committee may adopt, amend and rescind rules and regulations relating to the
Plan, to the extent appropriate to protect the Company's interests and has
complete discretion to make all other decisions necessary or advisable for the
administration and interpretation of the Plan. Any action by the Committee will
be final, binding and conclusive for all purposes and upon all Participants.
3.02 DELEGATION OF DUTIES. In its sole discretion, the Committee may delegate to
any individual or entity (including Employees) that it deems appropriate any of
its duties other than those described in Section 3.03[1].
3.03 PARTICIPATION.
[1] Consistent with the terms of the Plan, the Committee will:
[a] Decide which Employees and Directors may become Participants;
[b] Decide which Participants will be granted Awards;
[c] Identify the type of Awards to be granted to each Participant;
[d] Identify the terms and conditions imposed on any Awards granted;
[e] Identify the procedures through which an Award may be exercised;
[f] Identify the circumstances under which the Company may cancel an
Award or reacquire any Award or shares of Stock acquired through the
Plan; and
[g] Impose any other terms and conditions the Committee believes are
appropriate and necessary to implement the purpose of this Plan.
[2] The Committee may establish different terms and conditions:
[a] For each type of Award;
[b] For Participants receiving the same type of Award; and
A-3
[c] For the same Participant for each Award the Participant receives,
whether or not those Awards are granted at different times.
[3] The Committee will prepare and deliver an Award Agreement to
each affected Participant with respect to each Award. The Award
Agreement will describe:
[a] The type of Award and when and how it may be exercised;
[b] The effect of exercising the Award;
[c] Any Exercise Price associated with the Award;
[d] Any conditions that must be met before the Award may be exercised;
[e] Any objective restrictions placed on Restricted Stock and any
conditions that must be met before those restrictions will be released
(e.g., conditions related to Company-wide, divisional or individual
performance or growth in earnings per share, revenues or profits) and
the related Restriction Periods. Performance related restrictions must
be established before 25 percent of the related Restriction Period has
expired. In its sole discretion, the Committee may adjust any
performance related conditions with respect to any Participant who is
transferred during a Restriction Period to a materially different
position (or whose job duties change otherwise) to ensure that those
conditions are appropriate to his or her new position;
[f] When and how the Award may be exercised; and
[g] Any other applicable terms and conditions affecting the Award.
3.04 CONDITIONS OF PARTICIPATION.
Each Participant receiving an Award agrees:
[1] To sign an Award Agreement; and
[2] To be bound by the terms of the Award Agreement and the Plan.
3.05 LIMITS ON EXERCISABILITY. Regardless of any other provision of this Section
3.00 or the Plan, all unexercised Awards granted to a Participant will be
forfeited if that Participant, before his or her Termination of Service or after
Termination of Service but while any Award remains exercisable:
[1] Without the Committee's written consent, which may be withheld for any
reason or for no reason, serves (or agrees to serve) as an officer,
director or employee of any proprietorship, partnership or corporation or
becomes the owner of a business or a member of a partnership that competes
with any portion of the Company's (or a Subsidiary's) business or renders
any service (including business consulting) to entities that compete with
any portion of the Company's (or a Subsidiary's) business;
[2] Refuses or fails to consult with, supply information to, or otherwise
cooperate with, the Company after having been requested to do so; or
[3] Deliberately engages in any action that the Committee concludes has
caused substantial harm to the interests of the Company or any Subsidiary.
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4.00 STOCK SUBJECT TO PLAN
4.01 NUMBER OF SHARES.
[1] Subject to Section 4.03, the number of shares of Stock subject to
Awards under the Plan is 600,000.
[2] The shares of Stock to be delivered under the Plan may consist, in
whole or in part, of treasury Stock or authorized but unissued Stock not
reserved for any other purpose.
4.02 CANCELLED, TERMINATED OR FORFEITED AWARDS. Any Award (other than an Award
granted under Section 6.00) that, for any reason, is cancelled, terminated or
otherwise settled without the issuance of any Stock or cash may again be granted
under the Plan.
