Exhibit 10.1
EMPLOYMENT AGREEMENT
FOR
XXXXXX X. XXXXX
This employment agreement ("Agreement") by and between the Ohio Casualty
Corporation ("Corporation"), an Ohio corporation, and Xxxxxx X. XxXxx
("Executive"), collectively, the "Parties," is effective September 19, 2001
("Effective Date") and describes the terms and conditions governing Executive's
employment with the Corporation. Although it is not a direct Party to this
Agreement, The Ohio Casualty Insurance Company ("Company") joins in this
Agreement to the extent needed to enable the Corporation to discharge its
obligations under this Agreement.
ARTICLE 1 TERM OF AGREEMENT
This Agreement will remain in effect from the Effective Date until September
18, 2006, unless it terminates at an earlier date as provided below ("Term").
After the end of the Term, Executive will be an employee of the Corporation "at
will" unless the Parties agree to [1] extend this Agreement or [2] adopt a new
agreement that describes the terms and conditions of Executive's continued
employment with the Corporation.
ARTICLE 2 EXECUTIVE'S DUTIES
2.01 During the Term of this Agreement, Executive agrees:
[1] To serve as Chief Financial Officer of the Corporation and to
perform the services that are customarily performed by persons in a
similar executive capacity;
[2] To discharge any other duties and responsibilities that the
Corporation's Chief Executive Officer assigns to him from time to time;
[3] To serve, if elected, as an officer and director of any entity
that is related through common ownership to the Corporation (all
entities related through common ownership to the Corporation are
called "Affiliates" and the Corporation and all Affiliates are called
"Group");
[4] Except for periods of absence because of illness, vacations of
reasonable duration and any leaves of absence authorized by the CEO, to:
[a] Devote his full attention and energies to promoting the
Group's business;
[b] Fulfill the obligations described in this Agreement;
[c] Exercise the highest degree of loyalty and the highest
standards of conduct in the performance of his duties; and
[5] Not to engage in any other business activity, whether or not for
gain, profit or other pecuniary advantage. However, Executive may serve
as a director of companies other than Group members if that service:
[a] Does not violate any term or condition of this Agreement;
[b] Does not injure the Group or any Group member;
[c] Is not prohibited by law or by rules adopted by any Group
member; and
[d] Is approved by the CEO.
2.02 The restrictions described in Section 2.01[5] will not be construed to
prevent Executive from:
[1] Investing his personal assets in [a] businesses that do not
compete or do business with any Group member and do not require
Executive to perform any services connected with the operation or
affairs of the businesses in which the investment is made or [b] stocks
or corporate securities described in Section 6.02; or
[2] Participating in, or serving as a trustee or director of, civic
and charitable organizations or activities, but only if this activity
does not interfere with the performance of his duties under this
Agreement.
2.03 Executive will have a direct reporting relationship to the CEO.
ARTICLE 3 EXECUTIVE'S COMPENSATION
3.01 During the Term of this Agreement and subject to the terms of this
section and of Article 5, Corporation will pay the following amounts to
Executive:
[1] Beginning on the Effective Date, $350,000 for each full calendar
year of employment ("Base Salary"), prorated to reflect partial calendar
months and years of employment and paid in installments that correspond
with the Corporation's normal payroll practices. Base Salary will not
be reduced during the Term of this Agreement without Executive's
consent and may be increased during the Term of this Agreement upon
recommendation of the CEO to the Executive Compensation Committee of
the Company's Board of Directors ("Board").
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[2] An annual bonus [a] calculated under the terms of (and payable as
provided in) the Corporation's annual incentive program ("AIP"), a copy
of which Executive acknowledges having received, with a bonus percentage
of 50 percent of Base Salary, adjusted as provided in Section 3.01[1],
or [b] for the 2001 and 2002 performance cycles only, the larger of
the amount determined under Section 3.01[2][a] or $175,000. However,
the amount determined under this subsection will be paid only [c] if
Executive is actively employed on the date the AIP bonus is payable or
[d] if the Executive is not actively employed on the date the AIP
bonus is calculated, only as provided in Article 5.
[3] An annual long-term award beginning in 2004 under the terms of any
long-term award program that the Corporation adopts for its senior
executives.
[4] Participation, to the full extent of his eligibility, in the
employee and retirement benefit programs provided to the Corporation's
senior executives (a description of which has been given to Executive),
as these programs may from time to time be amended or modified by the
Board or the Board's Executive Compensation Committee.
[5] The perquisites that are made available to the Corporation's
senior executives.
