Exhibit 10(iii)(b)
As amended and restated effective September 21, 1998
THE HSB GROUP, INC. DIRECTORS STOCK AND DEFERRED COMPENSATION PLAN
1. Purposes of the Plan.
The purposes of The HSB Group, Inc. Directors Stock and Deferred
Compensation Plan are: (a) to attract and retain persons of ability as
directors of the Company; (b) to more closely align directors' interests
with those of shareholders; and (c) to encourage the highest level of
contribution by directors to the financial success of the Company by
providing a significant portion of their compensation in the form of equity
in the Company.
2. Definitions.
"Annual Award" shall mean the annual award made to a Director of Deferred
Shares.
"Board" shall mean the Board of Directors of the Company.
"Cash Compensation" shall mean the total of the annual cash retainer and
fees for attending and/or chairing any meeting of the Board or a committee
of the Board payable to a Director for any Plan Year.
"Change in Control" shall have occurred for purposes of this Plan if :
(a) any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company representing twenty-five (25%) or more of the Company's
then outstanding securities;
(b) during any period within two (2) consecutive years there shall
cease to be a majority of the Board of Directors comprised as
follows: individuals who at the beginning of such period
constitute the Board of Directors and any new director(s) whose
election by the Board of Directors or nomination for election by
the Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election
or nomination for election was previously so approved; or
(c) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (i) a
merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
more than 80% of the combined voting power of voting securities
after such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as
hereinabove defined) acquires more than 25% of the combined
voting power of the Company's then outstanding securities; or
(d) the shareholders of the Company approve (i) a plan of complete
liquidation of the Company or (ii) the sale or other disposition
of all or substantially all the Company assets.
"Committee" shall mean the Governance Committee of the Board or any future
committee of the Board performing similar functions.
"Company" shall mean HSB Group, Inc.
"Deferral Election" shall mean the election to defer receipt of Cash
Compensation in accordance with Section 7.
"Deferred Account" shall mean the account established and maintained for a
Director under the Plan pursuant to an election made pursuant to Section 7.
"Deferred Share" shall mean the right to receive the Fair Market Value of a
share of Stock in the form of Stock subject to the conditions set forth in
the Plan.
"Director" shall mean a non-employee director of the Company.
"Dividend Equivalent" shall mean an amount equal to the dividend that would
have been paid with respect to a Deferred Share if such unit had
constituted a share of Stock, duly issued and outstanding on the date a
dividend is payable on the Stock.
"Fair Market Value" shall mean the average of the high and low prices per
share of the Company's Stock as reported by the New York Stock Exchange
Composite Transaction Reporting System (NYSE) on the date for which the
Fair Market Value is being determined, or if no quotations are available
for the Company's Stock, for the next preceding date for which such a
quotation is available. If shares of Company Stock are not then listed on
the NYSE, Fair Market Value shall be reasonably determined by the Committee
in its sole discretion.
"Plan" shall mean The HSB Group, Inc. Directors Stock and Deferred
Compensation Plan.
"Plan Year" shall mean the calendar year.
"Stock" shall mean the common stock of the Company.
3. Administration of the Plan.
The Plan shall be administered by the Committee as defined herein. The
Committee is authorized to interpret the Plan and shall adopt guidelines
for carrying out the Plan as it may deem appropriate. Decisions of the
Committee shall be final, conclusive and binding upon all parties
concerned, unless otherwise determined by the Board of Directors.
4. Stock Subject to the Plan.
Subject to the provisions of Section 11 of the Plan, the maximum number of
shares of Stock which may be delivered to Directors under the Plan shall be
150,000. Any shares of Stock withheld to cover tax withholding shall be
deemed to have not been delivered for purposes of determining the maximum
number of shares of Stock available for delivery under the Plan.
5. Annual Awards
Annual Awards shall be made in the form of Deferred Shares subject to the
provisions of Article 6.
6. Award of Deferred Shares.
As of the last day of each Plan Year, an award of Deferred Shares shall be
made to each Director in an amount equal to 825 multiplied by a fraction
where the numerator is the number of full or partial months within such
Plan Year that such individual served as a Director and the denominator is
12. In the event that such Director's service on the Board terminates for
any reason prior to the end of the Plan Year, as soon as practicable
following such termination such Director's award will be determined in
accordance with the formula in the preceding sentence but as of the date of
such Director's termination.
