<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
OHIO CASUALTY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO CASUALTY CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
OHIO CASUALTY CORPORATION
136 NORTH THIRD STREET
HAMILTON, OHIO 45025
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
TO BE HELD APRIL 16, 1997
Hamilton, Ohio
March 14, 1997
To the Shareholders:
The Annual Meeting of Shareholders (the "Annual Meeting") of Ohio Casualty
Corporation (the "Company") will be held in the meeting rooms of The Hamiltonian
Hotel, One Riverfront Plaza, Hamilton, Ohio 45011, on Wednesday, April 16, 1997,
at 10:30 a.m., local time, for the following purposes:
(1) To elect the following four Directors for terms expiring in 2000 (Class
I), as successors to the class of Directors whose terms expire in 1996:
Jack E. Brown, Vaden Fitton, Joseph L. Marcum, and Howard L. Sloneker
III.
(2) To approve amendments to the Company's 1993 Stock Incentive Program.
(3) To consider and act upon, in their discretion, such other matters as
may properly come before the Annual Meeting or any adjournment thereof.
Holders of record of common shares of the Company as of the close of
business on March 3, 1997 are entitled to notice of and to vote at the Annual
Meeting and at any adjournment thereof. As of March 3, 1997, there were
35,110,231 common shares outstanding. Each common share is entitled to one vote
on all matters properly brought before the Annual Meeting.
By Order of the Board of Directors,
/s/ Howard L. Sloneker III
Howard L. Sloneker III, Secretary
EVERY SHAREHOLDER'S VOTE IS IMPORTANT. IF YOU ARE UNABLE TO BE PRESENT AT THE
ANNUAL MEETING, YOU ARE REQUESTED TO COMPLETE AND RETURN PROMPTLY THE ENCLOSED
PROXY SO THAT YOUR COMMON SHARES WILL BE REPRESENTED. A POSTAGE PAID, ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE> 3
OHIO CASUALTY CORPORATION
136 NORTH THIRD STREET
HAMILTON, OHIO 45025
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
APPROXIMATE DATE TO MAIL -- MARCH 14, 1997
On behalf of the Board of Directors of Ohio Casualty Corporation (the
"Company"), a proxy is solicited from you to be used at the Company's 1997
Annual Meeting of Shareholders (the "Annual Meeting") scheduled for Wednesday,
April 16, 1997 at 10:30 a.m., local time, in the meeting rooms of The
Hamiltonian Hotel, One Riverfront Plaza, Hamilton, Ohio 45011, or at any
adjournment thereof.
Proxies in the form enclosed herewith are being solicited on behalf of the
Company's Board of Directors. The common shares represented by proxies which are
properly executed and returned will be voted at the Annual Meeting, or any
adjournment thereof, as directed. Common shares represented by proxies properly
executed and returned which indicate no direction will be voted in favor of the
nominees of the Board of Directors identified in the Notice of Annual Meeting
accompanying this Proxy Statement and for the adoption of the proposed
amendments to the Company's 1993 Stock Incentive Program. Any shareholder giving
the enclosed proxy has the power to revoke the same prior to its exercise by
filing with the Secretary of the Company a written revocation or duly executed
proxy bearing a later date, or by giving notice of revocation in open meeting.
ATTENDANCE AT THE ANNUAL MEETING WILL NOT, IN AND OF ITSELF, CONSTITUTE
REVOCATION OF A PROXY.
VOTING AT ANNUAL MEETING
As of March 3, 1997, the record date fixed for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting, there were
outstanding 35,110,231 common shares, which is the only outstanding class of
capital stock of the Company. Each such common share is entitled to one vote on
all matters properly coming before the Annual Meeting.
A quorum for the Annual Meeting is a majority of the outstanding common
shares. Common shares represented by signed proxies that are returned to the
Company will be counted toward the quorum in all matters even though they are
marked "Abstain", "Against" or "Withhold Authority" on one or more or all
matters or they are not marked at all. Broker non-votes are also counted for
purposes of determining the presence or absence of a quorum. Broker non-votes
occur when brokers, who hold their customers' shares in street name, sign and
submit proxies for such shares on some matters, but not others. Typically, this
would occur when brokers have not received any instructions from their
customers, in which case the brokers, as the holders of record, are permitted to
vote on "routine" matters, which typically include the election of directors,
but not on non-routine matters.
1
<PAGE> 4
PRINCIPAL SHAREHOLDERS
The table below identifies the only persons known to the Company to own
beneficially (within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934) more than 5% of the Company's outstanding common shares.
<TABLE>
<CAPTION>
COMMON SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF COMMON
OF BENEFICIAL OWNER OWNED SHARES DATE
------------------- ------------- --------- ----
<S> <C> <C> <C>
FIRST NATIONAL BANK OF 3,411,430(1) 9.71% 12-31-96
SOUTHWESTERN OHIO
Third and High Streets
Hamilton, Ohio 45011
THE CHASE MANHATTAN BANK, 2,549,554(2) 7.25% 12-31-96
N.A., Trustee
1211 Avenue of the Americas
New York, New York 10036
THE CAPITAL GROUP, INC 2,921,400(3) 7.23% 12-31-96
333 South Hope Street
Los Angeles, California 90071
JOSEPH L. MARCUM 2,223,716(4) 6.35%(4) 03-03-97
136 North Third Street
Hamilton, Ohio 45025
</TABLE>
- ---------------
(1) Based upon information provided to the Company by First National Bank of
Southwestern Ohio (the "Bank"). The Bank holds the reported shares as
trustee under various trust agreements and arrangements. The Bank has
advised the Company that it has sole voting power for 3,039,017 shares,
shared voting power for 0 shares, sole investment power for 1,387,171
shares, and shared investment power for 1,600,620 shares. 425,656 shares are
held under trust arrangements for certain directors of the Company, and
their respective spouses, which shares are also reported in the following
table showing share ownership of directors and executive officers of the
Company.
(2) 1,707,322 shares are held as trustee for the Company's Employee Savings Plan
and 842,232 shares are held as trustee for the Company's Employees
Retirement Plan. Voting power with respect to shares held in the Employee
Savings Plan is exercised by the plan participants; investment power with
respect to these shares is held by plan participants subject to limitations
in the Plan. Voting and investment power with respect to shares held in the
Employees Retirement Plan is exercised by the committee which administers
the Employees Retirement Plan (the "Retirement Committee"). The Retirement
Committee consists of Joseph L. Marcum, Lauren N. Patch and Barry S. Porter.
(3) Based upon information contained in a Schedule 13G dated February 12, 1997,
as filed with the Securities and Exchange Commission by The Capital Group,
Inc. The Capital Group, Inc. reported sole voting power for 0 shares, shared
voting power for 0 shares and sole investment power for 2,921,400 shares as
of December 31, 1996.
(4) See share ownership information for Mr. Marcum in the following table.
2
<PAGE> 5
SHAREHOLDINGS OF DIRECTORS, EXECUTIVE OFFICERS
AND NOMINEES FOR ELECTION AS DIRECTOR
As of March 3, 1997, the directors of the Company, including the four
persons intended by the Board of Directors to be nominated for election as
directors, the executive officers of the Company named in the Summary
Compensation Table and all executive officers and directors of the Company as a
group beneficially owned common shares of the Company as set forth below.
<TABLE>
<CAPTION>
SHARED INVESTMENT
NUMBER OF OPTIONS VOTING POWER
COMMON SHARES EXERCISABLE OVER EMPLOYEES
NAME OF BENEFICIALLY WITHIN RETIREMENT PERCENT
INDIVIDUAL OR GROUP OWNED(1) 60 DAYS PLAN SHARES(2) TOTAL OF CLASS(3)
- --------------------------- ------------- ----------- ----------------- --------- -------------
<S> <C> <C> <C> <C> <C>
Arthur J. Bennert 19,178 6,000 25,178
Jack E. Brown 1,100 3,000 4,100
Catherine E. Dolan 100 6,000 6,100
Wayne Embry 200 6,000 6,200
Vaden Fitton 228,064(4) 3,000 231,064
Jeffery D. Lowe 157,978(4 (7)(8) 1,000 158,978
Joseph L. Marcum 1,378,484(5)(6) 3,000 842,232(2) 2,223,716 6.33%
Stephen S. Marcum 295,050(4)(6) 6,000 301,050
Lauren N. Patch 206,278(4)(7) 10,000 842,232(2) 1,058,510 3.01%
Stanley N. Pontius 1,120 6,000 7,120
Howard L. Sloneker III 192,611(7) 3,333 195,944
William L. Woodall 23,484 6,000 29,484
Andrew T. Fogarty 57,822(4 (7)(8) 1,429 59,251
Michael L. Evans 5,373(7) 3,333 8,706
Barry S. Porter 26,783(7) 3,333 842,232(2) 872,348 2.48%
All Executive Officers,
Directors and Nominees as
a Group (30 Persons) 2,702,940 78,999 842,232(2) 3,624,171 10.31%
</TABLE>
- ---------------
(1) Unless otherwise indicated, each named person has voting and investment
power over the listed shares and such voting and investment power is
exercised solely by the named person or shared with a spouse.
(2) Includes 842,232 shares held in the Company's Employees Retirement Plan as
to which the named individual shares voting and investment power solely by
reason of being a member of the Retirement Committee which administers such
Plan. See Note (2) of the preceding table. Messrs. Marcum, Patch and Porter
disclaim beneficial ownership of these shares.
(3) Percentages are listed only for those individuals who own in excess of 1% of
the outstanding shares.
(4) Includes the following number of shares owned by family members as to which
beneficial ownership is disclaimed: Mr. Fitton, 108,926 Mr. Fogarty, 5,468;
Mr. Joseph L. Marcum, 617,304; Mr. Lowe, 136,900; Mr. Patch, 169,692; and
Mr. Stephen S. Marcum, 84,090.
(5) Includes 237,852 shares held by Mr. Marcum's wife in her capacity as a
co-trustee of the estate of Howard Sloneker as to which shares Mr. Marcum
has no voting or investment power.
(6) Includes 85,306 shares held as co-trustee of the Joseph L. and Sarah S.
Marcum Foundation as to which voting and investment power is shared by
Joseph L. and Stephen S. Marcum.
(7) The share ownership for Messrs. Evans, Lowe, Patch, Sloneker, Fogarty, and
Porter includes 1,127, 4,952, 4,370, 2,187, 16,010 and 9,294 shares,
respectively, held for the accounts of these individuals by the trustee of
the Company's Employee Savings Plan. Such persons have sole voting power
with respect to these shares and also hold investment power subject to
limitations in the Plan.
3
<PAGE> 6
(8) Andrew T. Fogarty retired from his position as executive officer of the
Company on January 1, 1997.
ELECTION OF DIRECTORS
The Board of Directors intends that the four persons named under Class I in
the following table (the "Nominees") will be nominated for election at the
Annual Meeting for three-year terms expiring in 2000. The terms of the remaining
directors in Classes II and III will continue as indicated below. It is intended
that the common shares represented by the accompanying Proxy will be voted for
the election as directors of the Nominees, unless otherwise instructed on the
Proxy. In the event that any one or more of the Nominees unexpectedly becomes
unavailable for election, the common shares represented by the accompanying
Proxy will be voted in accordance with the best judgment of the proxy holders
for the election of the remaining Nominees and for the election of any
substitute nominee or nominees designated by the Board of Directors.
Under Ohio law and the Company's Regulations, the nominees receiving the
greatest number of votes will be elected as directors. Shares as to which the
authority to vote is withheld will be counted for quorum purposes but will not
be counted toward the election of the Nominees.
<TABLE>
<CAPTION>
POSITION WITH COMPANY AND/OR
PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NAME AND AGE(1) DURING LAST FIVE YEARS(2) SINCE
- ------------------------ -------------------------------------------------------- --------
<S> <C> <C>
NOMINEES:
Nominees for Terms Expiring in 2000:
Jack E. Brown, Chairman of Board, BBI Marketing Services, Inc., Cincin- 1994
53 nati, Ohio (professional marketing consulting firm).
Vaden Fitton, Director and Retired First Vice President of First 1967
68 National Bank of Southwestern Ohio, Hamilton, Ohio.
Joseph L. Marcum, Chairman of the Board and Director of the Company, The 1949
73 Ohio Casualty Insurance Company, West American Insur-
ance Company, American Fire and Casualty Company, Ohio
Security Insurance Company, OCASCO Budget, Inc. and The
Ohio Life Insurance Company. Mr. Marcum served as Chief
Executive Officer of the Company and its subsidiaries
until December 31, 1993, and President of the Company
and its subsidiaries until December 31, 1990.
Howard L. Sloneker III, Vice President, Secretary and Director of the Company, 1983
40 The Ohio Casualty Insurance Company, West American
Insurance Company, American Fire and Casualty Company,
Ohio Security Insurance Company and OCASCO Budget, Inc.;
Secretary and Director of The Ohio Life Insurance
Company.
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE ANNUAL MEETING:
Class II -- Terms Expiring in 1998:
Wayne Embry, Executive Vice President and General Manager of the 1991
60 Cleveland Cavaliers (professional basketball franchise);
Chairman of Michael Alan Lewis Company, Cleveland, Ohio
(fabricators of materials for the automobile industry).