3.02 Subject to the terms of this section and of Article 5 and as an
inducement to Executive to enter into this Agreement, Executive will receive
the following special payments and benefits in addition to the amounts
described in Section 3.01:
[1] $100,000 to be paid no later than October 12, 2001, subject to
the terms of the Corporation's sign-on bonus program, a copy of which
Executive acknowledges having received;
[2] Options to purchase 450,000 shares of the Corporation's common
shares ("Shares"). These options ("Options"):
[a] Will be granted under the following schedule:
[i] Options to purchase 200,000 Shares will be issued on
the Effective Date;
[ii] Options to purchase 150,000 Shares will be issued on
the first anniversary of the Effective Date; and
[iii] Options to purchase 100,000 Shares will be issued on
the second anniversary of the Effective Date.
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[b] Will be subject to the following terms and conditions:
[i] The Options to be issued under Section 3.02[2][a][i]
will be issued under a separate stock option agreement to
be adopted by the Corporation ("Other Option Grant"), which
will include terms that are as similar as possible to those
imposed under the Ohio Casualty Corporation 1993 Stock
Incentive Program ("1993 Program"). The Options to be
issued under Sections 3.02[2][a][ii] and [iii] will be
issued under the successor to the 1993 Program or, if there
is no successor to the 1993 Program, under the Other Option
Grant (collectively, the 1993 Program and the Other Option
Grant are referred to as the "Option Programs") ;
[ii] The Options to be issued under Section 3.02[2][a][i]
will be nonqualified (nonstatutory) stock options. At the
discretion of the Board's Executive Compensation Committee
and to the extent possible, the Options to be issued under
Section 3.02[2][a][ii] and [iii] will be incentive stock
options or nonqualified (nonstatutory) stock options;
[iii] The number of Options will be adjusted to reflect,
as appropriate, the effect of any stock splits, stock
dividends and similar events affecting the underlying
Shares;
[iv] Regardless of the obligation otherwise imposed
under this section, the Corporation will not be obligated
to issue the Options if:
[A] Executive does not meet all terms and
conditions imposed under the relevant Option
Program on the issue date specified in Section
3.02[2][a], including the requirement that
Executive be employed by the Corporation on the
scheduled issue date; or
[B] The Shares are not publicly traded and
registered under the Securities Exchange Act of
1934, as amended;
[v] The exercise price for all Options will be the
Shares' closing market price on the date the Options are
issued;
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[vi] All Options will be subject to the following
vesting schedule:
Date Issued Percent Vested
Effective Date 33-1/3%, at the end of 12 full
calendar months beginning after
Effective Date;
66-2/3%, at the end of 24 full
calendar months beginning after
Effective Date; and
100%, at the end of 36 full calendar
months beginning after Effective Date.
First anniversary 33-1/3%, at the end of 24 full calendar
of Effective Date months beginning after Effective Date;
66-2/3%, at the end of 36 full calendar
months beginning after Effective Date;
and
100%, at the end of 48 full calendar
months beginning after Effective Date.
Second anniversary 33-1/3%, at the end of 36 full calendar
of Effective Date months beginning after Effective Date;
66-2/3%, at the end of 48 full calendar
months beginning after Effective Date;
and
100%, at the end of 60 full calendar
months beginning after Effective Date.
[vii] All Options will expire 10 years after they are
issued unless they are terminated earlier under the terms
of the Option Program under which they are issued; and
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[3] Subject to the terms of the Corporation's relocation policy, a
copy of which Executive acknowledges having received, relocation
benefits made available to the Corporation's newly hired executives,
a description of which has been given to Executive.
ARTICLE 4 EXPENSES
The Corporation will pay or reimburse Executive for all reasonable, ordinary
and necessary expenses that he incurs to perform his duties under this
Agreement. Reimbursement will be made within 30 days after the date Executive
submits appropriate evidence of the expenditure to the Corporation (and all
other information required under the Corporation's business expense
reimbursement policy).
ARTICLE 5 TERMINATION OF EMPLOYMENT DURING TERM OF AGREEMENT
5.01 Termination of Employment Due to Death or Disability. If Executive
dies or becomes Disabled during the Term of this Agreement:
[1] This Agreement will terminate as of the date Executive dies or
becomes Disabled and Corporation will pay to Executive (or to his
beneficiary if Executive is deceased) the sum of:
[a] Any unpaid installments of his Base Salary, calculated to
the end of the payroll period during which he terminates
employment because of death or Disability;
[b] The value of any accrued but unused vacation, calculated
to the end of the payroll period during which he terminates
employment because of death or Disability (this value will be
calculated by dividing the Base Salary by 365 and multiplying by
the number of accrued but unused vacation days);
[c] Any amounts Executive is entitled to receive under the terms
of any employee benefit plan described in Section 3.01[4];
[d] The unpaid portion (if any) of the amounts described in
Sections 3.01[3] and 3.02[1], whether or not those amounts are
vested when employment terminates under this section; and
[e] A prorata portion of the amount described in Section 3.01[2]
based on the number of whole calendar months between the first day
of the calendar month during which the Executive dies or becomes
Disabled and
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the first day of the calendar months during which
his employment terminates because of death or Disability.