7. Election to Defer Receipt of Cash Compensation.
(a) A Director shall have the right to make on an annual basis an election
to defer payment of all, or a percentage of, the total Cash
Compensation to be earned during the ensuing Plan Year (a "Deferral
Election"). In order to make a Deferral Election pursuant to this
Section 7, a Director shall deliver to the Corporate Secretary of the
Company no later than the last business day prior to the commencement
of the first Plan Year to which such election relates a written notice
setting forth the percentage of Cash Compensation to be deferred and
whether such cash should be (i) converted into Deferred Shares in
accordance with subsection (b) below; or (ii) credited as cash to a
Deferred Account maintained for such Director on the date such
compensation would otherwise be paid. Individuals who become Directors
during a Plan Year shall have thirty days following their election or
appointment to make a Deferral Election for the remainder of the Plan
Year. Any Deferral Election made pursuant to this Section 7 shall
remain in effect for subsequent Plan Years until a new election form
is delivered to the Corporate Secretary in accordance with this
section.
(b) As soon as practicable following the end of a Plan Year, each Director
who made a Deferral Election in the form of Deferred Shares will be
credited as of the last day of the Plan Year with the number of
Deferred Share units, including fractional Deferred Share units, equal
to the amount of the Cash Compensation, the payment of which has been
deferred, divided by the Fair Market Value of shares of Stock on the
date such compensation would otherwise have been paid. In the event
that a Director's service on the Board terminates for any reason prior
to the end of a Plan Year, the calculation referred to in the
preceding sentence shall be made as soon as practicable following such
Director's date of termination.
8. Dividend Equivalents Payable on Deferred Shares and Interest Paid on
Deferred Cash Accounts.
(a) Dividend Equivalents shall be credited on Deferred Shares held by
Directors based upon dividends paid on shares of Stock between the
date such Deferred Shares are credited to Directors and the date they
are ultimately paid out in accordance with the Plan.
(b) Dividend Equivalents shall, at the election of the Director, be either
(i) paid in the form of cash as soon as practicable following the end
of a Plan Year; or (ii) converted into Deferred Shares following the
end of a Plan Year based on the number of Deferred Shares credited to
a Director's account as of the dividend record dates falling within
such Plan Year multiplied by the Dividend Equivalent amount per share
of Stock payable during such Plan Year divided by the Fair Market
Value of Stock on the last day of the Plan Year.
(c) Dividend Equivalents will be payable on Deferred Shares granted under
Section 6 for the Plan Year for which a grant is made in accordance
with subsections (a) and (b) above as though such Deferred Shares had
been granted as of the first day of such Plan Year, provided however,
such Dividend Equivalents shall not be credited to a Director until
the Deferred Shares to which they relate are credited to the Director
in accordance with Section 6.
(d) Dividend Equivalents will be payable on Deferred Shares credited
pursuant to a Deferral Election pursuant to Section 7 in accordance
with subsections (a) and (b) above as though such Deferred Shares had
been credited to a Director on the date the Cash Compensation to which
the Deferral Election relates would otherwise have been paid, provided
however, such Dividend Equivalents shall not be credited to a
Director's account until the Deferred Shares to which they relate are
credited to the Director in accordance with Section 7.
(e) At the end of each Plan Year, and at the time of payment of any
amounts held in a Deferred Account, interest at the rate of 8.5% shall
be credited to each Deferred Account on the average daily balance held
in such accounts for the preceding Plan Year or portion thereof.
9. Time and Form of Payment.
(a) Payment in settlement of Deferred Shares and any amounts held in a
Deferred Account will commence as soon as practicable after the date
the Director ceases to be a member of the Board, unless, with respect
to amounts held in a Deferred Account, a Director has specified an
alternate date in his or her Deferral Election.
(b) Payment in settlement of Deferred Shares and any amounts held in a
Deferred Account will be made in a lump sum or, if elected by a
Director at least one year prior to the date such Director ceases to
be a member of the Board, in a specified number (not to exceed ten) of
annual installments. Such election may be modified or revoked by the
Director, provided that no such modification or revocation will be
given effect unless it is made prior to the date specified in the
preceding sentence.
