Exhibit 10(iii)(b)
As amended and restated effective 1/1/98
HSB GROUP, INC. SHORT-TERM INCENTIVE PLAN
1. Purpose of Plan
The purposes of this Plan are: (a) to provide an additional incentive for
officers and other selected key employees to make significant contributions
to the performance and growth of the Company, and (b) to attract and retain
in the employ of the Company persons of exceptional ability.
2. Definitions
As used in the Plan, the following terms shall have the meanings set forth
below:
a) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
b) "Award" shall mean any award payable under this Plan.
c) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
d) "Board" shall mean the Board of Directors of the Company.
e) "Change in Control" shall be deemed to have occurred if the events set
forth in any one of the following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates)
representing 25% or more of the combined voting power of the
Company's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction
described in clause (A) of paragraph (iii) below; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on December 23, 1996, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's shareholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on December 23, 1996 or whose
appointment, election or nomination for election was previously
so approved or recommended; or
(iii)there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan
of the Company or any subsidiary of the Company, at least 60% of
the combined voting power of the securities of the Company or
such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (B) a merger
or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities Beneficially Owned
by such Person any securities acquired directly from the Company
or its Affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 60% of the combined
voting power of the voting securities of which are owned by
shareholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately
following which the record holders of the common stock of the
Company immediately prior to such transaction or series of
transactions continue to have substantially the same
proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately
following such transaction or series of transactions.
f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
g) "Committee" shall mean the Human Resource Committee of the Board
or any future committee of the board performing similar
functions.
h) "Company" shall mean HSB Group, Inc. and, except in determining
under this Plan whether or not any Change in Control of the
Company has occurred, shall include any successor to its business
and/or assets which assumes this Plan by operation of law, or
otherwise.
i) "Covered Employee" shall mean a "covered employee" within the
meaning of Section 162(m) of the Code.
j) "Disability" shall mean any condition which would entitle an
employee of the Company to receive benefits under the Company's
Long-Term Disability Plan.
k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
l) "Fair Market Value" shall mean the average of the high and low
prices per share of the Company's Shares as reported by the New
York Stock Exchange Composite Transaction Reporting System (NYSE)
on the date for which the Fair Market Value is being determined,
or if no quotations are available for the Company's Shares, for
the next preceding date for which a quotation is available. If
the Company's Shares are not then listed on the NYSE, Fair Market
Value shall be reasonable determined by the Committee in its sole
discretion.
m) "Net Income" shall mean after-tax income per share, before
cumulative effect of accounting changes, as determined under
generally accepted accounting principles, consolidating all
subsidiaries and inclusive of realized capital gains and losses.
n) "Participant" shall mean an employee of the Company to whom an
award has been made under the Plan.
o) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company
or any of its subsidiaries; (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company
or any of its Affiliates; (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions
as their ownership of stock of the Company.
p) "Plan" shall mean the HSB Group, Inc. Short-Term Incentive Plan.
q) "Plan Year" shall mean a calendar year.
r) "Retirement" shall mean the termination of employment under
circumstances which entitle an employee to receive retirement
benefits under the Company's Employees' Retirement Plan.
s) "Shares" shall mean the Common Stock of the Company.
t) "Stock Grant" shall mean a grant of Shares or of a right to
receive Shares (or their cash equivalent or a combination of
both) in the future subject to such conditions and restrictions
as the Committee shall determine at the time of grant.
u) "Target Award" shall mean an Award level that may be paid if a
certain level of Net Income is achieved for a Plan Year.
3. Administration of the Plan
The Plan shall be administered by the Committee as defined herein. Each
member of the Committee shall be a "disinterested director" within the
meaning of Rule 16b-3 of the General Rules and Regulations promulgated
under the Exchange Act and an "outside director" within the meaning of
Section 162(m) of the Code. The Committee is authorized to interpret the
Plan and shall adopt guidelines for carrying out the Plan as it may deem
appropriate. Such guidelines shall be consistent with the Plan and may
include, but need not be limited to, the size and terms of awards to be
made and the conditions for payment of such awards. Decisions of the
Committee shall be final, conclusive and binding upon all parties
concerned, unless otherwise determined by a vote of a majority of the
disinterested members of the Board of Directors.
4. Eligibility for Awards
Any employee who is an Officer of the Company (other than any Officer who
is the chief executive officer of any Affiliate of the Company and is a
participant in the annual bonus plan of such subsidiary, or any individual
expressly excluded by the Committee) on or prior to December 31 of each
Plan Year is eligible to participate in the Plan and receive an Award
pursuant to Section 5 except as provided in Section 6. The Committee may in
its discretion designate other key employees to participate in the Plan.
Eligibility will be determined at the close of each Plan Year.
