STOCK OPTION AGREEMENT (Non-Qualified Stock Option)
Exhibit 10.7
STOCK OPTION AGREEMENT
(Non-Qualified Stock Option)
(Non-Qualified Stock Option)
THIS AGREEMENT is made to be effective as of March 23, 2000, by and between Ohio Casualty
Corporation, an Ohio corporation (the “Company”), and the undersigned director of Ohio Casualty
Corporation (“Director”).
WITNESSETH:
WHEREAS, the Board of Directors (the “Board”) has determined that Director should be granted
an option to acquire common shares of the Company, upon the terms and conditions set forth in this
Agreement, in lieu of being paid any cash annual retainer for the year 2000;
NOW, THEREFORE, in consideration of the premises, the parties named above make the following
agreement, intending to be legally bound thereby:
1. Grant of Option. Subject to adjustment pursuant to Section 3 of this Agreement, the
Company hereby grants to Director an option (the “Option”) to purchase 15,000 common shares, $.125
par value, of the Company (the “Shares”). The Option is not intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
Anything contained in this Agreement to the contrary not withstanding, the Option may not be
exercised for a period of six months from the date of this Agreement.
2. Terms and Conditions of the Option.
(a) Option Price. The purchase price (the “Option Price”) to be paid by
Director to
the Company upon the exercise of the Option shall be $13.125 per Share, subject to adjustment as
provided in Section 3 of this Agreement.
(b) Vesting. Except as otherwise provided in this Agreement, the Option shall vest as
follows:
(i) Subject to Director’s continued service on the Board of
Directors (the “Board”) of the
Company, the Option shall vest and become exercisable with respect to (a) fifty percent (50%) of
the Shares on the first anniversary of the effective date of this Agreement and (b) fifty percent
(50%) of the Shares on the second anniversary of the effective date of this Agreement. The portion
of the Option which has become vested and exercisable pursuant to this Section 2(b) is hereinafter
referred to as the “Vested Portion” and the remaining portion shall be the “Unvested Portion”.
(ii) Subject to the six-month holding period requirements of
Section 1 of this Agreement, if
Director ceases to be a director of the Company because of Director’s death, Disability (as defined
below) or Retirement (as defined below), any portion of
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the Option which is then not exercisable shall vest and become exercisable upon such termination of
service as a director of the Company for the period specified in Section 2(c) below. For purposes
of this Agreement, “Disability” means a mental or physical condition which, in the opinion of the
Board, renders Director unable or incompetent to carry out the job responsibilities which Director
held or the tasks to which Director was assigned at the time the disability was incurred, and which
is expected to be permanent or for an indefinite duration exceeding one year. For purposes of this
Agreement, “Retirement” shall mean the retirement from service on the Board after (A) having
attained the age of 65 and (B) having served at least 10 years as a member of the Board.
(iii) If Director ceases to be a director of the Company for any
reason other than because of
Director’s death, Disability or Retirement, the Vested Portion of the Option will be exercisable
upon termination of Director’s status as a director of the Company for the period specified in
Section 2(c) below and the then Unvested Portion of the Option will terminate.
(c) Exercise of the Option. Subject to the provisions of this Agreement, including the
six-month holding period provided in Section 1, Director may exercise all or any part of the Vested
Portion of the Option at any time prior to the occurrence of the earliest event listed below:
(i) the tenth anniversary of the date of this Agreement;
(ii) twelve months following the date Director ceases to be a
director of the Company because
of Director’s death, Disability or Retirement; or
(iii) three months following the date Director ceases to be a
director of the Company for any
reason other than because of Director’s death, Disability or Retirement.
(d) Method of Exercise. The Vested Portion of the Option may be exercised by giving
written notice of exercise to the Company in care of the Treasurer of the Company stating the
number of Shares subject to the Option being purchased. Payment for all such Shares shall be made
to the Company at the time the Option is exercised in United States dollars in cash (including
check, bank draft or money order). Payment for such Shares also may be made (i) by delivery of
common shares of the Company already owned by Director and having a Fair Market Value (as defined
in Section 2(f) of this Agreement) on the date of delivery equal to the Option Price for the Shares
purchased, or (ii) by delivery of the combination of cash and already-owned common shares of the
Company. The Board may, in its discretion, permit payment of the Option Price of the Shares
subject to the Option by delivery of a properly executed exercise notice together with a copy of
irrevocable instructions to deliver promptly to the Company the amount of sale or loan proceeds to
pay the Option Price. After payment in full for the Shares purchased under the Option has been
made, the Company shall take all such action as is necessary to deliver appropriate share
certificates evidencing the Shares purchased upon exercise of the Option as promptly thereafter as
is reasonably practicable.