[2] Also, all unvested Options that were issued before Executive's
employment terminates because of his death or Disability will be
exercisable (regardless of the vesting schedule imposed under Section
3.02[2][b][vi]). However, any Options that have not been issued under
Section 3.02[2] as of the date Executive terminates employment because
of death or Disability will not be issued.
[3] For purposes of this section, Executive will be deemed to have
terminated employment on the date of his death or the date he is
determined to have become Disabled.
[4] "Disability" has the same meaning given to the term under the
Corporation's long-term disability plan as in effect on the Effective
Date, whether or not Executive has elected to participate in that plan
and whether or not that plan has been amended or terminated before
Executive's Disability arises.
[5] All amounts payable under this section will be:
[a] Paid in accordance with the Corporation's payroll procedures
(in the case of Base Salary) or on the date they would have been
paid under the terms of the program on which they are based as if
Executive's employment had not been terminated (in the case of all
other benefits under this section), unless the Parties agree to
accelerate one or more of these payments. If this acceleration
election is made, the amount distributed will be discounted to
reflect its then present value by applying a discount rate equal
to the rate paid on 90-day Treasury Bills issued on or
immediately before the date the calculation is made or by
applying the early distribution provisions included in any
benefit plan described in Section 3.01[4] from which the amount
is paid; and
[b] If Executive dies before all payments due under this section
have been paid, the unpaid amount will be paid to Executive's
beneficiary under the procedures described in Section 10.07.
5.02 Voluntary Termination of Employment Without Good Reason. Executive may
voluntarily terminate his employment at any time during the Term of this
Agreement without Good Reason (as defined in Section 5.05[6]) by giving the CEO
written notice of his intention to do so. This notice will be effective 30
days after it is given unless the Parties mutually agree to accelerate this
termination date ("Voluntary Termination Date"). If Executive voluntarily
terminates his employment without Good Reason:
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[1] This Agreement will terminate on the Voluntary Termination Date
and Corporation will pay to Executive the sum of:
[a] Any unpaid installments of his Base Salary, calculated to
the end of the payroll period during which his Voluntary
Termination Date occurs;
[b] The value of any accrued but unused vacation, calculated
to the end of the payroll period during which his Voluntary
Termination Date occurs (this value will be calculated by
dividing the Base Salary by 365 and multiplying by the number
of accrued but unused vacation days);
[c] Any amounts Executive is entitled to receive under the
terms of any employee benefit plan described in Section 3.01[4];
and
[d] The unpaid portion (if any) of the amount described in
Section 3.01[2] but only to the extent that the amount is payable
on or before his Voluntary Termination Date.
[2] Also, all [a] unvested Options will be forfeited, [b] any vested
Options that were issued before Executive's employment terminates will
be exercisable under the terms of the Option Program under which they
are issued and [c] any Options that have not been issued under Section
3.02[2] as of Executive's Voluntary Termination Date will not be issued.
[3] All amounts payable under this section will be:
[a] Paid in accordance with the Corporation's payroll procedures
(in the case of Base Salary) or on the date they would have been
due under the terms of the program on which they are based as if
Executive's employment had not been terminated (in the case of all
other benefits under this section), unless the Parties agree to
accelerate one or more of these payments. If this acceleration
election is made, the amount distributed will be discounted to
reflect its then present value by applying a discount rate equal
to the rate paid on 90-day Treasury Bills issued on or
immediately before the date the calculation is made or by
applying the early distribution provisions included in any
benefit plan described in Section 3.01[4] from which the amount
is being paid; and
[b] If Executive dies before all payments due under this
section have been paid, the unpaid amount will be paid to
Executive's beneficiary under the procedures described in Section
10.07.
