Exhibit 10(iii)(c)
As Amended and restated effective 9/21/98
HSB GROUP, INC.
LONG-TERM INCENTIVE PLAN
1. Purposes of Plan
The purposes of this Plan are: (a) to provide an additional incentive for
Senior Officers and other selected key employees to increase the earnings
of the Company on a long-term basis; (b) to attract and retain in the
employ of the Company persons of outstanding abilities; and (c) to more
closely align the interests of the Senior Officers and other selected key
employees with those of the shareholders of the Company.
2. Definitions
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
(b) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "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.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the Human Resource Committee of the Board or
any future committee of the Board performing similar functions.
(g) "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.
(h) "Disability" shall mean any condition which would entitle an employee
of the Company to receive benefits under the Company's Long-Term
Disability Plan.
(i) "Dividend Equivalent" shall mean an amount equal to the cash dividends
that would have been paid with respect to an award of Performance
Contingent Units paid hereunder if the award constituted Stock, duly
issued and outstanding on the date on which a dividend is payable on
the Shares.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "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 such a quotation is available. If Company Shares are not
then listed on the NYSE, Fair Market Value shall be reasonably
determined by the Committee in its sole discretion.
(l) "Participant" shall mean an employee of the Company to whom an award
has been made under the Plan.
(m) "Performance Contingent Award" shall mean an award of Performance
Contingent Units.
(n) "Performance Contingent Unit" shall mean the right to receive up to
100% of the value of Shares, which value may be paid in cash or a
Stock Grant, as determined by the Committee, contingent upon the
achievement of Performance Goals established by the Committee.
(o) "Performance Goals" shall mean specific levels of one or more
Performance Measures at a corporate and/or business unit level
established in writing by the Committee for a particular Performance
Period.
(p) "Performance Measures" shall mean any of the following:
- Insurance Combined Ratio
- Expense Ratio
- Net Income Per Share
- Return on Equity
- Total Shareholder Return
- Return on Assets
- Revenues
- Operating Margin
- Increase in Book Value
- Market Share
(q) "Performance Period" shall mean a three-year period, or such other
period established by the Committee during which any Performance Goals
set by the Committee with respect to a Performance Contingent Award
are to be measured.
(r) "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.
(s) "Plan" shall mean the HSB Group, Inc. Long-Term Incentive Plan.
(t) "Retirement" shall mean the termination of employment under
circumstances which entitle an employee to receive retirement benefits
under the Company's Employees' Retirement Plan.
(u) "Shares" shall mean the Common Stock of the Company.
(v) "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.
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. Shares Subject To the Plan
Subject to Section 9 of the Plan 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.
5. Eligibility
(a) All Senior Officers of the Company (presently defined as Chief
Executive Officer, President, Executive Vice President, Senior Vice
President, Corporate Secretary, Treasurer, General Counsel and Chief
Financial Officer) other than any individual expressly excluded by the
Committee, are eligible to participate in this Plan. An individual who
is elected by the Board as a Senior Officer following the commencement
of a Performance Period shall, unless otherwise determined by the
Committee, be eligible for an award for such Performance Period(s)
based on such individual's Base Salary in effect at the time of such
election, and prorated for the number of full months within such
Performance Period that such individual was a Senior Officer.
(b) The Committee, in its sole discretion, may designate from time to time
certain other officers or key employees of the Company, its affiliates
and subsidiaries who may participate in this Plan.
6. Establishment of Performance Goals and Performance Contingent Awards
(a) Prior to or within ninety days (or such shorter period as is required
under Section 162(m) of the Code) following the commencement of each
Performance Period, the Committee shall establish in writing for each
Participant, or all Participants as a group, specific Performance
Goals based on one or more Performance Measures. For each Performance
Goal an award schedule of Performance Contingent Units shall be
established for minimum, target and maximum attainment of such goal.
The actual Performance Contingent Award to be paid to a Participant at
the conclusion of the Performance Period shall be based on the level
of attainment of the Performance Goals established for such period.
The Committee may designate that Performance Contingent Awards shall
be credited with Dividend Equivalents during the Performance Period
which shall be paid when and if such awards are paid.
(b) After Performance Goals have been established, they shall not be
modified in respect to the Performance Period to which they relate.
7. Payment of Performance Contingent Awards and Dividend Equivalents
(a) Following the end of a Performance Period, the Committee shall
ascertain and certify in writing whether and the degree to which the
Performance Goals for such period have been met. A Participant shall
be entitled to receive payment of an amount not exceeding the Fair
Market Value of the maximum award of Performance Contingent Units
established by the Committee pursuant to Section 6 hereof based upon
the level of attainment of the Performance Goals determined by the
Committee. The Committee shall have the authority to reduce the award
of any Participant even if the Performance Goals attributable to such
award have been met. The Committee shall have no authority hereunder
to increase any award calculated under this Plan, except in accordance
with Section 16.
(b) As soon as practicable following certification by the Committee
pursuant to Section 7(a), payment of awards to Participants shall be
made. Payments shall be made in cash, a Stock Grant or a combination
of the foregoing as prescribed by the Committee and shall be subject
to such other conditions and restrictions as the Committee shall
establish.
(c) Payment of any award of Dividend Equivalents shall be made at the same
time as payment of the Performance Contingent Award to which it
relates and shall be made in cash or a Stock Grant as prescribed by
the Committee.
(d) The maximum aggregate Fair Market Value of Performance Contingent
Units (determined as of the first trading day of the Performance
Period) and Dividend Equivalents which may be awarded to any
Participant for any Performance Period shall not exceed $2 million.