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(e) Tax Withholding. Director will pay to the Company the amount of any taxes the
Company is required by law to withhold with respect to the exercise of the Option. Director may
instruct the Company to withhold from the Shares issuable upon exercise of the Option that number
of Shares having a Fair Market Value (as defined in Section 2(f) of this Agreement) on the date of
exercise equal to the amount of any taxes the Company is required by law to withhold with respect
to the exercise of the Option.
(f) For purposes of this Agreement, “Fair Market Value” means, on any given date, the
closing
price of the Company’s common shares, as reported on The Nasdaq National Market, or on any
securities exchange on which the common shares are listed for such date, or if the Company’s common
shares were not traded on such date, on the next preceding date on which the Company’s common
shares were traded.
3. Adjustments and Changes in the Shares.
The following provisions shall apply to the Option:
(a) Generally. In the event that the outstanding common shares of the Company shall be
changed into or exchanged for a different kind of shares, other securities or other property of the
Company or of another corporation or for cash (whether by reason of merger, consolidation,
recapitalization, reclassification, split-up, combination of shares or otherwise) or if the number
of common shares of the Company shall be increased through the payment of a share dividend, then
unless such change results in the termination of the Option, there shall be substituted for or
added to each Share subject to the Option, the number and kind of shares, other securities or other
property and the amount of cash into which each outstanding common share of the Company shall be
changed, or for which each such common share shall be exchanged, or to which the holder of each
such common share shall be entitled, as the case may be. The Option shall also be appropriately
amended as to the Option Price and other terms as may be necessary to reflect the foregoing events.
The number of Shares that will become vested in accordance with Section 2(b) of this Agreement
shall be appropriately adjusted to reflect any such change in the outstanding common shares of the
Company. In the event there shall be any other change in the number or kind of the outstanding
shares of the Company, or of any shares, other securities or other property (including cash) into
which such shares shall have been changed, or for which they shall have been exchanged, then if the
Board, in its sole discretion, shall determine that such change equitably requires an adjustment in
the Option, such adjustment shall be made by the Board in accordance with such determination.
Fractional shares resulting from any adjustment in the Option pursuant to this Section 3(a) shall
be rounded down to the nearest whole number of shares.
(b) Change in Control. In the event there is a Change in Control, subject to the six
month holding period, the Option shall become immediately exercisable as of the date of the Change
in Control, whether or not exercisable under this Agreement. If the Option has been held for less
than six months as of the date of the Change in Control, the Option shall be cancelled by the
Company without consideration and shall terminate as of the date of the
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Change in Control. For purposes of this Section 3, a Change in Control shall be deemed to have occurred
on the earliest of the following dates:
(i) Unless such acquisition shall have been approved in advance
by the Board, the date any
entity or person (including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) shall have become the beneficial owner of, or shall have obtained voting
control over, twenty percent (20%) or more of the outstanding common shares of the Company.
(ii) The date the shareholders of the Company approve a
definitive agreement (A) to merge or
consolidate the Company with or into another corporation, in which the Company is not the
continuing or surviving corporation or pursuant to which any common shares would be converted into
cash, securities or other property of another corporation, other than a merger of the Company in
which holders of common shares immediately prior to the merger have the same proportionate
ownership of common shares of the surviving corporation immediately after the merger as immediately
before, or (B) to sell or otherwise dispose of substantially all the assets of the Company; or
(iii) The date there shall have been a change in a majority of
the Board within a twelve (12)
month period; provided, however, that any new director whose nomination for election by the
Company’s shareholders was approved, or who was appointed or elected to the Board, by the vote of
two-thirds of the directors then still in office who were in office at the beginning of the twelve
(12) month period shall not be counted in determining whether there has been such a change in a
majority of the Board.