5.03 Termination of Employment by Corporation Without Cause. The
Corporation may terminate Executive's employment without Cause (as defined in
Section 5.04[4]) at any time during the Term of this Agreement by giving
Executive written notice of its intention to do so. This notice will be
effective 90 days after it is given unless the Parties mutually agree to
accelerate this termination date ("Involuntary Termination Date). If this
notice is given after a Change in Control (as defined in Section
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5.06[7]) occurs, Section 5.06 will apply. If this notice is given before a
Change in Control occurs (even if the Involuntary Termination Date occurs
after a Change in Control):
[1] This Agreement will terminate as of the Involuntary Termination
Date;
[2] Corporation will pay:
[a] Any unpaid installments of his Base Salary, calculated to
the end of the payroll period during which his Involuntary
Termination Date occurs;
[b] The value of any accrued but unused vacation, calculated
to the end of the payroll period during which his Involuntary
Termination Date occurs (this value will be calculated by
dividing the Base Salary by 365 and multiplying by the number
of accrued but unused vacation days);
[c] The Base Salary for 24 months beginning with the first
payroll period that begins after his Involuntary Termination
Date; and
[d] 200 percent of Executive's individual target bonus as
defined in the AIP for the year his Involuntary Termination
Date occurs.
[3] All unvested Options that were issued before Executive's
Involuntary Termination Date will vest and be exercisable (regardless
of the vesting schedule imposed under Section 3.02[2][b][vi]), but any
Option that has not been issued under Section 3.02[2] as of Executive's
Involuntary Termination Date will not be issued; and
[4] Executive will receive any other benefits he is entitled to
receive under the terms of any benefit program described in Section
3.01[4].
[5] All amounts payable under this section will be:
[a] Paid in accordance with the Corporation's payroll
procedures (in the case of Base Salary) or on the date they
would have been due under the terms of the program on which they
are based as if Executive's employment had not been terminated
(in the case of all other benefits under this section), unless
the Parties agree to accelerate one or more of these payments.
If this acceleration election is made, the amount distributed will
be discounted to reflect its then present value by applying a
discount rate equal to the rate paid on 90-day Treasury Bills
issued on or immediately before the date the calculation is made
or by applying the early distribution provisions included in any
benefit plan described in Section 3.01[4] from which the amount is
being paid; and
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[b] If Executive dies before all payments due under this section
have been paid, the unpaid amounts will be paid to Executive's
beneficiary under the procedures described in Section 10.07.
5.04 Termination of Employment by Corporation for Cause. The Corporation
may terminate Executive's employment with Cause at any time during the Term of
this Agreement by giving Executive written notice of its intention to do so.
This notice will be effective on the date it is given ("For Cause Termination
Date"). If this notice is given:
[1] This Agreement will terminate as of his For Cause Termination
Date;
[2] Corporation will pay:
[a] Any unpaid installments of his Base Salary, calculated to
the end of the payroll period during which his For Cause
Termination Date occurs;
[b] The value of any accrued but unused vacation, calculated to
the end of the payroll period during which his For Cause
Termination Date occurs (this value will be calculated by dividing
the Base Salary by 365 and multiplying by the number of accrued
but unused vacation days);
[c] Any amounts Executive is entitled to receive under the terms
of any employee benefit plan described in Section 3.01[4]; and
[d] The unpaid portion (if any) of the amount described in
Section 3.01[2] but only to the extent that the amount is payable
on or before his For Cause Termination Date.
[3] Also, [a] all unvested Options will be forfeited, [b] any vested
Options that were issued before Executive's employment terminates will
be exercisable under the terms of the Option Program under which they
are issued and [c] any Options that have not been issued under Section
3.02[2] as of Executive's For Cause Termination Date will not be issued.
[4] "Cause" includes any act of fraud, intentional misrepresentation,
embezzlement, misappropriation or conversion by Executive of the assets
or business opportunities of any Group member, conviction of Executive
of a felony or intentional or repeated or continuing violations by
Executive of the Corporation's written policies or procedures that
occurs after the Corporation has given Executive written notice that
he has violated these written policies or procedures.
[5] All amounts payable under this section will be:
[a] Paid in accordance with the Corporation's payroll procedures
(in the case of Base Salary) or on the date they would have been
due under the terms of the program on which they are based as if
Executive's
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employment had not been terminated (in the case of all other
benefits under this section), unless the Parties agree to
accelerate one or more of these payments. If this acceleration
election is made, the amount distributed will be discounted to
reflect its then present value by applying a discount rate equal
to the rate paid on 90-day Treasury Bills issued on or
immediately before the date the calculation is made or by applying
the early distribution provisions included in any benefit plan
described in Section 3.01[4] from which the amount is being
paid; and
[b] If Executive dies before all payments due under this
section have been paid, the unpaid amount will be paid to
Executive's beneficiary under the procedures described in Section
10.07.