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
POSITION WITH COMPANY AND/OR
PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NAME AND AGE(1) DURING LAST FIVE YEARS(2) SINCE
- ------------------------ -------------------------------------------------------- --------
<S> <C> <C>
Stephen S. Marcum, Member of the law firm of Parrish, Beimford, Fryman, 1989
39 Smith & Marcum Co., L.P.A., Hamilton, Ohio; such firm
has provided legal services to the Company and its
subsidiaries during the last fiscal year and continues
to do so.
Stanley N. Pontius, President and Chief Executive Officer of First Financial 1994
50 Bancorp and its principal subsidiary, First National
Bank of Southwestern Ohio, Hamilton, Ohio.
William L. Woodall, Director of the Company, The Ohio Casualty Insurance 1986
73 Company, West American Insurance Company, American Fire
and Casualty Company, Ohio Security Insurance Company,
OCASCO Budget, Inc. and The Ohio Life Insurance Company;
retired as an executive officer of the Company and its
subsidiaries on December 31, 1990.
Class III -- Terms Expiring in 1999
Arthur J. Bennert, Director of the Company, The Ohio Casualty Insurance 1989
70 Company, West American Insurance Company, American Fire
and Casualty Company, Ohio Security Insurance Company
and The Ohio Life Insurance Company; retired as an
executive officer of the Company and its subsidiaries on
January 1, 1992.
Catherine E. Dolan, Managing Director of the Financial Institutions Group, 1994
39 First Union National Bank, Charlotte, North Carolina,
since February 26, 1993; prior thereto, Managing
Director of the Insurance Division, Chase Manhattan
Bank, New York.
Jeffery D. Lowe, Vice President and Director of the Company, The Ohio 1983
51 Casualty Insurance Company, West American Insurance
Company, American Fire and Casualty Company, Ohio
Security Insurance Company and OCASCO Budget, Inc.;
President and Director of Ohio Life Insurance Company.
Lauren N. Patch, President, Chief Executive Officer and Director of the 1987
46 Company, The Ohio Casualty Insurance Company, West
American Insurance Company, American Fire and Casualty
Company, Ohio Security Insurance Company and OCASCO
Budget, Inc.; Vice Chairman and Director of The Ohio
Life Insurance Company. Mr. Patch became Chief Executive
Officer of the Company on January 1, 1994, and President
of the Company on January 1, 1991.
</TABLE>
- ---------------
(1) Ages are listed as of the date of the Annual Meeting.
(2) The Ohio Casualty Insurance Company, Ohio Security Insurance Company,
American Fire and Casualty Company, West American Insurance Company, OCASCO
Budget, Inc. and The Ohio Life Insurance Company are subsidiaries of the
Company.
5
<PAGE> 8
OTHER DIRECTORSHIPS AND RELATED TRANSACTIONS AND RELATIONSHIPS
Wayne Embry is also a director of M. A. Hanna Company and Society
Corporation; Vaden Fitton, Joseph L. Marcum, Lauren N. Patch and Stanley N.
Pontius are also directors of First Financial Bancorp.
Joseph L. Marcum, the Chairman of the Board of the Company, retired as the
Chief Executive Officer of the Company on December 31, 1993. Mr. Marcum receives
annual benefits from the Company of $142,393 pursuant to the Company's Employees
Retirement Plan. See "Pension Plans."
Jeffery D. Lowe is the son-in-law of Joseph L. Marcum; Lauren N. Patch and
Howard L. Sloneker III are brothers-in-law; and Stephen S. Marcum is the son of
Joseph L. Marcum.
MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
During 1996, the Board of Directors held five meetings. No director
attended fewer than 75% of the aggregate number of meetings of the Board of
Directors and the committees on which he or she served.
The Board of Directors has standing Executive, Audit and Executive
Compensation Committees, but does not have a Nominating Committee or committee
performing similar functions.
The Executive Committee held two meetings during 1996. The members of the
Executive Committee are Joseph L. Marcum, Lauren N. Patch, and Howard L.
Sloneker III. Each Executive Committee member attended both of the meetings in
1996. The Executive Committee is empowered to exercise all the powers of the
Board of Directors in the management of the Company between meetings of the
Board of Directors, other than filling vacancies on the Board or any other
committee of the Board.
The Audit Committee held two meetings during 1996. The members of the Audit
Committee are Arthur J. Bennert, Jack E. Brown, Catherine E. Dolan, Wayne Embry,
Vaden Fitton, Joseph L. Marcum, Stephen S. Marcum, Stanley N. Pontius and
William L. Woodall. Each Audit Committee member attended both of the meetings in
1996. The Audit Committee's primary function is to meet with the independent
auditors for the Company and to review the Company's internal and independent
auditing and financial controls.
The Executive Compensation Committee held two meeting during 1996. The
current members of the Executive Compensation Committee are Jack E. Brown, Vaden
Fitton, and Stanley N. Pontius. Each member of the Executive Compensation
Committee attended both meetings of the committee. The Executive Compensation
Committee administers the Company stock option plans and carries out the
responsibilities described in the Executive Compensation Committee Report in
this Proxy Statement.
DIRECTORS FEES AND COMPENSATION
Each director received $25,000 for services as a director of the Company
during 1996. Each non-employee director of the Company received $1,500 per
meeting for attending the regular meetings of the Board of Directors in 1996.
Members of the Audit Committee also received $5,000 each for serving on that
committee. In addition, members of the Executive Compensation Committee received
$300 per meeting for each meeting attended. Joseph L. Marcum was paid an
additional $65,000 during 1996 as compensation for serving as the Chairman of
the Board.
On May 21, 1996, Arthur J. Bennert and Catherine E. Dolan, each of whom is
a non-employee director of the Company, were granted a non-qualified stock
option (an "NQSO") to purchase 3,000 common shares of the Company at an exercise
price of $34.50 per share, the
6
<PAGE> 9
closing market price of the common shares on the date of grant. Any individual
who becomes or is re-elected a non-employee director is automatically granted an
NQSO to purchase 3,000 common shares effective on the third business day
following the first meeting of the Board of Directors after his/her election or
appointment to the Board. The exercise price of each NQSO granted to a
non-employee director is equal to the fair market value of the common shares on
the date of grant. NQSOs granted to non-employee directors have terms of ten
years (subject to earlier termination in certain cases) and may not be exercised
during the six months following their date of grant.
EXECUTIVE COMPENSATION
The following table presents information concerning compensation provided
by the Company to its Chief Executive Officer and to each of the Company's four
most highly compensated executive officers, other than the Chief Executive
Officer, for services rendered in all capacities for each of the Company's last
three completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------ ----------------------------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING DIVIDEND
NAME AND SALARY COMPENSATION STOCK OPTIONS/ PAYMENT
PRINCIPAL POSITION YEAR ($)(1) ($)(2)(3)(4) AWARDS($)(5) SARS(#) RIGHTS(#)(6)
- ------------------------ ---- ------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lauren N. Patch 1996 529,560 47,881 57,709 30,000 30,000
President and Chief 1995 474,231 13,477 0 0 0
Executive Officer 1994 374,616 10,489 0 0 0
Andrew T. Fogarty(7) 1996 296,749 47,058 0 10,000 0
Senior Vice 1995 231,300 6,939 0 0 0
President 1994 220,838 6,625 0 0 0
Barry S. Porter 1996 248,604 22,484 23,677 10,000 10,000
Chief Financial 1995 233,208 6,996 0 0 0
Officer and Treasurer 1994 211,285 6,339 0 0 0
Jeffery D. Lowe 1996 231,012 6,180 0 3,000 0
Vice 1995 231,012 3,090 0 0 0
President 1994 227,781 4,699 0 0 0
Michael L. Evans 1996 199,500 5,985 18,686 10,000 10,000
Executive Vice 1995 174,462 4,500 0 0 0
President 1994 134,262 4,028 0 0 0
</TABLE>
- ---------------
(1) Includes annual directors' fees for Messrs. Patch and Lowe.
(2) Includes for Messrs. Patch, Fogarty, Porter, Lowe and Evans for 1996 the
amounts of $4,500, $4,500, $4,500, $4,500 and $4,500, respectively,
contributed by the Company under the Company's Employee Savings Plan. Also
includes for Messrs. Patch, Fogarty, Porter, Lowe and Evans for 1996 the
amounts of $10,637, $2,735, $2,958, $1,680 and $1,485, respectively,
contributed by the Company under the Company's Supplemental Executive
Savings Plan, a non-qualified plan.
(3) Includes the following amounts paid in 1997 to the named executives to
reimburse them for income taxes incurred as a result of the grant of the
restricted shares described in note (5) below: Mr. Patch $32,744, Mr. Porter
$15,026 and Mr. Evans $13,066.
(4) Includes for Mr. Fogarty $25,905, the fair market value on February 20, 1997
of 628 common shares which were awarded to him on that date for services
rendered in 1996. Also includes $13,918 paid by the Company to reimburse Mr.
Fogarty for income later incurred as a result of the shares awarded.
(5) Awards under the Company's Annual Incentive Plan are made in the form of
restricted common shares (a description of the Plan is set forth in the
Executive Compensation
7
<PAGE> 10
Committee Report on Executive Compensation). Shares of restricted stock were
granted on February 20, 1997 to certain of the named executive officers
pursuant to the Plan for services rendered in 1996. Such restricted common
shares vest on the third anniversary of the date of grant so long as the
executive officer is an employee on such date (with earlier vesting
occurring on retirement, death or disability or termination of employment
following a change of control). Dividends are paid on restricted common
shares at the same rate as paid on the Company's common shares. No
restricted common shares were outstanding at the end of 1996.
(6) Dividend payment rights were granted to the named executive officers in
1996. One third of these rights become effective on each anniversary of the
grant date. These rights entitle to the holder on the April 15th following
the fourth anniversary of the grant date to receive, for each dividend
payment right, an amount in cash equal to the aggregate amount of dividends
that the Company has paid on each common share from the date on which such
right becomes effective through the payout date subject to certain
restrictions.
(7) Mr. Fogarty retired as executive officer of the Company effective January 1,
1997.
The following table sets forth information concerning the grant of stock
options and SARs during the last fiscal year to each of the executive officers
of the Company named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS/SARS PRICE APPRECIATION
NUMBER OF GRANTED FOR
SECURITIES TO EXERCISE OPTION TERM(2)
UNDERLYING EMPLOYEES OR BASE ---------------------
OPTIONS/SARS IN FISCAL PRICE EXPIRATION ($) ($)
NAME GRANTED #(1) YEAR# ($/SH) DATE 5% 10%
- ------------------- ------------ ------------ -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lauren N.Patch 30,000 24.79 35.00 01/23/06 660,339 1,673,430
Andrew T. Fogarty 10,000 8.26 35.00 01/23/06 220,113 557,810
Barry S. Porter 10,000 8.26 35.00 01/23/06 220,113 557,810
Jeffery D. Lowe 3,000 2.47 35.00 01/23/06 66,034 167,343
Michael L. Evans 10,000 8.26 35.00 01/23/06 220,113 557,810
</TABLE>
- ---------------
(1) All of these stock options, which were granted pursuant to the Ohio Casualty
Corporation 1993 Stock Incentive Program, were granted at market value on
the date of grant, become exercisable as to one-third of the option shares
on each of the first three anniversaries of the date of grant and have a
term of ten years. In the event of a change in control of the Company, the
stock options would become exercisable in full. Stock options reported
consist of incentive stock options and non-qualified stock options.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% annual appreciation rates set by the Securities Exchange
Commission for illustrative purposes, and, therefore, are not intended to
forecast future financial performance or possible future appreciation in the
price of the Company's common shares. Shareholders are therefore cautioned
against drawing any conclusions from the appreciation data shown, aside from
the fact that optionees will only realize value from the option grants shown
when the price of the Company's common shares appreciates, which benefits
all shareholders commensurately.
8
<PAGE> 11
OPTION/SAR EXERCISES IN LAST FISCAL YEAR
The following table sets forth information concerning the exercise of stock
options and SARs during the last fiscal year by each of the executive officers
of the Company named in the Summary Compensation Table and the fiscal year-end
value of unexercised stock options and SARs held by such executive officers:
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
--------------------------------------------------
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SHARES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS/SARS OPTIONS/SAR
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lauren N. Patch 3,500 29,750 30,000 15,000
Barry S. Porter 3,500 21,562 10,000 5,000
Andrew T. Fogarty 3,300 19,111 10,000 5,000
Jeffery D. Lowe 0 0 3,000 1,500
Michael L. Evans 3,500 29,874 10,000 5,000
</TABLE>
- ---------------
(1) "Value of Unexercised In-the-Money Options/SARs at Fiscal Year-End" is based
upon the fair market of the Company's common shares on December 31, 1996
($35.50), less the exercise price of in-the-money options and SARs at the
end of the last fiscal year.