4.03 ADJUSTMENT IN CAPITALIZATION. If, after the Effective Date, there is a
Stock dividend or Stock split, recapitalization (including payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to shareholders, exchange of shares or other similar
corporate change affecting Stock, the Committee will appropriately adjust the
number of Awards that may be issued to a Participant in any Plan Year, the
aggregate number of shares of Stock available for Awards under Section 4.01 or
subject to outstanding Awards (as well as any share-based limits imposed under
this Plan), the respective prices and/or limitations applicable to outstanding
Awards and any other affected factor, limit or term applying to Awards.
5.00 OPTIONS
5.01 GRANT OF OPTIONS. The Committee may grant Options to Participants at any
time during the term of this Plan. Options issued to Employees may be either [1]
Incentive Stock Options or [2] Nonqualified Stock Options. However, Options
issued to Directors may only be Nonqualified Stock Options.
5.02 OPTION PRICE. Each Option will bear an Exercise Price that is not less than
the Fair Market Value of a share of Stock on the Grant Date. However, each
Incentive Stock Option granted to a Participant who owns [as defined in Code
Section 424(d)] Stock possessing more than 10 percent of the total combined
voting power of all classes of Stock will bear an Exercise Price that is at
least 110 percent of the Fair Market Value of a share of Stock on the Grant
Date.
5.03 EXERCISE OF OPTIONS. Options awarded to a Participant under Section 5.01
may be exercised at the times and subject to the restrictions and conditions
(including a vesting schedule) that the Committee specifies in the Award
Agreement. However:
[1] An Option may not be exercised for a fraction of a share, although this
limitation will not be applied to prevent a Participant from acquiring the
full number of shares of Stock for which Options are then exercisable;
[2] The Committee may prohibit a Participant from exercising Options for
fewer than the minimum number of shares specified by the Committee in the
Award Agreement but only if this prohibition does not prevent a Participant
from acquiring the full number of shares of Stock for which Options are
then exercisable; and
[3] Subject to Section 5.04[4], unless the Committee specifies otherwise in
the Award Agreement, no Option may be exercised more than 10 years after it
is granted.
5.04 INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to the
contrary:
[1] No provision of this Plan relating to Incentive Stock Options will be
interpreted, amended or altered, nor will any discretion or authority
granted under the Plan be exercised, in a manner that is inconsistent with
Code Section 422 or, without the consent of any affected Participant, to
cause any Incentive Stock Option to fail to qualify for the federal income
tax treatment afforded under Code Section 421;
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[2] The aggregate Fair Market Value of the Stock (determined as of the
Grant Date) with respect to which Incentive Stock Options are exercisable
for the first time by any Participant during any calendar year (under all
option plans of the Company and all Subsidiaries) will not exceed $100,000
[or the amount specified in Code Section 422(d)];
[3] No Incentive Stock Option may be granted to any individual who is not
an Employee; and
[4] No Incentive Stock Option may be exercised more than 10 years after it
is granted (five years if the Participant owns [as defined in Code Section
424(d)] Stock possessing more than 10 percent of the total combined voting
power of all classes of Stock).
5.05 PAYMENT FOR OPTIONS. The Committee will develop procedures through which a
Participant may pay an Option's Exercise Price, including tendering shares of
Stock the Participant already has owned for at least six months, either by
actual delivery of the previously owned shares of Stock or by attestation,
valued at its Fair Market Value on the exercise date, as partial or full payment
of the Exercise Price.
5.06 RESTRICTIONS ON TRANSFERABILITY. The Committee may impose restrictions on
any shares of Stock acquired through an Option, including restrictions related
to applicable federal securities laws, the requirements of any national
securities exchange or system on which Stock are then listed or traded or any
applicable blue sky or state securities laws.
6.00 RESTRICTED STOCK
6.01 RESTRICTED STOCK GRANTS. The Committee may grant shares of Restricted Stock
to Participants at any time during the term of this Plan.
6.02 TRANSFERABILITY. Restricted Stock may not be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated until the end of the applicable
Restriction Period. In the Committee's sole discretion, all shares of Restricted
Stock will:
[1] Be held by the Company as escrow agent during the Restriction Period,
along with any cash dividends and other cash distributions made with
respect to escrowed Restricted Stock; or
[2] Be issued to the Participant in the form of certificates bearing a
legend describing the restrictions imposed on the shares.