5.05 Termination of Employment by Executive for Good Reason. Executive may
terminate his employment at any time during the Term of this Agreement for Good
Reason by giving the CEO written notice of his intention to do so. This notice
must describe, in reasonable detail, the reasons for which Executive believes
he has Good Reason to terminate this Agreement. If, during the ensuing 60
days, the Corporation cures the condition cited by Executive, no termination
will occur under this section. However, if the Corporation does not cure the
condition cited by Executive during this 60-day period, this Agreement will
terminate at the end of the 60-day period ("Good Reason Termination Date"). If
that termination is, in fact, for Good Reason and if the notice of termination
for Good Reason was given after a Change in Control (as defined in Section
5.06[7]) occurs, Section 5.06 will apply. If that termination is, in fact, for
Good Reason and if the notice of termination for Good Reason was given before a
Change in Control occurs (even if the Good Reason Termination Date occurs after
a Change in Control):
[1] This Agreement will terminate as of the Good Reason Termination
Date;
[2] Corporation will pay:
[a] Any unpaid installments of his Base Salary, calculated to
the end of the payroll period during which his Good Reason
Termination Date occurs;
[b] The value of any accrued but unused vacation, calculated to
the end of the payroll period during which his Good Reason
Termination Date occurs (this value will be calculated by dividing
the Base Salary by 365 and multiplying by the number of accrued
but unused vacation days);
[c] The Base Salary for 24 months beginning with the first
payroll period that begins after his Good Reason Termination Date;
and
[d] 200 percent of Executive's individual target bonus as
defined in the AIP for the year his Good Reason Termination Date
occurs.
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[3] All unvested Options that were issued before Executive's Good
Reason Termination Date will vest and be exercisable (regardless of the
vesting schedule imposed under Section 3.02[2][b][vi]), but any Options
that have not been issued under Section 3.02[2] as of Executive's Good
Reason Termination Date will not be issued;
[4] Executive will receive any other benefits he is entitled to
receive under the terms of any benefit program described in Section
3.01[4].
[5] All amounts payable under this section will be:
[a] Paid in accordance with the Corporation's payroll procedures
(in the case of Base Salary) or on the date they would have been
due under the terms of the program on which they are based as if
Executive's employment had not been terminated (in the case of
all other benefits under this section), unless the Parties agree
to accelerate one or more of these payments. If this
acceleration election is made, the amount distributed will be
discounted to reflect its then present value by applying a
discount rate equal to the rate paid on 90-day Treasury Bills
issued on or immediately before the date the calculation is made
or by applying the early distribution provisions included in any
benefit plan described in Section 3.01[4] from which the amount is
being paid; and
[b] If Executive dies before all payments due under this section
have been paid, the unpaid amount will be paid to Executive's
beneficiary under the procedures described in Section 10.07.
[6] The term "Good Reason" means, without Executive's express prior
written consent, the occurrence of any one or more of the following
events (Executive will be deemed to have given his written consent to
any of these events if he participates, or is entitled to participate,
in the decision making process that leads to the occurrence of any of
the following events):
[a] A material reduction in Executive's duties,
responsibilities or status with respect to the Corporation, as
compared to those in effect on the Effective Date;
[b] Deprivation of Executive of the title of CFO of the
Corporation;
[c] The permanent assignment to Executive of duties materially
inconsistent with Executive's office on the Effective Date;
[d] A requirement that Executive relocate his principal office
or worksite (or the indefinite assignment of Executive) to a
location more than 50 miles distant from [i] the principal office
or worksite to which he was permanently assigned as of the
Effective Date or [ii] any location to which Executive is
permanently assigned, without his consent, after the Effective
Date;
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[e] The failure of the Corporation to maintain Executive's
relative level of coverage under the employee benefit or
retirement plans, policies, practices or arrangements described
in Section 3.01[4] and 3.01[5] as in effect on the Effective
Date, both in terms of the amount of benefits provided and the
relative level of Executive's participation. However, Good
Reason will not arise under this subsection if the Corporation
eliminates and/or modifies any of the programs described in
Section 3.01[4] and 3.01[5] if (except as required by law or as
needed to preserve the tax-character of the plan, policy,
practice or arrangement) Executive's level of coverage under all
the programs described in Section 3.01[4] and 3.01[5] is at least
as great as the coverage provided to other senior executives of
the Corporation; or
[f] Any material breach of this Agreement by or in behalf of
the Corporation that is not cured by the Corporation within 60
days of its receipt of written notice describing the nature of
the alleged breach.
5.06 Termination of Employment Following a Change in Control. If a Change
in Control occurs during the Term of this Agreement, Executive will receive the
following amounts (under the conditions described below):
[1] If Executive dies or becomes Disabled during the Term of this
Agreement but after a Change in Control, he (or his beneficiary) will
receive the amounts described in Section 5.01, as if Executive had
died or become Disabled before the Change in Control occurred.