PENSION PLANS
The following table sets forth the estimated annual benefits payable under
the Employees Retirement Plan and the Ohio Casualty Insurance Company Benefit
Equalization Plan (the "Benefit Equalization Plan") to participants in such
plans, including the executive officers named in the Summary Compensation Table,
upon retirement in specified compensation and years of service classifications:
PENSION PLANS TABLE
<TABLE>
<CAPTION>
15 20 25 30 35 40 45
ANNUAL EARNINGS YEARS YEARS YEARS YEARS YEARS YEARS YEARS
- --------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 125,000 $ 28,056 $ 37,408 $ 46,760 $ 56,112 $ 65,464 $ 74,816 $ 84,168
175,000 40,056 53,408 66,760 80,112 93,464 106,816 120,168
225,000 52,056 69,408 86,760 104,112 121,464 138,816 156,168
275,000 64,056 85,408 106,760 128,112 149,464 170,816 192,168
325,000 76,056 101,408 126,760 152,112 177,464 202,816 228,168
375,000 88,056 117,408 146,760 176,112 205,464 234,816 264,168
400,000 94,056 125,408 156,760 188,112 219,464 250,816 282,168
425,000 100,056 133,408 166,760 200,112 233,464 266,816 300,168
450,000 106,056 141,408 176,760 212,112 247,464 282,816 318,168
475,000 112,056 149,408 186,760 224,112 261,464 298,816 336,168
500,000 118,056 157,408 196,760 236,112 275,464 314,816 354,168
525,000 124,056 165,408 206,760 248,112 289,464 330,816 372,168
550,000 130,056 173,408 216,760 260,112 303,464 346,816 390,168
600,000 142,056 189,408 236,760 284,112 331,464 378,816 426,168
</TABLE>
9
<PAGE> 12
Retirement benefits under the Company's Employees Retirement Plan, a
defined benefit plan qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), are generally payable to full-time and regular
part-time salaried employees whose participation in the plan has vested
(currently requiring the completion of five years of service) upon retirement at
age 65 or in reduced amounts upon retirement prior to age 65 if the participant
has ten years of vested service. A retiree's benefit amount is based upon his or
her credited years of service and average annual compensation (salary) for the
five consecutive years of highest salary during the last ten years of service
immediately prior to age 65 or, if greater, the average annual compensation paid
during the 60 consecutive month period immediately preceding retirement or other
termination of employment. Such retirement benefits are reduced by a portion of
the retiree's Social Security-covered compensation. Benefits figures shown in
the table above are computed on the assumption that participants retire at age
65 and are entitled to a single life annuity.
Section 401(a)(17) of the Code prohibits compensation in excess of $150,000
($160,000 for 1997) from being taken into account in determining benefits
payable under a qualified pension plan. As a result, the Benefit Equalization
Plan was adopted for those employees who are adversely affected by these
provisions of the Code. The Benefit Equalization Plan provides for payment of
benefits that would have been payable under the Employees Retirement Plan but
for the limitation on compensation imposed by the Code. Upon retirement,
participants receive the actuarial equivalent present value of the benefit
payable under the Benefit Equalization Plan in a lump sum.
At December 31, 1996, credited years of service and average annual earnings
under the Employees Retirement Plan and the Benefit Equalization Plan for the
executive officers named in the Summary Compensation Table were: Lauren N.
Patch, 20.5 years ($372,046); Barry S. Porter, 22.5 years ($210,852); Andrew T.
Fogarty, 24.5 years ($231,569); Jeffery D. Lowe, 21.5 years ($194,475); and
Michael L. Evans, 21.5 years ($148,778). The compensation covered by the
Employees Retirement Plan and the Benefit Equalization Plan is the amount shown
in the Summary Compensation Table as salary, less any directors' fees.
EXECUTIVE COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION POLICIES
The Company's executive compensation programs are designed to enable it to
recruit, retain and motivate outstanding executives. This is essential for the
Company to achieve its challenging performance objectives and to achieve
superior investment returns for its shareholders.
The Committee believes that the Company's executive compensation
opportunities, including those for the Company's Chief Executive Officer
("CEO"), should create incentives for superior performance and consequences for
below-target performance. In 1996, the Company's Board of Directors approved a
redesigned executive compensation program which more closely links the level of
executive compensation with Company performance. A substantial portion of each
executive's compensation potential is now tied to achievement of annual
objectives and long-term shareholder returns. An important consideration in the
design of the new executive compensation program was the use of Company shares
to encourage greater share ownership by Company executives so that the
opportunity of the Company's executives for financial gain is directly linked to
increases in shareholder wealth, as reflected by the market price of the
Company's common shares. This redesigned executive compensation program was
first implemented during the 1996 fiscal year.
The Company's basic compensation program for its executive officers and
approximately 17 additional key executives (collectively called the "Partners")
consists of the following ele-
10
<PAGE> 13
ments: (i) base salary established on an annual basis, (ii) an Annual Incentive
Plan whereby annual awards, payable in the form of restricted common shares, may
be made to the Partners based on individual and team performance with team
performance being measured generally by the Company's total return performance
as measured against predetermined return on equity (ROE) goals; and (iii) a
Long-Term Incentive Plan whereby stock options and dividend payment rights are
awarded on an annual basis. As described more fully below, each element of the
Company's executive compensation program has a somewhat different purpose. Stock
options and restricted shares are issued under the shareholder-approved 1993
Stock Incentive Program.
As part of the administration of the Company's new executive compensation
program, the Committee will annually examine short-term and long-term
compensation levels for the CEO and other senior executives against a survey of
the compensation practices of comparably sized property and casualty insurance
companies (the "survey companies"). The survey companies include some, but not
all, of the companies covered in the Dow Jones Insurance Index for Property and
Casualty Companies included in the Performance Graph on page 14.
SPECIFIC COMPENSATION PROGRAMS
Base salary ranges for the CEO and the other executive officers of the
Company are based on individual performance, the responsibilities associated
with an individual's position and the skills and experience of the individual,
which are reviewed annually and benchmarked against similar positions among the
survey companies. Salary ranges are targeted at the median level for similar
positions among the survey companies. The base salary of the CEO is established
by the Committee. The base salaries of the other executive officers are
established by the CEO. Salary adjustments are evaluated on an annual basis and
are based on individual performance, as determined in accordance with the
Company's executive performance evaluation system, and as reflective of
competitive conditions existing at the time.
The Company's Annual Incentive Plan and its Long Term Incentive Plan are
designed to provide participants with the opportunity to receive total
compensation targeted at 75th percentile of salaries for similar positions among
the survey companies.
The potential award opportunities for each of the executives who
participate in the Annual Incentive Plan are determined at the beginning of such
year by the Committee for the executive officers, including the CEO, and by the
CEO for all other Partners. Potential award opportunities for a fiscal year,
which are expressed as a percentage of a participant's base salary for the
fiscal year, are based on a participant's position in the Company's management
organization, with higher percentages being assigned to executives who hold more
senior positions. Actual award amounts are based on a combination of team
performance and individual performance. Team performance, which accounts for up
to 50% of the total award potential, is based on the Company's actual
performance against pre-determined return on equity and premium growth goals for
the year. If the Company does not meet the established threshold performance
level, no team awards are made. If the threshold performance is achieved, each
of the executive officers and other Partners receives a team award, the amount
of which depends on the extent to which the Company's performance exceeds the
threshold level and the potential award opportunity assigned to each individual
participant, as described above. Individual awards are made only if the
performance level required for team awards has been met and then only if a
determination is made by the Committee and CEO to fund such awards. The
Committee determines, based on a recommendation from the CEO, the level of
funding for the individual award pool based on the performance achieved by the
management team on a number of criteria. The pool is allocated among the
participants on the basis of their performance evaluations as determined by the
CEO (the CEO's performance evaluation is conducted by the Committee). Individual
performance accounts for the remaining 50% of the total award potential under
the Annual Incentive Plan.
11
<PAGE> 14
Awards under the Annual Incentive Plan are paid in restricted shares of the
Company. The Company also pays the taxable income resulting to the participant
from the grant. Such restricted stock shares may not be transferred by the
participant for a three-year period following the date of grant, unless the
participant dies or his employment is terminated as a result of disability or
retirement or following a change in control of the Company. If the employment of
the participant terminates for any other reason during such three-year period,
the restricted shares will be forfeited to the Company. The Committee believes
that restricted shares provide a strong incentive for executives to continue as
employees of the Company and to work to increase the value of the Company during
their employment. Awards under the Annual Incentive Plan for 1996 were paid in
the form of restricted common shares issued in February of 1997.
Awards under the Company's Long-Term Incentive Plan consist of stock
options, either incentive stock options or non-qualified stock options, and
dividend payment rights. Stock options are granted at market value on the date
of grant and increase in value only to the extent of appreciation in the
Company's common shares. The stock options become exercisable over a period of
three years and expire at the end of ten years from the date of grant. Stock
option grants are made at the beginning of each year, although grants may be
made at different times to participants who are promoted or newly hired. The
number of stock options to be granted annually to an individual participant over
a three-year period is based on the participant's salary level and position.
While it is the intention of the Committee to make stock options grants
annually, the Committee has reserved the right to eliminate stock option awards
or make other modifications in the Long-Term Incentive Plan. The Committee also
intends to hold constant the number of shares granted to each participant over
each three-year period, although it has reserved the right to make changes in
the number of shares granted to any participant.
In addition to stock options, participants in the Long-Term Incentive Plan
may be granted dividend payment rights. These rights, which become effective
over a three-year period, entitle the holder on the scheduled payout date to
receive, for each right, an amount in cash equal to the aggregate amount of
dividends that the Company has paid on each common share from the date on which
the dividend payment right becomes effective through the payout date. If the
holder ceases to be an employee prior to the payout date as a result of death,
disability, retirement or as a result of termination following change in control
of the Company, the Company will pay, for each dividend payment right which is
effective on the termination date, a cash amount equal to the aggregate amount
of dividends that the Company has paid on each Common Share from the date on
which the dividend payment right became effective through the termination date.
If the employment of the holder terminates for any other reason, the holder will
not be entitled to any payment whatsoever under this agreement. The employees to
whom stock options and dividend payment rights are to be awarded are determined
annually by the Committee for the executive officers, including the CEO, and by
the CEO for all other Partners.
Section 162(m) of the Code generally limits the corporate tax deduction for
compensation paid to executive officers named in the Summary Compensation Table
in the proxy statement to $1 million, unless certain requirements are met. None
of the executive officers of the Company exceeded the threshold for
deductibility under Section 162(m) in 1996.
BASES FOR CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee evaluates the performance of the CEO at least annually. In
1996, Mr. Patch received a base salary of $505,000, which represented a 12.2%
increase over his base salary for 1995. The Committee's decision to increase Mr.
Patch's base salary was based on its evaluation of his performance and its
current policy that the salaries for the Company's executive officers, including
Mr. Patch, should be set at the median level for CEO's of the survey companies.
Mr. Patch also received an award under the Annual Incentive Plan for service in
1996 of a total of 1,399 restricted common shares of the Company, which were
issued to him in 1997 and which
12
<PAGE> 15
will be forfeited to the Company if he leaves the Company during the three-year
period following the date of issue. As described in detail above, the
Committee's determination of the number of restricted common shares awarded to
Mr. Patch (and to all of the other executive officers) under the Annual
Incentive Plan was based on the Company's 1996 total return performance as
measured against an established return on equity target. No individual awards
were made to any of the Company's executive officers under the Annual Incentive
Plan for 1996. The Company also granted to Mr. Patch in 1996 pursuant to the
Long-Term Incentive Plan an incentive stock option for 8,571 shares and a
non-qualified stock option for 21,429 shares. The number of stock options
granted to Mr. Patch was based on his salary level and position with the
Company. As previously indicated, in establishing the compensation of Mr. Patch
and the other executive officers, the goal of the Committee has been to create a
total compensation opportunity through base salary and awards under the Annual
Incentive Plan and the Long-Term Incentive Plan which, if realized as a result
of the Company's performance, would result in total compensation being at the
75th percentile for similar positions at the survey companies.
The foregoing report on executive compensation is provided by the following
directors, who constituted the Executive Compensation Committee during 1996:
VADEN FITTON JACK E. BROWN JOSEPH L. MARCUM
EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The directors of the Company who served as members of the Company's
Executive Compensation Committee during 1996 were Vaden Fitton, Jack E. Brown
and Joseph L. Marcum. Joseph L. Marcum, is the Chairman of the Board of
Directors and former President and Chief Executive Officer of the Company. Mr.
Fitton and Barry S. Porter, the Company's Chief Financial Officer, also served
in 1996, as members of the Executive Compensation Committee of First Financial
Bancorp, whose Chief Executive Officer, Stanley N. Pontius is a member of the
Board of Directors of the Company.
As indicated in the Executive Compensation Committee Report on Executive
Compensation, Lauren N. Patch, the Company's President and Chief Executive
Officer, participates in decision-making regarding the compensation of certain
executive officers named in the Summary Compensation Table. Mr. Patch is not a
member of the Executive Compensation Committee.
13
<PAGE> 16
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph compares the five-year cumulative total shareholder
return, including reinvested dividends, of the Company with the Dow Jones Equity
Market Index and the Dow Jones Insurance Index for Property and Casualty
Companies(1):
<TABLE>
<CAPTION>
Measurement Period DJ Equity Market DJ Insurance P & Ohio Casualty
(Fiscal Year Covered) Index C (1) Corporation
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 108.61 121.77 133.38
1993 119.41 122.78 141.06
1994 120.33 129.11 131.34
1995 166.31 182.40 188.37
1996 205.57 219.31 180.58
</TABLE>
- ---------------
(1) The Dow Jones Insurance Index for Property and Casualty Companies (13
companies, including the Company) that are traditionally considered as a
peer group of property and casualty insurance companies within the United
States. The companies making up the Index are American International; Chubb
Corp.; Cincinnati Financial; Continental Corp.; GEICO Corp.; General RE
Corp.; Hartford Steam Boiler Co.; Loews Corp.; Ohio Casualty Corporation;
Progressive Corp.; Safeco Corp.; St. Paul Co.'s; and USF&G Corp.