(c) No Restrictions on Company. The grant of this Option shall not affect in any way
the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
4. Non-Assignability of Option. Unless otherwise permitted by the Board, the Option
shall not be assignable or otherwise transferable by Director except by will or by the laws of
descent and distribution. The Option may not be exercised during the lifetime of Director except
by Director or Director’s guardian or legal representative.
5. Buy Out of Option Grants. At any time after the Option becomes exercisable, the
Board shall have the right to elect, in its sole discretion and without the consent of Director, to
cancel the Option and pay to Director the excess of the Fair Market Value of the Shares over the
Option Price at the date the Board provides written notice (the “Buy Out Notice”) of the intention
to exercise the right. A buy out pursuant to this Section 5 shall be completed by the Company as
promptly as possible after the date of the Buy Out Notice. Payment of the buy out amount may be
made in cash, in common shares of the Company, or partly in cash and partly in common shares as the
Board deems advisable. To the extent payment is made in common shares, the number of common shares
shall be determined by dividing the amount of the payment to be made by the Fair Market Value of a
common share at the date of the
Buy Out Notice.
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Payment of any such buy out amount shall be made net of any applicable foreign,
federal (including FICA), state and local withholding taxes.
6. Restrictions on Transfers of Shares. Anything contained in this Agreement or
elsewhere to the contrary notwithstanding, the Company may postpone the issuance and delivery of
Shares upon any exercise of the Option until completion of any stock exchange listing or
registration or other qualification of such Shares under any state or federal law, rule or
regulation as the Company may consider appropriate. The Company may require Director, when
exercising the Option, to make such representations and furnish such information as the Company may
consider appropriate in connection with the issuance of the Shares in compliance with applicable
law.
Shares issued and delivered upon exercise of the Option shall be subject to such restrictions
on trading, including appropriate legending of certificates to that effect, as the Company, in its
discretion, shall determine are necessary to satisfy applicable legal requirements and obligations.
7. Rights of Director as a Shareholder. Director shall have no rights as a shareholder
of the Company with respect to any Shares of the Company covered by the Option until the date of
issuance of a certificate to Director.
8. No Right to Continue as a Director. The grant of the Option shall not confer upon
Director any right to continue as a director of the Company nor limit in any way the right of the
Company’s shareholders to terminate Director’s status as a director of the Company at any time.
9. Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio.
10. Rights and Remedies Cumulative. All rights and remedies of the Company and of
Director enumerated in this Agreement shall be cumulative and, except as expressly provided
otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in
equity, and each may be exercised and enforced concurrently.
11. Captions. The captions contained in this Agreement are included only for
convenience of reference and do not define, limit, explain or modify this Agreement or its
interpretation, construction or meaning and are in no way to be construed as a part of this
agreement.
12. Severability. If any provision of this Agreement or the application of any
provision hereof to any person or any circumstance shall be determined to be invalid or
unenforceable, then such determination shall not affect any other provision of this Agreement or
the application of said provision to any other person or circumstance, all of which other
provisions shall remain in full force and effect. It is the intention of each party to this
Agreement that if any provision of this Agreement is susceptible of two or more interpretations,
one of
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which
would render the provision enforceable and the other or others of which would render the provision
unenforceable, then the provision shall have the meaning which renders it enforceable.
13. Number and Gender. When used in this Agreement, the number and gender of each
pronoun shall be construed to be such number and gender as the context, circumstances or its
antecedent may require.
14. Entire Agreement. This Agreement constitutes the entire agreement between the
Company and Director with respect to this stock option grant, and this Agreement supersedes all
prior agreements between the parties related to this stock option grant. No officer, employee or
other servant or agent of the Company, and no servant or agent of Director is authorized to make
any representation, warranty or other promise not contained in this Agreement. No change,
termination or attempted waiver of any of the provisions of this Agreement shall be binding upon
any party hereto unless contained in a writing signed by the party to be charged.
15. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns (including subsequent, as well as immediate, successors and
assigns) of the parties.
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By signing below, Director accepts this Option subject to all of the terms and provisions set
forth in this Agreement. Director hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date
first above written.
| COMPANY | ||||
| OHIO CASUALTY CORPORATION | ||||
| By: | ||||
| Title: | ||||
| DIRECTOR: | ||||
| Signature | ||||
| Name | ||||
| Street Address | ||||
| City, State, Zip Code | ||||
| Social Security Number | ||||
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