[2] If Executive terminates his employment voluntarily during the
Term of this Agreement but after a Change in Control, he (or his
beneficiary) will receive the amounts described in Section 5.02, as
if Executive had voluntarily terminated his employment before the
Change in Control occurred, but only if he follows the procedures
described in Section 5.02.
[3] If the Corporation terminates Executive's employment for Cause
(as defined in Section 5.04[4]) during the Term of this Agreement but
after a Change in Control, he (or his beneficiary) will receive the
amounts described in Section 5.04 as if Executive had been terminated
for Cause before the Change in Control occurred.
[4] If Executive notifies the Corporation of his intent to terminate
his employment for Good Reason (as defined in Section 5.05[6]) during
the Term of this Agreement and if that notice is given after a Change
in Control occurs or if the Corporation notifies Executive of its
intent to terminate Executive without Cause (as defined in Section
5.04[4]) during the Term of this Agreement and if that notice is given
after a Change in Control has occurred, Executive will receive the
following amounts:
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[a] The amounts described in Section 5.05 as if the notice of
termination for Good Reason had been given before the Change in
Control occurred or the amounts described in Section 5.03 as if
the notice of termination without Cause had been given before
the Change in Control occurred. These amounts will be paid in
a lump sum without any discount applied to reflect the value of
any acceleration of payment;
[b] Reimbursement for the cost of continued participation in
all programs subject to the benefit provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1993 ("COBRA") for the period
beginning on the last day of Executive's active employment with
the Corporation and ending on the earlier of [i] the date
Executive acquires replacement coverage or [ii] the maximum
coverage period prescribed by COBRA;
[c] Reimbursement (or direct payment) for executive outplacement
services from an independent executive outplacement organization
until the earlier of [i] the date Executive is able to secure
employment acceptable to him or [ii] the fees paid to the
independent executive outplacement service equal $15,000 but
only if [iii] Executive begins to utilize these outplacement
services before the end of the 12-calendar-month period beginning
after the date the Employee terminates;
[d] A lump sum equal to the amounts described in this subsection
5.06[4][d]. This payment will be made no more than 60 days
after the occurrence giving rise to the payment obligation.
The amount payable under this subsection will be the sum of:
[i] $9,400;
[ii] An amount equal to the federal, state and local
income, wage and employment tax liability Executive will
incur as a result of receiving the amounts and property
described in Sections 5.06[4][d][i]; and
[iii] Any other Change in Control benefit to which Executive
is entitled under the terms of any other plan, program or
agreement with any Group Member.
[5] If the sum of the payments described in this section and those
provided under any other plan, program or agreement between Executive
and any Group member constitute "excess parachute payments" as defined
in Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended
("Code"), the Corporation will either:
[a] Reimburse Executive for the amount of any excise tax due
under Code Section 4999, if this procedure provides Executive
with an after-tax amount that is larger than the after-tax amount
produced under Section 5.06[5][b]; or
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[b] Reduce the amounts paid to Executive under this Agreement
so that his total "parachute payment" as defined in Code Section
280G(b)(2)(A) under this and any all other agreements will be
$1.00 less than the amount that would be an "excess parachute
payment" if this procedure provides Executive with an after-
tax amount that is larger than the after-tax amount produced
under Section 5.06[5][a].
[6] Payment of the amounts described in this section are expressly
conditioned on compliance with the following conditions, in addition to
those specified elsewhere in this Agreement:
[a] Except as expressly provided in this Agreement, Executive's
right to receive the payments described in this section will not
decrease the amount of, or otherwise adversely affect, any other
benefits payable to Executive under the terms of any of the
programs described in Section 3.01[4]; and
[b] If any "person" (as used in Section 5.06[7][a]) initiates a
tender or exchange offer, distributes proxy materials to the
Corporation's or to the Company's shareholders or takes other
steps to effect, or that may result in, a Change in Control,
Executive agrees he will forfeit all amounts described in this
section if he [i] voluntarily terminates his employment with
Corporation during the pendency of that activity other than by
reason of his retirement [A] at or after his Normal Retirement
Date [as defined in the Employees Retirement Plan of The Ohio
Casualty Insurance Company ("Retirement Plan")] or [B] after he
has attained age 62 and completed 30 or more years of service
(as defined in the Retirement Plan) or [ii] is indefinitely
absent from active employment other than for an absence covered
by the Family and Medical Leave Act before those efforts are
abandoned, that activity is terminated or until a Change in
Control has occurred (if this happens for other than Good
Reason, Executive will receive only those amounts
described in Section 5.02).