PROPOSED AMENDMENT TO 1993 STOCK INCENTIVE PROGRAM
The Company's 1993 Stock Incentive Program, which was approved by the
shareholders of the Company at the 1993 Annual Meeting of Shareholders, provides
for the issuance of incentive stock options ("ISOs"), nonqualified stock options
("NQSOs") (ISOs and NQSOs are herein referred to together as "Stock Options"),
stock appreciation rights ("SARs"), limited stock appreciation rights ("LSARs")
and restricted stock awards (collectively, "Awards").
The purpose of the 1993 Program is to attract and retain outstanding
individuals as directors, officers and other key employees of the Company and
its subsidiaries and to furnish incentives to such persons by providing them
opportunities to acquire common shares of the Company on advantageous terms.
The 1993 Program is administered by the Executive Compensation Committee of
the Board of Directors of the Company (the "Committee"). Officers and other
full-time, salaried employees of the Company and its subsidiaries (including the
persons identified in the Summary Compensation Table on page ) who are
selected by the Committee are eligible to receive Stock Options and other Awards
under the 1993 Program. Directors of the Company who are not full-time employees
of the Company or its subsidiaries ("Non-Employee Directors") are participants
in
14
<PAGE> 17
the 1993 Program solely for purposes of receiving certain NQSO Awards. See
"Stock Option Grant to Non-Employee Directors."
The 1993 Program currently authorizes the granting of Stock Options and
other Awards for a total of 1,000,000 common shares and an additional 293,500
common shares of the Company from the prior plan, subject to adjustment to
reflect certain corporate events, including stock splits. As of the date of this
Proxy Statement, a total of 1,006,320 common shares were available for future
grants of Stock Options and other Awards. As of March 3, 1997, ISOs to purchase
an aggregate of 118,284 common shares were outstanding and held by 18 employees,
including executive officers; NQSOs to purchase an aggregate of 133,716 common
shares were outstanding and held by 4 employees, including executive officers
and 9 Non-Employee Directors; and restricted stock awards for a total of 5,579
common shares were outstanding and held by 18 executive officers. It is
estimated that a total of 60 employees of the Company and its subsidiaries and 9
Non-Employee Directors are currently eligible to participate in the 1993
Program.
DESCRIPTION OF AMENDMENTS
On February 20, 1997, the Board of Directors of the Company adopted,
effective upon shareholder approval at the Annual Meeting, the following
amendments to the 1993 Program (the "Amendments"):
1. For purposes of satisfying the requirements of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), the 1993
Program has been amended, subject to shareholder approval, to (i) provide
that no participant may be granted Stock Options and other Awards for more
than 75,000 common shares during any 12-month period, and (ii) to clarify
that members of the Committee must satisfy the requirements of "outside
directors" as such term is described in the Code and accompanying
regulations of the Internal Revenue Service. In addition, the 1993 Program
has been amended, subject to shareholder approval, to provide that the
Committee shall be comprised of directors who are "Non-Employee Directors"
as that term is defined in Rule 16b-3(b) promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended
(the "1934 Act").
2. The 1993 Program has been amended, subject to shareholder approval,
to permit the Company to grant Stand Alone Stock Appreciation Rights which
may be granted without reference to any stock option granted under the 1993
Program ("Stand Alone Stock Appreciation Rights"). Previous to such
amendment, upon exercise of SARs granted pursuant to the 1993 Program, the
holder must surrender a related stock option for the number of SARs being
exercised. Stand Alone Stock Appreciation Rights may be exercised by a
holder without having to surrender a stock option or any portion thereof.
3. The 1993 Program has also been amended, subject to shareholder
approval, to clarify the circumstances under which Non-Employee Directors
are entitled to receive NQSOs. The Committee has interpreted the language
of the 1993 Program as providing for the grant of a NQSO to each
Non-Employee Director on the third business day following the first meeting
of the Board of Directors after his or her election or appointment to the
Board and on the third business day following re-election to the Board by
the shareholders. The proposed Amendment to the 1993 Program is intended to
clarify and confirm such interpretation of the Committee.
The Amendments will become effective as of February 20, 1997, the date of
approval of the Amendments by the Board of Directors, if a majority of the
common shares of the Company, present in person, or by proxy at the Annual
Meeting is voted in favor of the Amendments. The closing price of the Company's
common shares as reported in the NASDAQ National Market
15
<PAGE> 18
System on March 3, 1997 (record date for the Annual Meeting) was $39.50 per
share. The Amendments are discussed in greater detail below.
OPERATION OF THE 1993 PROGRAM
There follows a summary of the 1993 Program. This summary is qualified in
its entirety by reference to the copy of the 1993 Program, as amended, attached
to this Proxy Statement as Exhibit A.
SHARES AVAILABLE UNDER THE 1993 PROGRAM
Common shares issued pursuant to the 1993 Program may be either authorized
and unissued common shares or treasury shares. If there is a lapse, expiration,
termination or cancellation of any Stock Option or Award without the issuance of
common shares or payment of cash thereunder, or if common shares are issued
under any Award and thereafter are reacquired by the Company pursuant to rights
reserved upon the issuance thereof, in each case so long as the holder thereof
has not received any benefits of ownership of such common shares, the common
shares subject to or reserved for such Stock Option, or other Award may again be
used for new Stock Options or other authorized Awards under the 1993 Program.
In the event of the exercise of an SAR or an LSAR, the number of common
shares reserved for issuance under the 1993 Program will be reduced by the
number of common shares covered by the Stock Option or portion thereof which is
surrendered in connection with such exercise. If the Amendments are adopted and
Stand Alone Stock Appreciation Rights are authorized the exercise of Stand Alone
Stock Appreciation Rights will also reduce the number of common shares reserved
for issuance under the 1993 Program by the number of Stand Alone Stock
Appreciation Rights being exercised.
ADMINISTRATION
The 1993 Program is administered by the Committee. The Committee has
complete discretion to select the individuals to whom Stock Options and other
Awards are granted (other than Non-Employee Directors) and to establish the
terms and conditions of each such grant, subject in each case to the provisions
of the Program. In addition, the Committee is empowered to interpret the 1993
Program and make all determinations necessary or advisable for its
administration. Presently, the members of the Committee are Messrs. Vaden
Fitton, Jack E. Brown, and Stanley N. Pontius.
Section 162(m) of the Code prohibits a publicly held corporation, such as
the Company, from claiming a deduction on its federal income tax return for
compensation in excess of $1 million paid for a given fiscal year to the chief
executive officer (or person acting in that capacity) at the close of the
corporation's fiscal year or any of the four most highly compensated officers of
the corporation, other than the chief executive officer, at the end of the
corporation's fiscal year. The $1 million compensation deduction limitation does
not apply to "performance-based compensation." The regulations issued by the
Internal Revenue Service under Section 162(m) (the "IRS Regulations") set forth
a number of provisions which compensatory plans, such as the 1993 Program, must
contain if Stock Options issued under such plans are to qualify as
performance-based for the purposes of Section 162(m).
One of the Amendments that is necessary in order that the 1993 Program will
satisfy the requirements for performance based compensation set forth in the IRS
Regulation relates to the composition of the Committee. If the Amendments are
adopted by the shareholders, each member of the Committee will be required to be
an "outside director" as that term is used in the Code and the accompanying
regulations of the Code. The Amendments will also require that the Committee be
comprised of persons who satisfy the requirements of a "Non-Employee Director"
as that term is defined in newly-amended Rule 16b-3(b) under the 1934 Act. Rule
16b-3
16
<PAGE> 19
provides for an exemption from the short-swing profits recapture provisions of
Section 16(b) of the 1934 Act for certain transactions between an issuer and its
officers or directors involving shares of the issuer.
ELIGIBILITY
Officers and other full-time, salaried employees of the Company and its
subsidiaries (including the persons named in the Summary Compensation Table on
page 7) who are selected by the Committee are eligible to receive Stock Options
and other Awards. Non-Employee Directors are participants in the 1993 Program
solely for purposes of receiving certain NQSO awards. There are currently 9
Non-Employee Directors of the Company.
A second amendment of the 1993 Program that is necessary in order that the
1993 Program will satisfy the requirements of the IRS Regulations, for Stock
Options under Section 162(m) of the Code relates to the maximum number of common
shares which can be allocated to any one person under the 1993 Program. The 1993
Program originally included no limit on the number of common shares that could
be allocated to any one person, other than the limits imposed on common shares
covered by NQSO awards granted to Non-Employee Directors. The Amendments provide
that no participant may be granted Stock Options and other Awards for more than
75,000 common shares during any calendar year.
As described in the Executive Compensation Committee Report on Executive
Compensation, grants of stock options and restricted common shares under the
1993 Program are significant elements of the Company's executive compensation
program. The following table sets forth the number and exercise price of Stock
Options and restricted common shares granted and issued during 1996 and 1997
(through the date of this Proxy Statement) under the 1993 Program to (1) each of
the executive officers of the Company named in the Summary Compensation Table,
(ii) all current executive officers of the Company as a group, (iii) all current
directors who are not executive officers as a group and (iv) all employees,
including all current officers who are not executive officers, as a group. None
of the nominees for election as director who is not an executive officer
received stock options or other awards in 1996 or 1997 (through the date of this
proxy statement). No Stock Options or other Awards have been granted to
associates of any of the directors or executive officers, and other than the
persons identified in the following table,
17
<PAGE> 20
no person received five percent or more of the Stock Options or restricted
shares granted under the 1993 Program during 1996 or 1997.
<TABLE>
<CAPTION>
1996 1997 1996 1997
OPTION OPTION 1997 DIVIDEND DIVIDEND
1996 EXERCISE 1997 EXERCISE RESTRICTED PAYMENT PAYMENT
NAME OR GROUP OPTIONS# PRICE OPTIONS# PRICE SHARES RIGHTS# RIGHTS#
- -------------------------- -------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Lauren N. Patch 30,000 $35.00 30,000 $41.375 1,399 30,000 30,000
Chief Executive Officer
Barry S. Porter 10,000 $35.00 10,000 $41.375 574 10,000 10,000
Chief Financial Officer
Andrew T. Fogarty 10,000 $35.00 0 0 0 10,000 0
Senior Vice President
Jeffery D. Lowe, 3,000 $35.00 0 0 0 3,000 0
Vice President
Michael L. Evans 10,000 $35.00 10,000 $41.375 453 10,000 10,000
Executive Vice President
All current executive 99,000 $35.00 111,000 $41.375 5,579 102,000 111,000
officers as a group(1) 3,000 $33.00
All current directors who 6,000 $34.50 0 0 0 0 0
are not executive
officers as a group
All employees (including 0 0 0 0 1,601 0 0
all current officers 0 0
who are not executive
officers), as a group
</TABLE>
- ---------------
(1) No restricted shares were granted in 1996. Information concerning the
restricted shares awarded in 1997 appears in the Summary Compensation Table
for 1996 because these restricted shares were granted in connection with
services rendered in 1996.
(2) As discussed in the Report of the Executive Compensation Committee, it is
anticipated that a similar number of Stock Options will be granted under the
1993 Program to executive officers in 1998.
(3) See Report of the Executive Compensation Committee for discussion of
restricted share awards.
DURATION
Any grant of a Stock Option or other Award must be made within ten years
after the date the 1993 Program was adopted by the Company's Board of Directors
(February 18, 1993).
ADJUSTMENTS
The 1993 Program provides for adjustment in the number of common shares
reserved for issuance under the 1993 Program, the maximum number of common
shares which may be sold or awarded to any participant and the number and
exercise or purchase price of common shares covered by each outstanding Stock
Option or other Award in the event of a stock dividend, stock split or other
change in the Company's capitalization affecting its common shares and for
adjustment of Stock Options or other Awards in the event of changes in the
common shares resulting from reorganization, sale, merger, consolidation or
similar occurrence.
TERMS OF AWARDS
Stock Options. The option exercise price of any Stock Option granted under
the 1993 Program may not be less than 100% of the Fair Market Value of the
Common shares on the date of grant. In the case of any Stock Option, Fair Market
Value is defined as the closing price of the Company's common shares on the
relevant date, as reported in the NASDAQ National Market System. The period
during which any Stock Option may be exercised is determined by the
18
<PAGE> 21
Committee, but no Stock Option may be exercised after the expiration of ten
years from the date it is granted.
Under the 1993 Program, no employee may receive an ISO if, at the time of
grant, such employee owns of record or beneficially more than 10% of the total
combined voting power of all classes of stock of the Company or of any
subsidiary of the Company unless the option exercise price is at least 110% of
the Fair Market Value of the common shares covered by the ISO on the date of
grant and the option term does not exceed five years. The 1993 Program provides
that the aggregate fair market value (determined as of the time as ISO is
granted) of the common shares with respect to which ISOs may become exercisable
for the first time by any individual during any calendar year (under all option
plans of the Company and its subsidiary corporations) may not exceed $100,000.