6.03 FORFEITURES; REMOVAL OF RESTRICTIONS. Restricted Stock will be:
[1] Forfeited, if all restrictions have not been met at the end of the
Restriction Period, and again become available under the Plan; or
[2] Released from escrow and distributed (or any restrictions described in
the certificate removed) as soon as practicable after the last day of the
Restriction Period, if all restrictions have then been met.
6.04 RIGHTS ASSOCIATED WITH RESTRICTED STOCK. During the Restriction Period, and
unless the Award Agreement provides otherwise, each Participant to whom
Restricted Stock has been issued as described in Section 6.02[2]:
[1] May exercise full voting rights associated with his or her Restricted
Stock; and
[2] Subject to Section 6.02[1], will be entitled to receive all dividends
and other distributions paid with respect to his or her Restricted Stock.
If any dividends or other distributions are paid in shares of Stock, those
shares will be subject to the same restrictions on transferability and
forfeitability as the shares of Restricted Stock with respect to which they
were issued. Also, any dividend or other distribution paid with respect to
Restricted Stock will be subject to a Restriction
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Period that is equal to the remaining Restriction Period imposed on the
shares of Restricted Stock with respect to which the dividend or
distribution is paid.
7.00 STOCK APPRECIATION RIGHTS AND STOCK UNITS
7.01 STOCK APPRECIATION RIGHTS. The Committee may grant Freestanding SARs and
Tandem SARs (or a combination of each) to Participants at any time during the
term of this Plan.
[1] The Exercise Price specified in the Award Agreement will:
[a] In the case of a Freestanding SAR, never be less than 100 percent
of the Fair Market Value of a share of Stock on the Grant Date; and
[b] In the case of a Tandem SAR, never be less than the Exercise Price
of the related Option.
[2] Tandem SARs may be exercised with respect to all or part of the shares
of Stock subject to the related Option by surrendering the right to
exercise the equivalent portion of the related Option. However:
[a] A Tandem SAR may be exercised only with respect to the shares of
Stock for which its related Option is then exercisable;
[b] A Tandem SAR will expire no later than the date the related Option
expires;
[c] The value of the payout with respect to a Tandem SAR related to an
Incentive Stock Option will not be more than 100 percent of the
difference between the Exercise Price of the related Option and the
Fair Market Value of the shares of Stock subject to the related Option
at the time the Tandem SAR is exercised; and
[d] A Tandem SAR related to an Incentive Stock Option may be exercised
only if the Fair Market Value of the shares of Stock subject to the
related Option is greater than the Option's Exercise Price.
[3] Freestanding SARs will be exercisable subject to the terms specified in
the Award Agreement.
[4] A Participant exercising an SAR will receive an amount equal to:
[a] The difference between the Fair Market Value of a share of Stock on
the exercise date and the Exercise Price; multiplied by
[b] The number of shares of Stock with respect to which the SAR is
exercised.
At the discretion of the Committee, this amount may be paid in cash, shares
of Stock or any combination of both.
7.02 STOCK UNITS.
[1] Each Director may elect to receive all or a portion of his or her
Annual Retainer in Stock Units by returning to the Committee an Annual
Retainer Deferral Form specifying:
[a] The portion (stated in 25 percent increments) of the Annual
Retainer to be converted to Stock Units;
[b] The date Stock Units are to be settled;
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[c] Whether Stock Units are to be settled in cash or shares of Stock;
and
[d] The period (which may not be longer than 10 years) over which the
value of Stock Units is to be distributed.
If a completed Annual Retainer Deferral Form is not received at least two
weeks before the first meeting of the Board of Directors during the fiscal
year for which the Annual Retainer is to be paid, the Director's Annual
Retainer will be paid consistent with in the Company's regular procedures
and policies for paying Annual Retainers. Each Director that has
effectively elected to receive Stock Units in lieu of all or a portion of
his or her Annual Retainer will receive a number of Stock Units (including
fractional Stock Units) equal to the portion of the Annual Retainer to be
received as Stock Units divided by the Fair Market Value on the date the
Annual Retainer would have been paid had that election not been made.
[2] All Stock Units will be settled in cash or shares of Stock as soon as
practicable after the later of:
[a] The date the Director ceases to be a member of the Board; or
[b] The date the Director specifies on an Annual Retainer Deferral
Form.