(c) Amounts held in a Deferred Account in the form of cash shall be paid
out in cash and Deferred Shares held by a Director shall be paid in an
equivalent number of shares of Stock.
(d) Whenever a fractional share would otherwise be required to be issued
in accordance with the terms of this Section 9, the Fair Market Value
of such fractional share shall be paid in cash.
10. Payment in the Event of Death.
(a) In the event of a Director's death, payment of amounts credited to
such Director's Deferred Account shall be paid in cash and payment of
Deferred Shares shall be made in shares of Stock, except for any
fractional share the Fair Market Value of which shall be paid in cash.
(b) Payment shall be made as soon as practicable following the death of
the Director in a single lump sum to the beneficiary designated in
writing by the Director, of if no designation was made, to the person
legally entitled thereto, as designated under the will of the
Director, or to such heir or heirs as determined under the laws of
intestacy of the Director's domicile.
11. Adjustments in the Event of Change in Common Stock of the Company.
In the event that there is any change in the Stock by reason of any stock
dividend, stock split, combination of shares, exchange of shares, warrants
or rights offering to purchase Stock at a price below its fair market
value, reclassification, recapitalization, merger, consolidation, spin-off
or other change in capitalization, appropriate adjustment shall be made in
the number and kind of shares or other property subject to the Plan and the
number and kind of shares or other property credited to the Directors under
the Plan, and any other relevant provisions of the Plan by the Committee,
whose determination shall be binding and conclusive on all persons.
12. Change in Control.
In the event of a Change in Control, the following shall occur on the date
thereof (the "Change in Control Date"): (i) the last day of the then
current Plan Year shall be deemed to occur on the Change in Control Date;
(ii) pursuant to Sections 5, 6, and 7, Directors shall be credited with
Deferred Shares, as if for this purpose Directors' service as Directors
ceased on the Change in Control Date; (iii) Dividend Equivalents on
Deferred Shares, including those credited under clause (ii), and interest
on any Deferred Accounts shall be credited in accordance with Section 8;
and (iv) the Company shall pay a lump sum cash payment in settlement of the
amount of cash credited to each Director's Deferred Account and the number
of Deferred Shares then credited to such Director, including cash and
Deferred Shares credited pursuant to clauses (ii) and (iii) above. For
purposes of the preceding sentence, the amount of cash delivered in payment
of Deferred Shares shall equal such units multiplied by the greater of (i)
the highest Fair Market Value per share of Stock at any time during the
60-day period preceding the Change in Control and (ii) if applicable, the
price of a share of Stock which is paid or offered to be paid, by any
person or entity, in connection with the transaction constituting the
Change in Control.
13. Rights with respect to Deferred Shares.
Except to the extent otherwise set forth in the Plan, Directors shall not
have any of the rights of a shareholder with respect to the Deferred Shares
credited to them.
14. General Restrictions.
(a) No shares of Stock shall be issued under the Plan prior to compliance
by the Company, to the satisfaction of its counsel, with any
applicable law. The Company shall not be obligated to, but may in its
discretion, take any action under applicable federal or state law
(including registration or qualification of the Plan or the Stock)
necessary for compliance therewith in order to permit the issuance of
shares hereunder.
(b) The Company may impose such restrictions on the sale or other
disposition of shares of Stock issued under the Plan as it deems
necessary to comply with applicable securities laws.
15. Withholding.
The Company may defer making payment or delivery of shares of Stock under
the Plan until satisfactory arrangements have been made for the payment of
any Federal, state or local income taxes required to be withheld with
respect to such payment or delivery, including without limitation by the
withholding of shares that would otherwise be so delivered, by withholding
from any other payment due to the Director, or by a cash payment to the
Company by a Director.
16. No Right to Nomination for Reelection.
Nothing in the Plan shall be deemed to create any obligation on the part of
the Board to nominate any Director for reelection by the Company's
shareholders or to limit the rights of the shareholders to remove any
Director.
17. Amendment and Termination of the Plan.
The Board may at any time amend or terminate the Plan, in whole or in part,
however, no amendment or termination shall without the written consent of a
Director, reduce the Director's rights with respect to awards previously
granted hereunder or any fees previously earned the payment of which has
been deferred pursuant to the terms of the Plan.
18. Governing Law.
The Plan and all actions taken thereunder shall be construed in accordance
with and governed by the laws of the State of Connecticut.