The Committee may provide for the payment of the option exercise price of
common shares under a Stock Option in cash, by delivery of other common shares
of the Company having a Fair Market Value equal to the option exercise price of
such shares, or by delivery of an exercise notice accompanied by a copy of
irrevocable instructions to a broker to deliver promptly to the Company sale or
loan proceeds to pay the option exercise price. A Stock Option may be exercised
only after six months from its grant date. The 1993 Program contains special
rules governing the time of exercise of Stock Options and SARs in cases of
retirement, death, disability, or other termination of employment. The 1993
Program also provides that, upon the occurrence of a "Change in Control" (as
defined in the 1993 Program) of the Company, all Stock Options, SARs, Stand
Alone Stock Appreciation Rights and LSARs which have been outstanding for at
least six months (whether or not then exercisable) will become fully exercisable
as of the date of the Change in Control.
SARs. An SAR permits the holder to elect to surrender any related Stock
Option or portion thereof which is then exercisable and to receive in exchange
therefor cash in an amount equal to the excess of the Fair Market Value on the
date of such election of one common share over the option exercise price
multiplied by the number of common shares covered by the Stock Option or portion
thereof which is surrendered. The Committee has the discretion to satisfy the
right of a holder of an SAR to receive cash upon the exercise of an SAR, in
whole or in part, by the delivery of common shares. For purposes of an SAR, Fair
Market Value is defined as the closing price of the Company's common shares on
the date of grant.
SARs may be granted with respect to a Stock Option at the time of its grant
or at any time thereafter up to six months prior to its expiration. An SAR may
be granted to an employee regardless of whether such employee has been granted
an LSAR (as described below) with respect to the same Stock Option, although an
SAR may not be exercised during any period that an LSAR with respect to the same
Stock Option may be exercised. An SAR may be exercised only after six months
from its grant date. An SAR will be exercisable upon such additional terms and
conditions as may be prescribed by the Committee in its sole discretion, but in
no event will it be exercisable after the expiration of the related Stock
Option.
LSARs. The 1993 Program also permits the grant of LSARs to the holder of
any Stock Option at the time of the grant of the Stock Option or at any time
thereafter up to six months prior to its expiration. An LSAR may be granted to
an employee regardless of whether such employee has been granted an SAR with
respect to the same Stock Option. An LSAR will permit the holder to surrender
the related Stock Option or portion thereof which is then exercisable and
receive in exchange therefor cash in an amount equal to the excess of the Fair
Market Value on the date of such election of one common share over the option
exercise price multiplied by the number of common shares covered by the Stock
Option or portion thereof which is surrendered. An LSAR may be exercised only
after six months from its date of grant and only during the sixty-day period
commencing with the day following the date of a Change in Control of the
Company. In the case of an LSAR (other than an LSAR related to an ISO), Fair
Market Value is
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the higher of (i) the highest daily closing price of the Common Shares during
the sixty-day period following the Change in Control or (ii) the highest price
paid for Common Shares by the acquirer in the Change in Control. In addition, an
LSAR will be exercisable upon such additional terms and conditions as may be
prescribed by the Committee, in its sole discretion, but in no event will an
LSAR be exercisable after the expiration of the related Stock Option.
Restricted Stock. Restricted stock awards consist of common shares
transferred to participants, without other payment therefor (other than the
payment of the par value of such common shares if required by applicable law),
as additional compensation for their services to the Company or one of its
subsidiaries. Restricted stock awards will be subject to such terms and
conditions as the Committee determines appropriate including, without
limitation, restrictions on the sale or other disposition of such common shares
and rights of the Company to acquire such common shares upon termination of the
participant's employment within specified periods. Subject to such other
restrictions as are imposed by the Committee, the common shares covered by a
restricted stock award may be sold or otherwise disposed of only after six
months from the grant date of the award.
Stand Alone Stock Appreciation Rights. If the Amendments are adopted by
the shareholders, the 1993 Program will authorize the grant of Stand Alone Stock
Appreciation Rights. Unlike SARs and LSARs, Stand Alone Stock Appreciation
Rights may be granted without reference to any Stock Option granted under the
1993 Program. Thus, when a Stand Alone Stock Appreciation Right is exercised,
the holder is not required to surrender any related Stock Option or portion
thereof. Upon exercise of a Stand Alone Stock Appreciation Right, the holder
will receive cash (or, at the election of the Committee, common shares) in an
amount (or, in the case of common shares, having a Fair Market Value) equal to
the excess of the Fair Market Value on the date of election of one common share
over the exercise price of the right multiplied by the number of Stand Alone
Stock Appreciation Rights being exercised. For purposes of the Stand Alone Stock
Appreciation Rights, Fair Market Value is defined as the closing price of the
common shares as reported in the NASDAQ National Market System on the date of
grant. Stand Alone Stock Appreciation Rights may not be exercised during the six
months following the date of grant. The Amendments contain special rules
governing the time of exercise of Stand Alone Stock Appreciation Rights in case
of death or other termination of employment.
Stock Option Grants to Non-Employee Directors. The 1993 Program also
provides that each person who becomes a Non-Employee Director of the Company is
automatically granted an NQSO to purchase 3,000 common shares (reflects
adjustment for a two-for-one stock split in 1994) effective on the third
business day following the first meeting of the Board of Directors after
election or appointment to the Board. The option exercise price of each NQSO
granted to a Non-Employee Director is equal to the Fair Market Value of the
common shares on the date of grant.
The Committee has interpreted the language of the 1993 Program as providing
for the grant of a NQSO to a Non-Employee Director following his or her initial
election or appointment to the Board of Directors and following each subsequent
annual meeting of shareholders at which he or she is re-elected to the Board of
Directors. The Amendments clarify the language of the 1993 Program to provide
for the grant of a NQSO to a Non-Employee Director on the third business day
following the date of his or her first election or appointment to the Board of
Directors and on the third business day following each Annual Meeting of
Shareholders at which he or she is elected or re-elected to the Board of
Directors for an additional term of office by the shareholders of the Company.
NQSOs granted to Non-Employee Directors have terms of ten years. The 1993
Program contains special rules governing the time of exercise of NQSOs granted
to Non-Employee Directors in case of death, disability or other termination of
service as a director. Stock Options
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granted to Non-Employee Directors may not be exercised during the six months
following their date of grant.
Each Stock Option, SAR, LSAR, Stand Alone Stock Appreciation Right and
restricted stock award granted under the 1993 Program will not be transferable
other than by will or the laws of descent and distribution, and will be
exercisable, during a participant's lifetime, only by the participant or the
participant's guardian or legal representative.
AMENDMENTS AND DISCONTINUANCE
The Board of Directors may amend the 1993 Program from time to time or
terminate the 1993 Program at any time without the approval of the shareholders
of the Company except as such shareholder approval may be required (a) to
satisfy the requirements of Rule 16b-3 under the Securities Exchange Act of
1934, (b) to satisfy applicable tax law requirements or (c) to satisfy
applicable requirements of the NASDAQ National Market System. No such action
may, without the consent of the participant, reduce the amount of any existing
Award of such participant or adversely change the terms and conditions thereof.
The provisions of the 1993 Program governing grants of NQSOs to Non-Employee
Directors may not be amended more frequently than once every six months other
than to comport with changes in the Code, or the rules thereunder or changes in
the Employee Retirement Income Security Act of 1974.
The terms and conditions applicable to any Awards granted and outstanding
may at any time be amended, modified, or canceled, without shareholder approval,
by mutual agreement between the Committee and the participant so long as
shareholder approval of such amendment, modification or cancellation is not
required to permit the 1993 Program to satisfy the requirements of Rule 16b-3,
to satisfy applicable provisions of the tax laws or to satisfy any applicable
requirements of the NASDAQ National Market System. The Committee may, at any
time and in its sole discretion, declare any or all Stock Options (other than
any NQSO granted to a Non-Employee Director), SARs, Stand Alone Stock
Appreciation Rights and LSARs then outstanding under the 1993 Program to be
exercisable, and any or all outstanding restricted stock awards to be vested,
whether or not such Stock Options, SARs, Stand Alone Stock Appreciation Rights,
LSARs or other Awards are otherwise exercisable or vested.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code and the existing regulations
thereunder, the anticipated federal income tax consequences in respect of Stock
Options and other Awards granted under the 1993 Program are as described below.
The following discussion is not intended to be a complete statement of
applicable law and is based upon the federal income tax laws as in effect on the
date hereof. Since tax law is subject to change and since the application of tax
law may vary depending upon the facts applicable to the taxpayer, each
participant in the 1993 Program will be advised to consult with such
Participant's own tax advisor before taking action with respect to benefits
awarded to him or her under the 1993 Program.
ISOS
In general, a participant who is granted an ISO does not recognize taxable
income either on the date of grant or on the date of exercise. However, upon the
exercise of the ISO, the difference between the Fair Market Value of the common
shares received and the option price is a tax preference item potentially
subject to the alternative minimum tax.
Upon disposition of common shares acquired from exercise of an ISO,
long-term capital gain or loss is generally recognized in an amount equal to the
difference between the amount realized on the sale or disposition and the
exercise price. However, if the participant disposes of the common shares within
two years of the date of grant or within one year from the date of the issuing
of the common shares to the participant (a "Disqualifying Disposition"), then
the
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participant will recognize ordinary income, as opposed to capital gain, at the
time of disposition in an amount generally equal to the lesser of (i) the amount
of gain realized on the disposition or (ii) the difference between the Fair
Market Value of the common shares received on the date of exercise and the
exercise price. Any remaining gain or loss is treated as a short-term or long-
term capital gain or loss, depending upon the period of time the common shares
have been held.
The Company is not entitled to a tax deduction upon either exercise of an
ISO or disposition of common shares acquired pursuant to such exercise, except
to the extent that the participant recognizes ordinary income in a Disqualifying
Disposition.
If the holder of an ISO pays the exercise price, in whole or in part, with
previously acquired shares, the exchange will not affect the tax treatment of
the exercise. Upon such exchange, and except for Disqualifying Dispositions, no
gain or loss is recognized upon the delivery of the previously acquired shares
to the Company, and the shares received by the participant equal in number to
the previously acquired shares exchanged therefor will have the same basis and
holding period for capital gain or capital loss purposes as the previously
acquired shares. Shares received by the participant in excess of the number of
previously acquired shares will have a basis of zero and a holding period which
commences as of the date the shares are issued to the participant upon exercise
of the ISO. If such an exercise is effected using shares previously acquired
through the exercise of an ISO, the exchange of the previously acquired shares
will be considered a disposition of such shares for the purpose of determining
whether a Disqualifying Disposition has occurred.
NQSOS
In general, a participant receiving an NQSO generally does not recognize
taxable income on the date of grant of the NQSO. The participant must recognize
ordinary income generally at the time of exercise of the NQSO in the amount of
the difference between the Fair Market Value of the common shares on the date of
exercise and the option price. The ordinary income received will constitute
compensation for which tax withholding generally will be required. The amount of
ordinary income recognized by a participant will be deductible by the Company in
the year that the participant recognizes the income if the Company complies with
the applicable withholding requirement.
Common shares acquired upon exercise of an NQSO will have a tax basis equal
to their fair market value on the exercise date or other relevant date on which
ordinary income is recognized, and the holding period for the common shares
generally will begin on the date of exercise or such other relevant date. Upon
subsequent disposition of the common shares, the participant will recognize
long-term capital gain or loss if the participant has held the common shares for
more than one year prior to disposition, or short-term capital gain or loss if
the participant has held the common shares for one year or less.
If the holder of an NQSO pays the exercise price, in whole or in part, with
previously acquired shares, the exchange will not affect the tax treatment of
the exercise, i.e., the holder will recognize ordinary income in the amount by
which the fair market value of the shares received exceeds the exercise price.
Upon such exchange, no gain or loss is recognized upon delivery of the
previously acquired shares to the Company, and the shares received by the holder
equal in number to the previously acquired shares exchanged therefor will have
the same basis and holding period for capital gain purposes as the previously
acquired shares. Shares received by the holder of the NQSO in excess of the
number of previously acquired shares will have a basis equal to the fair market
value of such additional shares as of the date ordinary income equal to such
fair market value is realized and a holding period which commences as of such
date.
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SARS AND STAND ALONE STOCK APPRECIATION RIGHTS
A participant is not taxed upon the grant of SARS or Stand Alone Stock
Appreciation Rights. Rather, participants will generally be taxed upon the
exercise date, at ordinary income tax rates, on the amount of cash received and
the fair market value of any common shares received. The amount of ordinary
income recognized by a participant will be deductible by the Company in the year
in which the participant recognizes income.
RESTRICTED STOCK AWARDS
An employee who is granted a restricted stock award will not be taxed upon
the acquisition of such common shares so long as the interest in such common
shares is subject to a substantial risk of forfeiture. Upon lapse or release of
the restrictions, the participant will be taxed at ordinary income tax rates on
an amount equal to either the current fair market value of the common shares (in
the case of lapse or termination) or the sale price (in the case of a sale),
less any consideration paid for the shares. The Company will be entitled to a
corresponding deduction. The basis of restricted shares held after lapse or
termination of restrictions will be equal to their fair market value on the date
of lapse or termination of restrictions, and upon subsequent disposition, any
further gain or loss will be long-term or short-term capital gain or loss,
depending upon the length of time the common shares are held.
A participant may elect to be taxed at ordinary income tax rates on the
full fair market value of the restricted shares at the time of issuance (less
any consideration paid). The basis of the common shares so acquired will be
equal to the fair market value at such time. If the election is made, no tax
will be payable upon the subsequent lapse or release of the restrictions, and
any gain or loss upon disposition will be a capital gain or loss.