5. Basis of Awards
At the beginning of each Plan Year, the Committee shall establish Target
Awards and the level of Net Income which must be achieved for a Plan Year
in order for Target Awards to be payable to Participants. The maximum
amount of any Award to be paid to a Participant under the Plan is
$2,000,000. The Committee shall have the sole authority to determine the
amount of any Award within the above maximum for each Participant. In
determining such Award, the Committee shall consider the contribution made
by the Participant towards achievement of the Net Income and such other
factors as the Committee considers appropriate.
6. Awards to Covered Employees
a) If the Committee determines at the time that a Target Award is
established for a Participant that such Participant is, or may be as
of the end of the tax year for which the Company would claim a tax
deduction for such Award, a Covered Employee, then the Committee may
provide that this Section 6 is applicable to such Award under such
terms as the Committee shall determine.
b) If an award is subject to this Section 6, then the level of Net Income
which must be achieved for a Plan Year will be established by the
Committee within 90 days of the beginning of a Plan Year or within
such other time period set forth under Section 162(m) of the Code or
any regulations thereunder in order for such level to be considered
"pre-established".
c) The Committee may, in its discretion reduce the Award payable to a
Covered Employee at any time prior to payment based on such criteria
it may establish. Notwithstanding any provision in this Plan to the
contrary, the Committee may not adjust upwards the amount payable
pursuant to any award subject to this Section 6, nor may it waive the
achievement of Net Income pre-established by the Committee pursuant to
this Section 6 except in the case of a Participant who no longer is a
Covered Employee at the time such award is paid.
d) Prior to the payment of any Award to a Covered Employee pursuant to
this Section 6, the Committee shall certify in writing that the Net
Income level applicable to such Award has been met.
e) The Committee shall have the power to impose such other restrictions
on awards subject to this Section 6 as it may deem necessary or
appropriate to ensure that such Awards satisfy all requirements for
"performance-based compensation" within the meaning of section 162(m)
of the Code, and any regulations thereunder.
7. Timing and Form of Payment of Awards
The Committee will have the sole discretion to determine the form of
payment of an Award for each Participant. Awards may be payable in cash or
in the form of a Stock Grant, or a combination of the foregoing and shall
be subject to such other conditions and restrictions as the Committee shall
establish.
8. Deferral of Payment
a) A Participant may, with permission of the Committee elect to defer
receipt of all or a specified part of any Award. Such an election
shall be subject to such terms and conditions as are prescribed by the
Committee. Deferral elections are irrevocable and must be made during
the time period and in the manner prescribed by the Committee.
b) To the extent that the Committee, in its discretion, determines that
the payment of an Award would not be deductible by the Company
pursuant to Section 162(m) of the Code, the Committee may defer
payment of all or the non-deductible portion of such Award until such
time as such amount would be deductible. The terms and conditions of
any such deferral shall be prescribed by the Committee.
c) The right of a Participant to receive any unpaid portion of any amount
deferred hereunder shall be an unsecured claim against the general
assets of the Company.
9. Tax Withholding
The Company shall have the right to require Participants to remit to the
Company an amount sufficient to satisfy any tax withholding requirements or
to deduct from any payments made pursuant to the Plan amounts sufficient to
satisfy tax withholding requirements.
10. No Right to an Award or Continued Employment
a) Nothing contained in this Plan or in any resolution adopted or to be
adopted by the Board of Directors will constitute the granting of an
Award hereunder. The granting of an Award pursuant to the Plan will
take place only when authorized by the Committee. No Award and no
rights of ownership thereunder will be transferable otherwise than
pursuant to Section 12. There is no obligation imposed on the
Committee for uniformity of treatment of Participants under the Plan.
b) Nothing in the Plan shall interfere with or limit in any way the right
of the Company to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of
the Company.
11. Rights on Termination of Employment
a) If a Participant in this Plan shall terminate employment with the
Company on account of death, Retirement or Disability or otherwise
terminates employment with the written consent of the Committee prior
to the end of any Plan Year in respect of which such Participant may
be eligible for an Award, the amount of the award, if any, payable to
the Participant or his or her beneficiary, shall be prorated based
upon the number of full and partial months of employment within such
Plan Year.
b) A Participant whose employment terminates by dismissal with or without
cause, or who voluntarily terminates his or her employment without
consent prior to the expiration of a Plan Year, will not be entitled
to receive an award under the Plan. Notwithstanding the foregoing, a
Participant whose employment terminates within two years following a
Change in Control and prior to the end of any Plan Year shall be
entitled to receive an Award as though such termination was with the
written consent of the Committee.
c) In no event shall an Award or a portion thereof, the payment of which
has been deferred pursuant to Section 8 be subject to forfeiture.