If Stock Units are to be settled in cash, the amount distributed will be
calculated by multiplying the number of Stock Units to be settled in cash
by the Fair Market Value as of the most recent trading date before the
settlement date. If a Director dies before all of his or her Stock Units
have been settled, the value of any unpaid Stock Units will be paid in a
lump sum in cash to his or her Beneficiary.
If Stock Units are to be settled in Stock, the number of shares to be
distributed will equal the number of Stock Units, adjusted, if appropriate,
under Section 4.03.
[3] Once filed, elections made on an Annual Retainer Deferral Form will
remain in effect until changed. Any change to an earlier election must be
made by completing and returning another completed Annual Retainer Deferral
Form to the Committee:
[a] If the change relates to the portion of the Annual Retainer to be
deferred, no later than two weeks before the date the Annual Retainer
otherwise would be paid;
[b] If the change relates to the time Stock Units are to be settled, no
later than 12 months before the previously established settlement date;
or
[c] If the change relates to the form in which Stock Units are to be
settled, no later than 12 months before the settlement date.
8.00 TERMINATION OF SERVICE/BUY OUT
8.01 EXERCISE PERIOD. Except as provided in Section 8.02 and unless otherwise
specified in the Award Agreement (other than an Award Agreement or portion of an
Award Agreement relating to an Incentive Stock Option) , all Awards that are
outstanding (whether or not then exercisable) when a Participant Terminates
Service will expire on the earlier of [1] the date the Award expires under the
terms of the Award Agreement, [2] the date the Participant Terminates Service
for any reason other than death or Disability or [3] 12 months after the
Participant Terminates Service because of death or Disability.
8.02 BUY OUT OF AWARDS. At any time, the Committee, in its sole discretion and
without the consent of the Participant, may cancel any or all outstanding Awards
held by that Participant by providing to that Participant written notice ("Buy
Out Notice") of its intention to exercise the rights reserved in this section.
If a Buy Out Notice is given, the Company also will pay to each affected
Participant the difference between [1] the Fair Market Value of each Award (or
portion of an Award) to be cancelled and [2] the Exercise Price associated with
each cancelled Award. However, unless otherwise specified in the Award
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Agreement, no payment will be made with respect to any Awards that are not
exercisable when cancelled under this section. The Company will complete any buy
out made under this section as soon as administratively possible after the date
of the Buy Out Notice. At the Committee's option, payment of the buy out amount
may be made in cash, in whole shares of Stock or partly in cash and partly in
shares of Stock. The number of whole shares of Stock, if any, included in the
buy out amount will be determined by dividing the amount of the payment to be
made in shares of Stock by the Fair Market Value as of the date of the Buy Out
Notice.
9.00 MERGER, CONSOLIDATION OR SIMILAR EVENT
If [1] the Company enters into a plan or agreement that results in the merger or
consolidation of the Company or reclassification of Stock or the exchange of
Stock for the securities of another entity (other than a Subsidiary) that has
acquired the Company's assets or which is in control [as defined in Code Section
368(c)] of an entity that has acquired the Company's assets and [2] the terms of
that plan or agreement are binding on all holders of Stock (except to the extent
that dissenting shareholders are entitled to relief under applicable law), then
[3] Awards will become fully exercisable, all restrictions will lapse and each
affected Participant will receive, upon payment of the Exercise Price, if
applicable, securities or cash, or both, equal to those the Participant would
have been entitled to receive under the plan or agreement if the Participant had
already exercised the Award.
10.00 AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
The Board or the Committee may terminate, suspend or amend the Plan at any time
without shareholder approval except to the extent that shareholder approval is
required to satisfy applicable requirements imposed by [1] Rule 16b-3 under the
Act, or any successor rule or regulation, [2] applicable requirements of the
Code or [3] any securities exchange, market or other quotation system on or
through which the Company's securities are listed or traded. Also, no Plan
amendment may [4] result in the loss of a Committee member's status as a
"non-employee director" as defined in Rule 16b-3 under the Act, or any successor
rule or regulation, with respect to any employee benefit plan of the Company,
[5] cause the Plan to fail to meet requirements imposed by Rule 16b-3 or [6]
without the consent of the affected Participant, adversely affect any Award
issued before the amendment, modification or termination. However, nothing in
this section will restrict the Committee's right to exercise the discretion
retained in Section 8.02.