VOTE REQUIRED
Shareholder approval of the Amendments to the 1993 Program will require the
affirmative vote of the holders of a majority of the Company's common shares
represented in person or by proxy at the Annual Meeting or any adjournment
thereof. Under Ohio Law, abstentions and broker non-votes are counted as
present; the effect of an abstention or broker non-vote on the proposal is the
same as a "no" vote.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE AMENDMENTS TO THE 1993
PROGRAM. UNLESS OTHERWISE DIRECTED, THE PERSONS NAMED IN THE ENCLOSED PROXY WILL
VOTE THE COMMON SHARES REPRESENTED BY ALL PROXIES RECEIVED PRIOR TO THE ANNUAL
MEETING, AND NOT PROPERLY REVOKED, IN FAVOR OF THE AMENDMENTS TO THE 1993
PROGRAM.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31, 1996
accompanies this Proxy Statement.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Coopers & Lybrand has served for many years as
independent public accountants for the Company and its subsidiaries, and Coopers
& Lybrand will continue to serve as independent public accountants for 1997.
Management expects that representatives of that firm will be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
The Company's financial statements for the last fiscal year were examined
by Coopers & Lybrand. In connection with the audit function, Coopers & Lybrand
also reviewed the Com-
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pany's annual and quarterly reports and reviewed its filings with the Securities
and Exchange Commission.
SHAREHOLDER PROPOSALS
If an eligible shareholder wishes to present a proposal for action at the
next annual meeting of shareholders of the Company, it must be received by the
Company not later than November 25, 1997 for inclusion in the Company's Proxy
Statement and form of Proxy relating to that meeting. An eligible shareholder
may present no more than one proposal of not more than five hundred (500) words,
including supporting statements, for inclusion in the Company's proxy materials
for the next annual meeting. Proposals shall be sent to Ohio Casualty
Corporation, Attention: Howard L. Sloneker III, Secretary, 136 North Third
Street, Hamilton, Ohio 45025.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (SEC). Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based on the Company's review of the copies of such forms it has received,
the Company believes that all its officers, directors, and greater than ten
percent beneficial owners complied with all filing requirements applicable to
them with respect to transactions during fiscal 1996.
OTHER MATTERS
The Company files annually with the Securities and Exchange Commission an
Annual Report on Form 10-K. This report includes financial statements and
financial statement schedules.
A SHAREHOLDER OF THE COMPANY MAY OBTAIN A COPY OF THE ANNUAL REPORT ON FORM
10-K, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996, WITHOUT CHARGE BY SUBMITTING A WRITTEN
REQUEST THEREFOR TO THE FOLLOWING ADDRESS:
OHIO CASUALTY CORPORATION
Attention: Barry S. Porter
Chief Financial Officer/Treasurer
136 North Third Street
Hamilton, Ohio 45025
Management and the Board of Directors of the Company know of no business to
be brought before the Annual Meeting other than as set forth in this Proxy
Statement. However, if any matters other than those referred to in this Proxy
Statement should properly come before the Annual Meeting, it is the intention of
the persons named in the enclosed proxy to vote the common shares represented by
such proxy on such matters in accordance with their best judgment.
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EXPENSES OF SOLICITATION
The expense of proxy solicitation will be borne by the Company. Proxies
will be solicited by mail and may be solicited, for no additional compensation,
by officers, directors or employees of the Company or its subsidiaries, by
telephone, telegraph or in person. Brokerage houses and other custodians,
nominees and fiduciaries may be requested to forward soliciting material to the
beneficial owners of common shares of the Company, and will be reimbursed for
their related expenses. In addition, the Company has retained Morrow & Co.,
Inc., a professional soliciting organization, to assist in soliciting proxies
from brokerage houses, custodians and nominees. The fees and expenses of that
firm in connection with such solicitation are not expected to exceed $15,000.
By Order of the Board of Directors,
Howard L. Sloneker III, Secretary
March 14, 1997
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EXHIBIT A
OHIO CASUALTY CORPORATION 1993 STOCK INCENTIVE PROGRAM
(AS AMENDED THROUGH FEBRUARY 20, 1997)
1. PURPOSE. The purpose of the Ohio Casualty Corporation 1993 Stock
Incentive Program (the "Program") is to attract and retain outstanding
individuals as directors, officers and other key employees of Ohio Casualty
Corporation (the "Company") and its Subsidiaries, and to furnish incentives to
such persons by providing such persons opportunities to acquire Common Shares of
the Company, or monetary payments based on the value of such shares, on
advantageous terms as herein provided.
2. ADMINISTRATION. The Program will be administered by a committee (the
"Committee") of at least three persons which shall be either the Executive
Compensation Committee of the Board of Directors of the Company or such other
committee comprised entirely of persons that are both (i) Non-Employee Directors
as defined in Rule 16b-3 promulgated by the Securities and Exchange Commission,
and (ii) "outside directors" as defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder, as the Board
of Directors of the Company may from time to time designate. The Committee shall
interpret the Program, prescribe, amend and rescind rules and regulations
relating thereto, and make all other determinations necessary or advisable for
the administration of the Program. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration or
application of the Program shall be final, conclusive and binding upon all
persons participating in the Program and any person validly claiming under or
through persons participating in the Program. A majority of the members of the
Committee shall constitute a quorum at any meeting of the Committee, and all
determinations of the Committee at a meeting shall be made by a majority of its
members. Any determination of the Committee under the Program may be made
without a meeting of the Committee by a writing signed by all of its members.
The Company shall effect the granting of Awards under the Program in accordance
with the determination of the Committee, by execution of instruments in writing
in such form as approved by the Committee.
With respect to persons subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), transactions under this Program
are intended to comply with all applicable conditions of Rule 16b-3 of the
Securities and Exchange Commission or its successors. To the extent any
provision of the Program or action by the Committee fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
3. PARTICIPANTS. Participants in the Program will consist of such officers
and other full-time, salaried employees of the Company and its Subsidiaries as
the Committee in its sole discretion may designate from time to time to receive
Awards hereunder. The Committee's designation of a Participant in any year shall
not require the Committee to designate such person to receive an Award in any
other year. The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the type and amount of their
respective Awards, including without limitation (i) the financial condition of
the Company and its Subsidiaries; (ii) anticipated profits for the current or
future years; (iii) contributions of Participants to the profitability and
development of the Company and its Subsidiaries; and (iv) other compensation
provided to Participants. Non-Employee Directors shall also be Participants in
the Program solely for purposes of receiving Stock Options under Section 11
hereof. For purposes of Section 11 of the Program, the term "Non-Employee
Director" shall mean a member of the Board of Directors of the Company who is
not a full-time employee of the Company or any of its Subsidiaries.
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4. TYPES OF AWARDS. Awards under the Program may be granted in any one or
a combination of (a) Incentive Stock Options; (b) Non-Qualified Stock Options;
(c) Stock Appreciation Rights; (d) Limited Stock Appreciation Rights; (e) Stand
Alone Stock Appreciation Rights; and (f) Restricted Stock Awards, all as
described below in Sections 6-11 hereof. The maximum aggregate number of Common
Shares with respect to which Awards may be made to any Participant in any
calendar year is 75,000 Common Shares. For purposes of this limitation, a Stock
Option shall be treated as being made with respect to the number of Common
Shares that may be purchased with the Stock Option; a Stand Alone Stock
Appreciation Right shall be treated as being made with respect to the number of
Common Shares as to which the cash payment at exercise is computed; a Restricted
Stock Award shall be counted as being equal to the number of underlying Common
Shares; and Stock Appreciation Rights and Limited Stock Appreciation Rights
shall not enter into the computation hereunder if such Awards, when exercised,
will result in a related Stock Option being surrendered.
5. SHARES RESERVED UNDER THE PROGRAM. There is hereby reserved for
issuance under the Program an aggregate of One Million (1,000,000) Common
Shares, which may be newly issued or treasury shares. The Common Shares hereby
reserved are in addition to the Common Shares previously reserved under the
Company's 1982 Incentive Stock Program (the "Prior Stock Option Program"). Any
Common Shares reserved for issuance under the Prior Stock Option Program in
excess of the number of Common Shares as to which stock options or other awards
have been awarded thereunder on the Effective Date, plus any such shares as to
which stock options or other awards granted under the Prior Stock Option Program
may lapse, expire, terminate or be canceled after the Effective Date (so long as
the holder thereof has not received any benefits of ownership of such shares),
shall also be reserved and available for issuance in connection with Awards
under this Program. All of such shares may, but need not, be issued pursuant to
the exercise of Incentive Stock Options.
If there is a lapse, expiration, termination or cancellation of any Award
granted hereunder without the issuance of Common Shares or payment of cash
thereunder, or if Common Shares are issued under any Award and thereafter are
reacquired by the Company pursuant to rights reserved upon the issuance thereof,
the Common Shares subject to or reserved for such Award may again be used for
new Stock Options or other Awards under this Program so long as the holder
thereof has not received any benefits of ownership of such shares; provided,
however, that in no event may the number of Commons Shares issued under this
Program exceed the total number of Common Shares reserved for issuance
hereunder.
6. INCENTIVE STOCK OPTION PLAN. Incentive Stock Options will consist of
Stock Options, qualifying as "incentive stock options" under the requirements of
Section 422 of the Code, to purchase Common Shares at purchase prices not less
than One Hundred Percent (100%) of the Fair Market Value of such Common Shares
on the date of grant. Incentive Stock Options will be exercisable over not more
than ten (10) years after the date of grant. In the event of termination of
employment for any reason other than Retirement, Disability or death, the right
of the optionee to exercise an Incentive Stock Option shall terminate
immediately upon the termination of employment. In the event of termination of
employment due to Retirement, the right of the optionee to exercise an Incentive
Stock Option shall terminate upon the earlier of the end of the original term of
the Incentive Stock Option or three (3) months after the date of such
Retirement. In the event of termination of employment due to Disability, the
right of the optionee to exercise an Incentive Stock Option shall terminate upon
the earlier of the end of the original term of the Incentive Stock Option or one
(1) year after the date of termination of employment. If the optionee should die
while employed, the right of the optionee's successor in interest to exercise an
Incentive Stock Option granted to the optionee shall terminate upon the earlier
of the end of the original term of the Incentive Stock Option or one (1) year
after optionee's last date of employment. If the optionee should die within
three (3) months after termination of employment due to Retirement, the right of
his or her successor in interest to
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exercise an Incentive Stock Option shall terminate three (3) months after the
date of termination of employment as a result of such Retirement, but not later
than the end of the original term of the Incentive Stock Option. If the optionee
should die within one (1) year after termination of employment due to
Disability, the right of his or her successor in interest to exercise an
Incentive Stock Option shall terminate upon the earlier of one (1) year after
the date of termination of employment or the end of the original term of the
Incentive Stock Option. The aggregate fair market value (determined as of the
time the Stock Option is granted) of the Common Shares with respect to which
incentive stock options are exercisable for the first time by any Participant
during any calendar year (under all option plans of the Company and all
Subsidiaries and Parents of the Company) shall not exceed $100,000. An Incentive
Stock Option granted to a Participant under the Program may be exercised only
after six (6) months from its grant date. Anything contained herein to the
contrary notwithstanding, no Incentive Stock Option shall be granted to an
employee who, at the time the Incentive Stock Option is granted, owns (actually
or constructively under the provisions of Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of any Parent or Subsidiary of the Company, unless the
option exercise price is not less than 110% of the Fair Market Value of the
Common Shares subject to the Incentive Stock Option on the date of grant and the
Incentive Stock Option by its terms is not exercisable more than five years from
the date it is granted. For purposes of this Section 6, if an optionee
terminates his employment voluntarily, the date of termination of employment
shall be deemed the date on which he notifies the Company of his intention to
terminate his employment; in all other cases the date of termination of
employment shall be the last day of employment.
7. NON-QUALIFIED STOCK OPTION PLAN. Non-Qualified Stock Options will
consist of options (other than Incentive Stock Options) to purchase Common
Shares at purchase prices not less than One Hundred Percent (100%) of the Fair
Market Value of such Common Shares on the date of grant. Non-Qualified Stock
Options will be exercisable over not more than ten (10) years after the date of
grant. In the event of termination of employment for any reason other than
Retirement, Disability or Death, the right of the optionee to exercise a
Non-Qualified Stock Option shall terminate immediately upon the termination of
employment. In the event of termination of employment due to Retirement or
Disability, or if the optionee should die while employed, the right of the
optionee or his or her successor in interest to exercise a Non-Qualified Stock
Option shall terminate upon the earlier of the end of the original term of the
Non-Qualified Stock Option or one (1) year after the date of termination of
employment as a result of such Retirement, Disability or Death. If the optionee
should die within one (1) year after termination of employment due to Retirement
or Disability, the right of his or her successor in interest to exercise a
Non-Qualified Stock Option shall terminate upon the earlier of one (1) year
after termination of employment as a result of such Retirement or Disability or
the end of the original term of the Non-Qualified Stock Option. A Non-Qualified
Stock Option granted to a Participant under the Program may be exercised only
after six (6) months from its grant date. For purposes of this Section 7, if an
optionee terminates his employment voluntarily, the date of termination of
employment shall be deemed the date on which he notifies the Company of his
intention to terminate his employment; in all other cases the date of
termination shall be the last day of employment.