12. Designation of Beneficiary
A Participant may file with the Corporate Secretary of the Company a
designation of a beneficiary or beneficiaries on the appropriate form,
which designation may be changed or revoked by the Participant's sole
action, provided that the change or revocation is filed with the Corporate
Secretary. In case of the death of the Participant, before or after
termination of employment, any Award to which he or she is entitled and any
deferred portions of a deceased Participant's Award shall be delivered to
the beneficiary or beneficiaries so designated or, if no beneficiary has
been designated or survives such Participant, will be delivered to, or in
accordance with the directions of, the executor or administrator of such
Participant's estate.
13. Change in Control
a) In the event of a Change in Control of the Company, this Plan shall
continue to be binding upon the Company, any successor in interest to
the Company and all persons in control of the Company or any successor
thereto and no transaction or series of transactions shall have the
effect of reducing or canceling the Award of a Participant that has
been declared but not paid unless consented to in writing by such
affected Participant.
b) As soon as practicable following a Change in Control, a Participant
shall be paid a lump sum amount in cash equal to the Target Award
payable to the Participant (in lieu of any other award payable
hereunder for the Plan Year within which the Change in Control occurs)
and any Awards previously deferred in accordance with Section 8
hereof, plus interest accrued thereon up until the date of payment.
c) Upon a Change in Control the restrictions and deferral limitations and
other conditions applicable to any Stock Grant made pursuant to
Section 7 shall lapse as of the date of such Change in Control.
14. Unfunded Obligations; Trust Agreement
a) The Company will pay from its general assets all awards to be made
hereunder. However, the Company may in its discretion establish a
trust, escrow agreement or similar arrangement in order to aid the
Company in meeting its obligations hereunder.
b) Any assets transferred by the Company into any such arrangement shall
remain at all times assets of the Company and subject to the claims of
the Company's general creditors in the event of bankruptcy or
insolvency of the Company. No security interest in such assets shall
be created in a Participant's favor and a Participant's rights under
this Plan and under any such arrangement shall be those of a general
unsecured creditor of the Company.
15. Assignment and Alienation
Benefits under this Plan may not be anticipated, assigned (either at law or
in equity), alienated, or subjected to attachment, garnishment, levy,
execution or other legal or equitable process. If any Participant or
beneficiary under this Plan becomes bankrupt or attempts to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge any benefit
under this Plan, such benefit shall, in the discretion of the Committee,
cease and terminate, in which event the Committee may hold or apply the
same or any part thereof for the benefit of such Participant, his or her
beneficiary, spouse, children, other dependents or any of such individuals,
in such proportion as the Committee may deem proper.
16. Modification or Termination of the Plan
a) The Committee may at any time terminate or from time to time modify or
suspend, and if suspended, may reinstate any or all of the provisions
of this Plan, subject to any requirement for shareholder approval
imposed by applicable law, except that no modification of this Plan
may be made which will adversely affect any rights or obligations with
respect to any awards theretofore made under the Plan.
b) The Corporate Secretary of the Company shall be authorized to make
minor or administrative changes in the Plan or changes required by or
made desirable by law or government regulation.
17. Other Plans and Special Awards
a) Nothing contained in this Plan shall prohibit the Committee or the
Board from granting other awards or establishing other incentive
compensation plans providing for the payment of incentive compensation
to employees, including Participants.
b) Notwithstanding Section 6 and the intention of the Committee to
maintain tax deductibility of awards granted hereunder to Covered
Employees pursuant to Section 162(m) of the Code, the Committee
reserves the right to grant awards which do not meet the requirements
of Section 162(m) as to deductibility (for example, awards based on
measures other than Net Income or otherwise not established in
accordance with Section 6 ) in order to recognize unanticipated
business conditions or events which have, or are expected to have, a
significant effect on the Company.
18. Shares Subject to the Plan
a) Subject to Section 18 ( b), the maximum number of Shares that may be
delivered to Participants and their beneficiaries under the Plan shall
be 250,000. Any Shares covered by a Stock Grant which are subsequently
forfeited, withheld to cover tax withholding or settled in cash shall
be deemed to have not been delivered for purposes of determining the
maximum number of Shares available for delivery under the Plan.
b) In the event of any change in the Shares of the Company by reason of
any stock dividend, stock split, recapitalization, reorganization,
merger, consolidation, split-up, combination, or exchange of shares,
or rights offering to purchase Shares at a price substantially below
Fair Market Value, or of any similar change affecting the Shares, the
number of Shares covered by a Stock Grant which have not been
delivered, and the number of Shares which may be delivered hereunder,
shall be appropriately adjusted consistent with such change in such
manner as the Board in its discretion may deem equitable to prevent
substantial dilution or enlargement of the awards and rights granted
or made available to Participants hereunder. Any fractional Shares
resulting from such adjustments shall be eliminated.
19. Effective Date
This Plan as amended and restated shall be effective as of January 1, 1998,
subject to approval by shareholders at their annual meeting in 1998, and
shall remain in effect until such time as it shall be terminated by the
Committee.