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 Performance Contingent Award
and related Dividend Equivalents. Such an election shall be subject to
such terms and conditions as are prescribed by the Committee. Deferral
elections are irrevocable and must be made during the time period and
in the manner prescribed by the Committee.
(b) To the extent that the Committee, in its discretion, determines that
the payment of a Performance Contingent 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. Adjustments in the Event of Change in Common Stock of the Company
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
Performance Contingent Units awarded which have not been paid and 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 to, or available for
Participants hereunder. Any fractional shares resulting from such
adjustments shall be eliminated.
10. No Right to an Award or Continued Employment
(a) Nothing contained in this Plan or in any resolution adopted or to be
adopted by the Board of Directors will constitute the granting of an
award hereunder. The granting of an award pursuant to the Plan will
take place only when authorized by the Committee. No award and no
rights of ownership thereunder will be transferable otherwise than
pursuant to Section 12. 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 Retirement or Disability or otherwise terminate
employment with the written consent of the Company prior to the
expiration of any Performance Period(s) in respect of which such
Participant may be eligible for an award, or if a subsidiary at which
a Participant is employed shall cease to be a subsidiary of the
Company prior to the expiration of any Performance Period(s), the
award(s) paid to such Participant shall be prorated according to the
number of months of employment in each such Performance Period.
(b) A Participant whose employment terminates by dismissal with or without
cause, or who voluntarily terminates employment without consent prior
to the expiration of a Performance Period, shall lose any right to
receive payment of such award.
(c) In no event shall an award or a portion thereof the payment of which
has been deferred pursuant to Section 8 be subject to forfeiture.
12. Death of a Participant
(a) A Participant may file with the Corporate Secretary of the Company a
designation of a beneficiary or beneficiaries on 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 earned but unpaid portion of
an award to which he or she is entitled and any deferred portions of a
deceased Participant's award shall be delivered to the beneficiary or
beneficiaries so designated or, if no beneficiary has been designated
or survives such Participant, shall be delivered to, or in accordance
with the directions of, the executor or administrator of such
Participant's estate.
(b) If a Participant shall die during a Performance Period, such
Participant's beneficiary shall only be entitled to receive the award
declared for the Performance Period ending in the year of the
Participant's death.
13. Tax Withholding
The Company shall have the right to require Participants to remit to the
Company an amount sufficient to satisfy any tax withholding requirements or
to deduct from any payments made pursuant to the Plan amounts sufficient to
satisfy tax withholding requirements.
14. Modification or Termination
(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, provided that the Committee may not, without shareholder
approval, take any of the following actions unless such actions fall
within the provisions of Section 9 of the Plan: (i) increase the
number of Shares reserved for delivery under the Plan; (ii) change the
class of persons eligible to participate in the Plan; or (iii)
increase the maximum amount of awards to be made to Participants as
determined pursuant to Section 7(d) of the Plan; and 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.
15. Change in Control
(a) In the event of a Change in Control of the Company, this Plan shall
continue to be binding upon the Company, any successor in interest to
the Company and all persons in control of the Company or any successor
thereto, and no transaction or series of transactions shall have the
effect of reducing or canceling the award of a Participant that has
been declared but not paid unless consented to in writing by such
affected Participant.
(b) As soon as practicable following a Change in Control, a Participant
shall be paid a lump sum amount in cash equal to the aggregate value
of the Performance Contingent Awards payable to the Participant for
each of the Performance Periods within which the date of the Change in
Control occurs, calculated as to each such Performance Period by
multiplying the award that the Participant would have earned on the
last day of such Performance Period, assuming the achievement of each
of the Performance Goals at the target level established for such
Performance Period, by the fraction obtained by dividing the number of
full months and any fractional portion of a month during such
Performance Period prior to the Change in Control by the total number
of months contained in such Performance Period. For purposes of the
preceding sentence, the amount of cash delivered in payment of the
value of the Performance Contingent Awards shall equal the number of
Performance Contingent Units constituting such each such award
multiplied by the greater of (i) the highest Fair Market Value per
share of Stock at any time during the 60-day period preceding the
Change in Control and (ii) if applicable, the price of a Share which
is paid or offered to be paid, by any person or entity, in connection
with the transaction constituting the Change in Control. The amount
paid hereunder shall be in lieu of any other awards payable under this
Plan for the Performance Periods within which the Change in Control
occurs.
(c) Upon a Change in Control, the restrictions and deferral limitations
applicable to any Stock Grant made pursuant to Section 7 hereunder
shall lapse as of the date of such Change in Control.
(d) As soon as practicable following a Change in Control, any awards or
Dividend Equivalents previously deferred in accordance with Section 8
hereof, plus interest accrued thereon up until the date of payment,
shall be paid in full.
16. 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 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
Performance Measures or 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.
17. 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.
18. Assignment and Alienation
Benefits under this Plan may not be anticipated, assigned (either at law or
in equity), alienated, or subjected to attachment, garnishment, levy,
execution or other legal or equitable process. If any Participant or
beneficiary under this Plan becomes bankrupt or attempts to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge any benefit
under this Plan, such benefit shall, in the discretion of the Committee,
cease and terminate, in which event the Committee may hold or apply the
same or any part thereof for the benefit of such Participant, his or her
beneficiary, spouse, children, other dependents or any of such individuals,
in such manner and in such proportion as the Committee may deem proper.
19. Effective Date and Termination of the Plan
This Plan, as amended, shall become effective as of January 1, 1998 subject
to the approval of the shareholders at their annual meeting in 1998. Unless
earlier terminated by the Committee subject to Section 14, the Plan shall
terminate on December 31, 2003. No Performance Contingent Award shall be
made pursuant to this Plan after the
termination date, but awards made prior to its termination date may extend
beyond that date.