8. STOCK APPRECIATION RIGHTS PLAN. The Committee may, in its discretion,
grant a Stock Appreciation Right to the holder of any Stock Option granted
hereunder. Such Stock Appreciation Rights shall be subject to such terms and
conditions consistent with the Program as the Committee shall impose from time
to time, including the following:
(a) A Stock Appreciation Right may be granted with respect to a Stock
Option at the time of its grant or at any time thereafter up to six (6)
months prior to its expiration.
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(b) Stock Appreciation Rights will permit the holder to surrender any
related Stock Option or portion thereof which is then exercisable and to
elect to receive in exchange therefor cash in an amount equal to:
(i) The excess of the Fair Market Value on the date of such
election of one Common Share over the option exercise price, multiplied
by
(ii) The number of Common Shares covered by such Stock Option or
portion thereof which is so surrendered.
(c) A Stock Appreciation Right granted to a Participant under the
Program may be exercised only after six (6) months from its grant date.
(d) The Committee shall have the discretion to satisfy a Participant's
right to receive the amount of cash determined under subsection (b) hereof,
in whole or in part, by the delivery of Common Shares valued as of the date
of the Participant's election.
(e) A Stock Appreciation Right may be granted to a Participant
regardless of whether such Participant has been granted a Limited Stock
Appreciation Right with respect to the same Stock Option. However, a Stock
Appreciation Right may not be exercised during any period that a Limited
Stock Appreciation Right with respect to the same Stock Option may be
exercised.
(f) In the event of the exercise of a Stock Appreciation Right, the
number of Common Shares reserved for issuance hereunder shall be reduced by
the number of shares covered by the Stock Option or portion thereof
surrendered.
8A. STAND ALONE STOCK APPRECIATION RIGHTS PLAN. The Committee may, in its
discretion, grant Stand Alone Stock Appreciation Rights to any Participant. Such
Stand Alone Stock Appreciation Rights shall be subject to such terms and
conditions consistent with the Program as the Committee shall impose from time
to time, including the following:
(a) Stand Alone Stock Appreciation Rights shall be granted without
reference to any Stock Option which is then exercisable.
(b) Each Stand Alone Stock Appreciation Right will permit the holder
to elect to receive in exchange therefor cash in an amount equal to the
excess of:
(i) the Fair Market Value on the date of such election of one
Common Share, over
(ii) the Fair Market Value of one Common Share on the date which
the Stand Alone Stock Appreciation Right was granted.
(c) A Stand Alone Stock Appreciation Right granted to a Participant
under the Program may be exercised only after six (6) months from its
grant date.
(d) The Committee shall have the discretion to satisfy a Participant's
right to receive the amount of cash determined under subsection (b) hereof,
in whole or in part, by the delivery of Common Shares valued as of the date
of the Participant's election.
(e) Stand Alone Stock Appreciation Rights will be exercisable over not
more than ten (10) after the date of grant.
(f) In the event of termination of employment of a Participant to whom
a Stand Alone Stock Appreciation Right is granted for any reason other than
Retirement, Disability or death, the right of the holder to exercise such
Stand Alone Stock Appreciation Right shall terminate immediately upon the
termination of employment. In the event of termination of employment due to
Retirement or Disability, or if the optionee should die while employed, the
right of the holder or his or her successor in interest to exercise a Stand
Alone Stock Appreciation Right shall terminate upon the earlier of the end
of the original term of the
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Stand Alone Stock Appreciation Right or one (1) year after the date of
termination of employment as a result of such Retirement, Disability or
Death. If the holder should die within one (1) year after termination of
employment due to Retirement or Disability, the right of his or her
successor in interest to exercise a Stand Alone Stock Appreciation Right
shall terminate upon the earlier of one (1) year after termination of
employment as a result of such Retirement or Disability or the end of the
original term of the Stand Alone Stock Appreciation Right. For purposes of
this Section 8A, if a holder terminates his employment voluntarily, the
date of termination of employment shall be deemed the date on which he
notifies the Company of his intention to terminate his employment; in all
other cases the date of termination of employment shall be the last day of
employment.
(g) In the event of the grant of any Stand Alone Stock Appreciation
Rights, the number of Common Shares reserved for issuance hereunder shall
be reduced by the number of Stand Alone Stock Appreciation Rights granted.
9. LIMITED STOCK APPRECIATION RIGHTS PLAN. The Committee may, in its
discretion, grant a Limited Stock Appreciation Right to the holder of any Stock
Option granted hereunder. Such Limited Stock Appreciation Rights shall be
subject to such terms and conditions consistent with the Program as the
Committee shall impose from time to time, including the following:
(a) A Limited Stock Appreciation Right may be granted with respect to
a Stock Option at the time of its grant or at any time thereafter up to six
(6) months prior to its expiration.
(b) A Limited Stock Appreciation Right will permit the holder to
surrender any related Stock Option or portion thereof which is then
exercisable and to receive in exchange therefor cash in an amount equal to:
(i) The excess of the Fair Market Value on the date of such
election of one Common Share over the option exercise price, multiplied
by
(ii) The number of Common Shares covered by such Stock Option or
portion thereof which is so surrendered.
(c) A Limited Stock Appreciation Right granted to a Participant under
the Program may be exercised only after six (6) months from its grant date
and only during the sixty (60) day period commencing with the day following
the date of a Change in Control.
(d) A Limited Stock Appreciation Right may be granted to a Participant
regardless of whether such Participant has been granted a Stock
Appreciation Right with respect to the same Stock Option.
(e) In the event of the exercise of a Limited Stock Appreciation
Right, the number of Common Shares reserved for issuance hereunder shall be
reduced by the number of Common Shares covered by the Stock Option or
portion thereof surrendered.
10. RESTRICTED STOCK AWARDS PLAN. Restricted Stock Awards will consist of
Common Shares transferred to Participants without other payment therefor (other
than the payment of the par value of such shares if required by applicable law)
as additional compensation for their services to the Company or one of its
Subsidiaries. Restricted Stock Awards shall be subject to such terms and
conditions as the Committee determines appropriate including, without
limitation, restrictions on the sale or other disposition of such shares and
rights of the Company to reacquire such shares upon termination of the
Participant's employment within specified periods. Subject to such other
restrictions as are imposed by the Committee, the Common Shares covered by a
Restricted Stock Award granted to a Participant under the Program may be sold or
otherwise disposed of only after six (6) months from the grant date of the
award.
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11. NON-QUALIFIED STOCK OPTION AWARDS FOR NON-EMPLOYEE DIRECTORS.
(a) Grant of Options. Each person who is a Non-Employee Director
shall be granted a Non-Qualified Stock Option to purchase 3,000 Common
Shares effective on the third business day following the date of his or her
first election or appointment to the Board of Directors and on the third
business day following each annual meeting of shareholders at which he or
she is re-elected to the Board of Directors.
(b) Price. The option exercise price per share of each Non-Qualified
Stock Option granted under this Section 11 shall be equal to the Fair
Market Value of a Common Share on the date of grant, provided that the
option exercise price shall be subject to adjustment as provided in Section
18 hereof:
(c) Term of Options. Non-Qualified Stock Options granted under this
Section 11 shall be effective on and shall be of a term of ten (10) years
from the date of grant. Each such option shall be subject to earlier
termination as provided in subsection (e) hereof.
(d) Restriction on Exercise. Non-Qualified Stock Options granted
under this Section 11 may not be exercised within six (6) months following
their date of grant.
(e) Termination of Service as a Director.
(i) Except as otherwise provided in this subsection (e), any
Non-Qualified Stock Option granted under this Section 11 is exercisable
only by the optionee, is exercisable only while the optionee is a
director of the Company and then only if the option has become
exercisable by its terms, and if not exercisable by its terms at the
time the optionee ceases to be a director of the Company, shall
immediately expire on the date the optionee ceased to be a director of
the Company.
(ii) Any Non-Qualified Stock Option granted under this Section 11
which is exercisable by its terms at the time the optionee ceases to be
a director of the Company must be exercised on or before the earlier of
three months after the date the optionee ceases to be a director of the
Company or the expiration date of such option, after which period such
option shall expire. Notwithstanding the foregoing, if an optionee's
status as a director of the Company is Terminated For Cause (as herein
defined), however, all options granted to such optionee shall, to the
extent not previously exercised, expire immediately upon such
termination.
(iii) In the event of the death of the holder of a Non-Qualified
Stock Option granted under this Section 11 while a director of the
Company or within three months after he ceases to be a director of the
Company, such optionee's unexercised Non-Qualified Stock Option (whether
or not then exercisable by its terms) shall become immediately
exercisable by the optionee's successor in interest for a period ending
on the earlier of the end of the original term of the option or twelve
months after the date of death, after which period such option shall
expire.
(iv) In the case of any Non-Qualified Stock Option granted under
this Section 11, in the event the optionee ceases to be a director of
the Company by reason of a Disability, such optionee's unexercised
Non-Qualified Stock Option (whether or not then exercisable by its
terms) shall become immediately exercisable for a period ending on the
earlier of the end of the original term of such option or twelve months
from the date the optionee ceases to be a director, after which period
such option shall expire.
(f) Except in the event of conflict, all provisions of the Program
shall apply to this Section 11. In the event of any conflict between the
other provisions of the Program and this Section 11, this Section 11 shall
control. Those provisions of Sections 8 and 9 hereof which authorize the
Committee to grant a Stock Appreciation Right or a Limited Stock
Appreciation Right with respect to a Stock Option shall not apply to any
Non-Qualified Stock Option
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granted under this Section 11. Those provisions of Section 14 hereof which
authorize the Committee to declare outstanding options to be vested and to
amend or modify the terms of any Awards shall not apply to any
Non-Qualified Stock Option granted under this Section 11.
12. NONTRANSFERABILITY. Each Stock Option, Stock Appreciation Right, Stand
Alone Stock Appreciation Right, Limited Stock Appreciation Right and Restricted
Stock Award granted under this Program shall not be transferable other than by
will or the laws of descent and distribution, and shall be exercisable, during
the Participant's lifetime, only by the Participant or the Participant's
guardian or legal representative.
13. OTHER PROVISIONS. The grant of any Award under the Program may also be
subject to other provisions (whether or not applicable to any Award granted to
any other Participant) as the Committee determines appropriate including,
without limitation, provisions for the purchase of Common Shares under Stock
Options in installments, provisions for the payment of the option exercise price
of shares under a Stock Option by delivery of other Common Shares of the Company
having a then Fair Market Value equal to the option exercise price of such
shares, restrictions on resale or other disposition, such provisions as may be
appropriate to comply with federal or state securities laws and stock exchange
requirements and understandings or conditions as to the Participant's employment
in addition to those specifically provided for under the Program.
The Committee may, in its discretion, permit payment of the option exercise
price of shares under Stock Options by delivery of a properly executed exercise
notice together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the option
exercise price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
The Committee may, in its discretion and subject to such rules as it may
adopt, permit a Participant (other than a Non-Employee Director who receives a
Non-Qualified Stock Option under Section 11 hereof) to pay all or a portion of
the federal, state and local taxes, including FICA withholding tax, arising in
connection with the following transactions: (a) the exercise of a Non-Qualified
Stock Option; (b) the lapse of restrictions on Common Shares received as a
Restricted Stock Award; or (c) the receipt or exercise of any other Award; by
electing (i) to have the Company withhold Common Shares, (ii) to tender back
Common Shares received in connection with such Award or (iii) to deliver other
previously acquired Common Shares of the Company having a Fair Market Value
approximately equal to the amount to be withheld.
14. TERM OF PROGRAM AND AMENDMENT, MODIFICATION, CANCELLATION OR
ACCELERATION OF AWARDS. No Award shall be granted under the Program more than
ten (10) years after the date of the original adoption of this Program by the
Company's Board of Directors. The terms and conditions applicable to any Award
granted prior to such date may at any time be amended, modified or canceled,
without shareholder approval, by mutual agreement between the Committee and the
Participant or such other persons as may then have an interest therein, so long
as shareholder approval of such amendment, modification or cancellation is not
required under Rule 16b-3 of the Securities and Exchange Commission or any
applicable requirements of any securities exchange on which are listed any of
the Company's equity securities or any applicable requirements for issuers whose
securities are traded in the NASDAQ National Market System or any applicable
requirements of the Code. The Committee may, at any time and in its sole
discretion, declare any or all Stock Options, Stock Appreciation Rights and
Stand Alone Stock Appreciation Rights then outstanding under this Program or the
Prior Stock Option Program to be exercisable and any or all then outstanding
Restricted Stock Awards to be vested, whether or not such options, rights or
awards are then otherwise exercisable or vested.
15. AMENDMENT TO PRIOR STOCK OPTION PROGRAM. No Stock Options or other
awards shall be granted under the Prior Stock Option Program on or after the
Effective Date.
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16. TAXES. The Company shall be entitled to withhold the amount of any tax
attributable to any amount payable or shares deliverable under the Program after
giving the person entitled to receive such amount or shares notice as far in
advance as practicable, and the Company may defer making payment or delivery if
any such tax may be pending unless and until indemnified to its satisfaction.
17. DEFINITIONS.
(a) Award. The term "Award" means an award or grant of a Stock
Option, Stock Appreciation Right, Limited Stock Appreciation Right, Stand
Alone Stock Appreciation Right or Restricted Stock Award made to a
Participant under Sections 5, 6, 7, 8, 9, 10 or 11 of the Program.