[7] For purposes of this section "Change in Control" means the date
on which the earliest of the following events occurs:
[a] Any entity or person [including a "group" as defined in
Section 13(d)(3) of the Exchange Act but excluding another Group
member] becomes the beneficial owner of, or obtains voting control
over 20 percent or more of the outstanding common shares of the
Corporation or the Company;
[b] The Corporation's shareholders approve a definitive agreement
[i] to merge or consolidate the Corporation with or into another
business entity (other than into the Company or another Group
member) in which the Corporation is not the continuing or
surviving entity or through which the Corporation's common shares
would be converted into cash, securities
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or other property of another business entity, other than a merger
of the Corporation in which holders of its common shares
immediately before the merger have the same proportionate
ownership of the survivor immediately after the merger as
immediately before the merger or [ii] to sell or otherwise dispose
of substantially all the assets of the Corporation or the Group to
an entity that is not a Group member;
[c] The Company's shareholders approve a definitive agreement
[i] to merge or consolidate the Company with or into another
business entity (other than into another Group member) in which
the Company is not the continuing or surviving entity or through
which the Company's common shares would be converted into cash,
securities or other property of another business entity, other
than a merger of the Company in which holders of its common shares
immediately before the merger have the same proportionate
ownership of the survivor immediately after the merger as
immediately before the merger or [ii] to sell or otherwise dispose
of substantially all of the assets of the Corporation or the Group
to an entity that is not a Group member;
[d] Within a 12-month period, there is a change in the majority
of the members of the Corporation's Board; provided, however, that
any new director whose nomination for election by the Corporation's
shareholders was approved, or who was appointed or elected to that
Board, by the vote of two-thirds of the directors then still in
office who were in office at the beginning of the 12-month period
will be disregarded in determining if there has been a change in
the majority of the Corporation's Board; and
[e] Within a 12-month period, there is a change in the majority
of the members of the Company's Board; provided, however, that any
new director whose nomination for election by the Company's
shareholders was approved, or who was appointed or elected to that
Board, by the vote of two-thirds of the directors then still in
office who were in office at the beginning of the 12-month period
will be disregarded in determining if there has been a change in
the majority of the Company's Board.
[8] If a Change in Control occurs after the Term of this Agreement,
Executive will receive amounts calculated under the change in control
agreement provided to the Corporation's other senior executives.
5.07 Regardless of any other provision of this Agreement, all amounts paid
under this Article 5 (other than those payable under Section 5.06) will be
reduced by any amounts payable to Executive from any other broad based
severance or disability program in which Executive participates.
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ARTICLE 6 NONCOMPETITION
6.01 For a period of 24 full calendar months after Executive's employment
terminates for any reason, he will not directly or indirectly engage in, assist
or have an active interest in (whether as proprietor, partner, investor,
shareholder, officer, director or any type of principal whatsoever) or enter
the employment of or act as agent for or adviser or consultant to any person or
entity who is (or is about to become) engaged in any business that competes
with the Group anywhere within the United States.
6.02 Section 6.01 does not prohibit Executive from purchasing, for
investment purposes only, any stock or other corporate security that is listed
on a national securities exchange or quoted in any national market system
(except as otherwise provided in this Agreement), so long as such stock or
other corporate security owned by Executive does not represent more than one
percent of the market value or voting power of the total stock or other
corporate securities of that class.
6.03 Executive is not obligated to comply with the prohibitions described in
this article if the Corporation defaults in the payment of any severance
compensation or benefits owed under this Agreement.
6.04 For a period of 24 full calendar months after Executive's employment
terminates for any reason, he will not, on his own behalf or on behalf of any
other person, partnership, association, corporation or other entity, solicit or
in any manner attempt to influence or induce any employee of the Group to leave
the Group's employment nor will he use or disclose to any person, partnership,
association, corporation or other entity any information obtained while an
employee of the Corporation concerning the names and addresses of the Group's
employees.
6.05 Executive recognizes that he has access to and knowledge of certain
confidential and proprietary information of the Group that is essential to the
performance of his duties under this Agreement. Executive agrees that he will
not, during or after the term of his employment by the Corporation, in whole or
in part, disclose this information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever, nor shall he
make use of any such information for his own purposes.
6.06 The Parties recognize that the Group will have no adequate remedy at
law for breach by Executive of the restrictions imposed by this article and
that the Group could suffer substantial and irreparable damage if Executive
breaches any of these restrictions. For this reason, Executive agrees that, if
Executive breaches any of the restrictions imposed under this article, the
Group, in addition to the right to seek monetary damages, may seek a temporary
and/or permanent injunction to restrain any breach or threatened breach of
these restrictions or a decree of specific performance, mandamus or other
appropriate remedy to enforce compliance with the restrictions imposed under
this article.