11.00 MISCELLANEOUS
11.01 ASSIGNABILITY. Except as provided in this section, an Award may not be
transferred except by will or applicable laws of descent and distribution and,
during the Participant's lifetime, may be exercised only by the Participant or
the Participant's guardian or legal representative. However, with the
Committee's written consent (which may be withheld for any reason or for no
reason), a Participant or a specified group of Participants may transfer Awards
(other than Incentive Stock Options) to a revocable inter vivos trust, of which
the Participant is the settlor, or may transfer Awards (other than Incentive
Stock Options) to any member of the Participant's immediate family, any trust,
whether revocable or irrevocable, established solely for the benefit of the
Participant's immediate family, or any partnership or limited liability company
whose only partners or members are members of the Participant's immediate family
("Permissible Transferees"). Any Award transferred to a Permissible Transferee
will continue to be subject to all of the terms and conditions that applied to
the Award before the transfer and to any other rules prescribed by the
Committee. A Permissible Transferee may subsequently transfer an Award but only
to another Permissible Transferee and only after complying with the terms of
this section as if the Permissible Transferee was a Participant.
11.02 BENEFICIARY DESIGNATION. Each Participant may name a Beneficiary or
Beneficiaries (who may be named contingently or successively) to receive or to
exercise any vested Award that is unpaid or unexercised at the Participant's
death. Each designation made will revoke all earlier designations made by the
same Participant, must be made on a form prescribed by the Committee and will be
effective only when filed in writing with the Committee. If a Participant has
not made an effective Beneficiary designation, the deceased Participant's
Beneficiary will be his or her surviving spouse or, if there is no surviving
spouse, the deceased Participant's estate.
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11.03 NO GUARANTEE OF EMPLOYMENT OR PARTICIPATION. Nothing in the Plan may be
construed as:
[1] Interfering with or limiting the right of the Company or any
Subsidiary to terminate any Participant's employment at any time;
[2] Conferring on any Participant any right to continue as an Employee or
Director;
[3] Guaranteeing that any Employee will be selected to be a Participant;
or
[4] Guaranteeing that any Participant will receive any future Awards.
11.04 TAX WITHHOLDING. The Company will withhold from other amounts owed to a
Participant, or require the Participant to remit to the Company, an amount
sufficient to satisfy federal, state and local withholding tax requirements on
any Award, exercise or cancellation of an Award or purchase of shares of Stock.
If these amounts are not to be withheld from other payments due to the
Participant, the Company will defer payment of cash or issuance of shares of
Stock until the earlier of:
[1] Thirty days after the settlement date; or
[2] The date the Participant remits the required amount.
If the Participant has not remitted the required amount, the Company will
permanently withhold from the value of the Awards to be distributed the minimum
amount required to be withheld to comply with applicable federal, state and
local income, wage and employment taxes and distribute the balance to the
Participant.
In its discretion, the Committee may allow a Participant to elect, subject to
conditions the Committee establishes, to reimburse the Company for this
withholding obligation through one or more of the following methods:
[3] By having shares of Stock otherwise issuable under the Plan withheld
by the Company (but only to the extent of the minimum amount that must be
withheld to comply with applicable state, federal and local income,
employment and wage tax laws);
[4] By delivering, including by attestation, to the Company previously
acquired shares of Stock that the Participant has owned for at least six
months;
[5] By remitting cash to the Company; or
[6] By remitting a personal check immediately payable to the Company.
11.05 INDEMNIFICATION. Each individual who is or was a member of the Committee
or of the Board will be indemnified and held harmless by the Company against and
from any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be made a party or in which he or she
may be involved by reason of any action taken or failure to take action under
the Plan as a Committee member and against and from any and all amounts paid,
with the Company's approval, by him or her in settlement of any matter related
to or arising from the Plan as a Committee member; or paid by him or her in
satisfaction of any judgment in any action, suit or proceeding relating to or
arising from the Plan against him or her as a Committee member, but only if he
or she gives the Company an opportunity, at its own expense, to handle and
defend the matter before he or she undertakes to handle and defend it in his or
her own behalf. The right of indemnification described in this section is not
exclusive and is independent of any other rights of indemnification to which the
individual may be entitled under the Company's organizational documents, by
contract, as a matter of law, or otherwise.