(b) Change in Control. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as defined
in Section 13(d)(3) of the Exchange Act) shall have become the
beneficial owner of, or shall have obtained voting control over, twenty
percent (20%) or more of the outstanding Common Shares;
(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 of Directors of the Company 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) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended, and regulations and rulings thereunder. References to a particular
section of the Code shall include references to successor provisions.
(d) Committee. The "Committee" means the Committee of the Board of
Directors of the Company constituted as provided in Section 2 hereof.
(e) Common Shares. "Common Shares" means the Common Shares of the
Company or any security of the Company issued in substitution, exchange or
lieu thereof.
(f) Company. The "Company" means Ohio Casualty Corporation, an Ohio
corporation, or any successor corporation.
(g) Disability. The term "Disability" means, as it relates to the
exercise of an Incentive Stock Option after termination of employment, a
disability within the meaning of Section 22(e)(3) of the Code, and for all
other purposes, a mental or physical condition which, in the opinion of the
Committee, renders an optionee unable or incompetent to carry out the job
responsibilities which such optionee held or the tasks to which such
optionee
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was assigned at the time the disability was incurred, and which is expected
to be permanent or for an indefinite duration exceeding one year.
(h) Effective Date. The term "Effective Date" means the date on which
the Program is approved originally by the shareholders of the Company.
(i) Exchange Act. The term "Exchange Act" means the Securities Act of
1934, as amended, or a successor statute.
(j) Fair Market Value. The "Fair Market Value" of the Company's
Common Shares at any time shall mean, on any given date, the closing price
of the Common Shares, as reported on the NASDAQ National Market System for
such date or, if Common Shares were not traded on such date, on the next
preceding day on which Common Shares were traded; provided, however, that
in the case of any Limited Stock Appreciation Right (other than a right
related to an Incentive Stock Option), the Fair Market Value shall be the
higher of:
(i) The highest daily closing price of the Common Shares during the
sixty (60) day period following the Change in Control; or
(ii) The highest gross price paid or to be paid for the Common
Shares in any of the transactions described in Sections 17(b)(i) and
17(b)(ii).
(k) Incentive Stock Option. "Incentive Stock Option" means any Stock
Option granted pursuant to the provisions of Section 6 of the Program that
is intended to be and is specifically designated as an "incentive stock
option" within the meaning of Section 422 of the Code.
(l) Limited Stock Appreciation Rights. "Limited Stock Appreciation
Rights" mean limited stock appreciation rights granted to a Participant
under Section 9 of the Program.
(m) Non-Employee Director. For purposes of Section 11 of the Program,
"Non-Employee Director" means a member of the Board of Directors of the
Company who is not a full-time employee of the Company or any Subsidiary.
(n) Non-Qualified Stock Option. A "Non-Qualified Stock Option" means
any Stock Option granted pursuant to the provisions of Section 7 or Section
11 of the Program that is not an Incentive Stock Option.
(o) Parent. The term "Parent of the Company" shall have the meaning
set forth in 424(e) of the Code.
(p) Participant. The term "Participant" means a full-time employee of
the Company or a Subsidiary or a Non-Employee Director who is granted a
Non-Qualified Stock Option under Section 11 of the Program.
(q) Prior Stock Option Program. The "Prior Stock Option Program"
means the Ohio Casualty Corporation 1982 Incentive Stock Program, as
amended.
(r) Program. The "Program" means this Ohio Casualty Corporation 1993
Stock Incentive Program, as set forth herein and as it may be hereafter
amended and from time to time in effect.
(s) Restricted Stock Awards. "Restricted Stock Awards" mean awards of
restricted stock granted to a Participant under Section 10 of the Program.
(t) Retirement. The term "Retirement" for all purposes of the Program
shall have the meaning given to such term in the Ohio Casualty Corporation
Employees Retirement Plan.
(u) Stock Appreciation Rights. "Stock Appreciation Rights" mean stock
appreciation rights granted to a Participant under Section 8 of the
Program.
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(v) Stock Option. The term "Stock Option" means any Incentive Stock
Option or Non-Qualified Stock Option granted under the Program.
(w) Stock Option Awards. The term "Stock Option Awards" means any
grant of a Stock Option to a Participant under the Program.
(x) Subsidiary. The term "Subsidiary" for all purposes other than the
Incentive Stock Option plan described in Section 6, shall mean any
corporation, partnership, joint venture or business trust, fifty percent
(50%) or more of the control of which is owned, directly or indirectly, by
the Company. For Incentive Stock Option plan purposes the term "Subsidiary"
shall be defined as provided in Section 424(f) of the Code.
(y) Terminated for Cause. The term "Terminated for Cause" for
purposes of the Program shall mean termination on account of any act of
fraud or intentional misrepresentation or embezzlement, misappropriation or
conversion of assets or opportunities of the Company or a Subsidiary, the
conviction of a felony or intentional and repeated violations of the
written policies or procedures of the Company or any Subsidiary.
(z) Stand Alone Stock Appreciation Rights. The term "Stand Alone
Stock Appreciation Rights" means the stock appreciation rights granted to a
Participant under Section 8A of the Program.
18. ADJUSTMENT PROVISIONS.
(a) The existence of this Program and the Awards granted hereunder
shall not affect or restrict in any way the right or power of the Board of
Directors or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation of
the Company, any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting the Company's capital stock or the rights
thereof, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding.
(b) In the event of any change in capitalization affecting the Common
Shares, such as a stock dividend, stock split, recapitalization, merger,
consolidation, split-up, combination or exchange of shares or other form of
reorganization, or any other change affecting the Common Shares, the
Committee shall make proportionate adjustments to reflect such change with
respect to the aggregate number of Common Shares for which Awards in
respect thereof may be granted under the Program, the maximum number of
Common Shares which may be sold or awarded to any Participant, the number
of Common Shares covered by each outstanding Award and the price per share
in respect of outstanding Awards.
(c) The Committee also shall make such adjustments in the number of
shares covered by, and the price or other value of any outstanding Awards
in the event of a spin-off or other distribution (other than normal cash
dividends) of Company assets to shareholders.
(d) Subject to the six month holding requirements of Sections 6, 7,
8(c), 8A(c), 9(c), 10 and 11(d) but notwithstanding any other provision of
this Program or the Prior Stock Option Program, upon the occurrence of a
Change in Control:
(i) All Stock Options then outstanding under this Program or the
Prior Stock Option Program shall become fully exercisable as of the date
of the Change in Control, whether or not then otherwise exercisable;
(ii) All Stock Appreciation Rights, Stand Alone Stock Appreciation
Rights and Limited Stock Appreciation Rights then outstanding shall
become fully exercisable as of the date of the Change in Control,
whether or not then otherwise exercisable; and
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(iii) All terms and conditions of all Restricted Stock Awards then
outstanding shall be deemed satisfied as of the date of the Change in
Control, whether or not then otherwise satisfied.
19. AMENDMENT AND TERMINATION OF PROGRAM. The Board of Directors of the
Company may amend the Program from time to time or terminate the Program at any
time without the approval of the shareholders of the Company except as such
shareholder approval may be required (a) to satisfy the requirements of Rule
16b-3 of the Securities and Exchange Commission, (b) to satisfy applicable
requirements of the Code or (c) to satisfy applicable requirements of any
securities exchange on which are listed any of the Company's equity securities
or any requirements applicable to issuers whose securities are traded in the
NASDAQ National Market System. No such action to amend or terminate the Program
shall reduce the then existing amount of any Participant's Award or adversely
change the terms and conditions thereof without the Participant's consent.
Section 11 of the Program may not be amended more frequently than once every six
months other than to comport with changes in the Code, or changes in the
Employees Retirement Income Securities Act, or the rules thereunder, and no
amendment of the Program shall result in any Committee member losing his or her
status as a "disinterested person" as defined in Rule 16b-3 of the Securities
and Exchange Commission with respect to any employee benefit plan of the Company
or result in the Program losing its status as a plan satisfying the requirements
of said Rule 16b-3.
20. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Program nor the
granting of any Awards hereunder shall confer upon any employee of the Company
or any Subsidiary any right to continued employment with the Company or any
Subsidiary, as the case may be, nor shall it interfere in any way with the right
of the Company or a Subsidiary to terminate the employment of any of its
employees at any time, with or without cause.
21. UNFUNDED PLAN. The Program shall be unfunded and the Company shall not
be required to segregate any assets that may at any time be represented by
Awards under the Program. Any liability of the Company to any person with
respect to any Awards under the Program shall be based solely upon any
contractual obligations that may be effected pursuant to the Program. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company or any Subsidiary.
22. PAYMENTS TO TRUST. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Program.
23. ENGAGING IN COMPETITION WITH COMPANY. In the event a Participant
terminates his or her employment with the Company or a Subsidiary for any reason
whatsoever, and within eighteen (18) months after the date thereof accepts
employment with any competitor of, or otherwise engaged in competition with, the
Company or any subsidiary, the Committee, in its sole discretion, may require
such Participant to return to the Company the economic value of any Award which
is realized or obtained (measured at the date of exercise, vesting or payment)
by such Participant at any time during the period beginning on that date which
is six months prior to the date of such Participant's termination of employment
with the Company or any Subsidiary.
24. OTHER COMPANY AWARD AND COMPENSATION PROGRAMS. Payments and other
Awards received by a Participant under the Program shall not be deemed a part of
a Participant's regular, recurring compensation for purposes of any termination
indemnity or severance pay law and shall not be included in, nor have any effect
on, the determination of Awards under any other employee benefit plan or similar
arrangement provided by the Company or a Subsidiary unless expressly so provided
by such other plan or arrangements, or except where the Committee or the Board
of Directors determines that an Award or portion of an Award should be included
to accurately reflect competitive compensation practices or to recognize that an
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Award has been made in lieu of a portion of competitive annual cash
compensation. Awards under the Program may be made in combination with or in
tandem with, or as alternatives to, grants, awards or payments under any other
Company or Subsidiary plans. The Program notwithstanding, the Company or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain and reward
employees for their service with the Company and its Subsidiaries.
25. SECURITIES LAW RESTRICTIONS. No Common Shares shall be issued under
the Program unless counsel for the Company shall be satisfied that such issuance
will be in compliance with applicable federal and state securities law.
Certificates for Common Shares delivered under the Program may be subject to
such stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Common Shares are
then listed or traded on the NASDAQ National Market System or any applicable
federal or state securities law. The Committee may cause a legend or legends to
be put on any such certificates to make appropriate reference to such
restrictions.
26. AWARD AGREEMENT. Each Participant receiving an Award under the Program
shall enter into an agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Award and such related
matters as the Committee shall, in its sole discretion determine.
27. COST OF PROGRAM. The costs and expenses of administering the Program
shall be borne by the Company.
28. GOVERNING LAW. The Program and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Ohio.
29. SHAREHOLDER APPROVAL. The Program was adopted by the Board of
Directors of the Company on February 18, 1993. The Program and any Award granted
thereunder shall be null and void if shareholder approval is not obtained within
twelve (12) months of the adoption of the Program by the Board of Directors.
37
<PAGE> 40
OHIO CASUALTY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS APRIL 16, 1997
Each undersigned shareholder of Ohio Casualty Corporation (the "Company")
hereby constitutes and appoints Joseph L. Marcum and Lauren N. Patch, or either
one of them, with full power of substitution in each of them, the proxy or
proxies of the undersigned to vote at the Annual Meeting of Shareholders (the
"Annual Meeting") of the Company to be held in the meeting rooms of the
Hamiltonian Hotel, One Riverfront Plaza, Hamilton, Ohio, on Wednesday, April 16,
1997, at 10:30 a.m., local time, and at any adjournment thereof, all of the
common shares of the Company which the undersigned would be entitled to vote if
personally present at such annual meeting, or at any adjournment thereof, as
follows:
(1) TO ELECT THE FOLLOWING FOUR DIRECTORS FOR TERMS EXPIRING IN 2000 (CLASS I)
AS SUCCESSORS TO THE CLASS OF FOUR DIRECTORS WHOSE TERMS EXPIRE IN 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below)* to vote for all nominees listed below
</TABLE>
JACK E. BROWN VADEN FITTON JOSEPH L. MARCUM HOWARD L. SLONEKER III
* INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
(2) TO APPROVE AMENDMENTS TO THE COMPANY'S 1993 STOCK INCENTIVE PROGRAM:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) IN THEIR DISCRETION, TO CONSIDER AND VOTE UPON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFIC INDICATION ABOVE. IN THE ABSENCE OF SUCH INDICATION, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF EACH OF THE ABOVE NOMINEES FOR DIRECTOR AND FOR
PROPOSAL (2). IF ANY OTHER MATTERS ARE BROUGHT BEFORE THE MEETING, OR IF A
NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO
SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PROXY WILL BE VOTED IN THE
DISCRETION OF THE PROXIES ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEES AS THE
DIRECTORS MAY RECOMMEND.
(Continued, and to be executed and dated on the reverse side.)
(Continued from other side)
All proxies previously given by the undersigned are hereby revoked. Receipt of
the accompanying Proxy Statement and the Annual Report of the Company for the
fiscal year ended December 31, 1996, is hereby acknowledged.
The signature or signatures to this
proxy should be the same as the
name or names which appear hereon.
Persons signing as attorneys,
executors, administrators, trustees
or guardians should give full title
as such.
Dated: , 1997
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Signature(s) of Shareholders(s)
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED STAMPED ENVELOPE