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ARTICLE 7 INDEMNIFICATION
The Corporation will indemnify Executive (including his heirs, executors and
administrators) to the fullest extent permitted under the Corporation's
Regulations and Ohio law.
ARTICLE 8 ASSIGNMENT OF AGREEMENT
8.01 Except as specifically provided in this section, the Corporation may
not assign this Agreement to any person or entity that is not a member of the
Group. However, this Agreement may and will be assigned or transferred to, and
will be binding upon and inure to the benefit of, any successor of the
Corporation, in which case this Agreement will be interpreted and applied by
substituting that successor for the "Corporation" under the terms of this
Agreement. For these purposes, "successor" means any person, firm, corporation
or business entity which at any time, whether by merger, purchase or otherwise
acquires all or substantially all of the assets or the business of the
Corporation.
8.02 Because the services to be provided by Executive to the Corporation
under this Agreement are personal to him, Executive may not assign the duties
allocated to him under this Agreement to any other person or entity. However,
this Agreement will inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, and administrators, successors,
heirs, distributees, devisees and legatees to the extent of any amounts payable
to Executive that are due to Executive upon his death.
ARTICLE 9 DISPUTE RESOLUTION
9.01 The Parties agree that arbitration will be the exclusive means of
resolving all disputes or questions arising out of or relating to this
Agreement (except that nothing included in this Article 9 prevents the
Corporation from seeking injunctive or other equitable relief if there is a
breach or threatened breach of any of the restrictions described in Article 6).
Any arbitration proceeding will be conducted before a panel of three
arbitrators, one appointed by the Corporation, a second appointed by Executive
and a third appointed by those two arbitrators. Any arbitration may be
initiated by either Party by written notice to the other Party specifying the
subject of the requested arbitration and appointing that Party's arbitrator.
9.02 The arbitration will take place in Cincinnati, Ohio and will be
conducted in accordance with the rules of the American Arbitration Association
in effect when the arbitration begins. Any determination or award made or
approved by at least two of the arbitrators will be final and binding on the
Parties. Judgment upon any award made in any arbitration may be entered and
enforced in any court having competent jurisdiction.
9.03 The costs of arbitration will be borne solely by the Party by which
they are incurred.
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ARTICLE 10 MISCELLANEOUS
10.01 Any notices, consents, requests, demands, approvals or other
communications to be given under this Agreement must be given in writing and
must be sent by registered or certified mail, return receipt requested, to
Executive at the last address he has filed in writing with the Corporation or,
in the case of the Corporation, to the CEO at the Corporation's principal
offices.
10.02 This Agreement supersedes any prior agreements or understandings, oral
or written, between the Parties, or between Executive and the Corporation, with
respect to the subject matter described in this Agreement and constitutes the
entire agreement of the Parties with respect to any matter covered in this
Agreement.
10.03 This Agreement may not be varied, altered, modified, canceled, changed
or in any way amended except by written agreement of the Parties.
10.04 If any provision or portion of this Agreement is determined to be
invalid or unenforceable for any reason, the remaining provisions of this
Agreement will remain in full force and effect.
10.05 This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original, but all of which together will
constitute one and the same Agreement.
10.06 The Corporation will withhold from any benefits payable under this
Agreement all federal, state, city or other taxes as required by any applicable
law or governmental regulation or ruling.
10.07 Executive may designate one or more persons or entities as the primary
and/or contingent beneficiaries of any amounts to be received under this
Agreement that are unpaid when Executive dies. This designation must be
written and presented in a form acceptable to the Corporation or the
Corporation's designee, if appropriate, or in the form required by any affected
benefit plan or program. Subject to any rules prescribed by the Corporation,
its designee or the affected benefit plan or program, Executive may make or
change his designation at any time.
10.08 Failure to insist upon strict compliance with any of the terms,
covenants or conditions described in this Agreement will not constitute a
waiver of that or any other term, covenant or condition nor will any such
failure constitute a waiver or relinquishment of the Party's right to insist
subsequently on strict compliance of the affected (and all other) terms,
covenants or conditions of this Agreement.
10.09 To the extent not preempted by federal law, the provisions of this
Agreement will be construed and enforced in accordance with the laws of the
state of Ohio.
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IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective September 19, 2001.
THE OHIO CASUALTY INSURANCE COMPANY
By:
------------------------------------
Xxx X. Xxxxxxxxxx, CEO and President
OHIO CASUALTY CORPORATION
By:
------------------------------------
Xxx X. Xxxxxxxxxx, CEO and President
XXXXXX X. XXXXX
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