11.06 NO LIMITATION ON COMPENSATION. Nothing in the Plan is to be construed to
limit the right of the Company to establish other plans or to pay compensation
to its employees or Directors in cash or property, in a manner not expressly
contemplated by the Plan.
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11.07 REQUIREMENTS OF LAW. The grant of Awards and the issuance of shares of
Stock will be subject to all applicable laws, rules and regulations and to all
required approvals of any governmental agencies or national securities exchange,
market or other quotation system. Also, no shares of Stock will be issued under
the Plan unless the Company is satisfied that the issuance of those shares of
Stock will comply with applicable federal and state securities laws.
Certificates for shares of Stock delivered under the Plan may be subject to any
stock transfer orders and other restrictions that the Committee believes to be
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange or other recognized market or
quotation system upon which the Stock is then listed or traded or any other
applicable federal or state securities law. The Committee may cause a legend or
legends to be placed on any certificates issued under the Plan to make
appropriate reference to restrictions within the scope of this section.
11.08 TERM OF PLAN. The Plan will be effective upon its adoption by the Board
and approval by the affirmative vote of the holders of a majority of the shares
of voting stock present in person or represented by proxy at the first Annual
Meeting occurring after the Board approves the Plan. Subject to Section 10.00,
the Plan will continue until the tenth anniversary of the date it is adopted by
the Board or approved by the Company's shareholders, whichever is earliest.
11.09 GOVERNING LAW. The Plan and all related agreements will be construed in
accordance with and governed by the laws (other than laws governing conflicts of
laws) of the United States and of the State of Ohio.
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BANCINSURANCE CORPORATION
250 EAST BROAD STREET, TENTH FLOOR
COLUMBUS, OHIO 43215
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel D. Harkins, William S. Sheley,
and Matthew D. Walter, or any of them as proxies, each with the power to appoint
his substitute, and hereby authorizes them (or any of them if all shall not be
present) to represent and to vote, as indicated below, at the Annual Meeting of
Shareholders of Bancinsurance Corporation to be held June 3, 2002, at 10:30 a.m.
local time, at the offices of Vorys, Sater, Seymour and Pease LLP, 52 East Gay
Street, Columbus, Ohio, or at any adjournment thereof, all the Common Shares of
Bancinsurance Corporation held of record by the undersigned on April 10, 2002.
1. ELECTION OF DIRECTORS [ ] OR all nominees [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for ALL nominees listed below
Daniel D. Harkins William S. Sheley John S. Sokol Saul Sokol Si Sokol Matthew D. Walter
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME.
2. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY FOR FISCAL YEAR 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. TO APPROVE THE ADOPTION OF THE BANCINSURANCE CORPORATION 2002 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION OF THE NAMED NOMINEES FOR DIRECTORS, "FOR" THE PROPOSAL TO
RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS FOR
FISCAL YEAR 2002 AND "FOR" THE PROPOSAL TO APPROVE THE ADOPTION OF THE
BANCINSURANCE CORPORATION 2002 STOCK INCENTIVE PLAN. IF ANY OTHER MATTERS ARE
PROPERLY BROUGHT BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF, OR IF A
NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO
SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE COMMON SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS OR
FOR SUCH SUBSTITUE NOMINEE(S) AS THE DIRECTORS MAY RECOMMEND.
(This Proxy Continues And Must Be Signed On The Reverse Side)
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders dated April 24, 2002, the Proxy Statement furnished
therewith and the Annual Report of Bancinsurance Corporation for the fiscal year
ended December 31, 2001. Any Proxy heretofore given to vote the Common Shares
which the undersigned is entitled to vote at the Annual Meeting is hereby
revoked.
[ ] Please check if you plan to attend the Annual Meeting.
PLEASE RETURN PROXY IN ENVELOPE FURNISHED.
--------------------------------
(Date)
--------------------------------
(Signature)
--------------------------------
(Second Signature, if Applicable)
Please date and sign exactly as
name appears above. When signing
as attorney, executor,
administrator, trustee, guardian
or corporate officer, please give
full title. All joint owners must
sign. Please return promptly.