DEF 14A of American Financial Group Inc
Filed Apr 4, 2024 · FY20230001140361-24-017965
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| A.M. Best | | A+(Superior) |
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| Standard & Poor’s | | A+ (Strong) |
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| Moody’s | | A1 |
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| Rated “A” Excellent or better by A.M. Best for more than 115 years | | One of only four companies to achieve this result |
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| (1) AFG’s net earnings attributable to shareholders, a GAAP financial measure, include certain items that may not be indicative of its ongoing core operations. AFG believes that its core net operating earnings, a non-GAAP financial measure, provides management, financial analysts, ratings agencies and investors with an understanding of the results from the ongoing operations of the Company by excluding, net realized gains and losses and other items that are not necessarily indicative of operating trends. AFG’s management uses core net operating earnings to evaluate financial performance against historical results because it believes this provides a more comparable measure of its continuing business. A reconciliation of net earnings attributable to shareholders to core net operating earnings can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — General” on page 50 of AFG’s Annual Report on Form 10-K for the year ended December 31, 2023. |
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| (2) Based on core net operating earnings and using a five-quarter average of ending shareholders’ equity excluding accumulated other comprehensive income. |
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| (3) Commercial lines industry data based on AM Best's Market Segment Report – March 6, 2024. |
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| (4) Adjusted book value per share excludes net unrealized losses related to fixed maturity investments. |
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| (5) Ratings of the Company’s U.S.-based property and casualty insurance companies, where rated. |
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Corporate Governance Highlights Corporate Governance Summary
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| Board Independence and Leadership | | All key board committees (Audit, Compensation and Corporate Governance) are chaired by and entirely comprised of independent directors. | | | | 64% of our director nominees are independent. | | | | Lead independent director empowered with broadly defined authorities and responsibilities. | | | | Regular (at least quarterly) executive sessions of independent directors chaired by our lead independent director. | | | | Strong board oversight of enterprise risk. |
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| Shareholder Rights | | Individual directors tender resignation if they fail to receive a majority of votes cast. | | | | Shareholders have a right to call a special meeting. | | | | No poison pill. |
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| Board Effectiveness | | Our Corporate Governance guidelines provide that we will consider diverse Board candidates, including women and minorities, and 80% (four of five) of independent directors elected to the Board since 2013 are a woman or a minority. | | | | Our Board consists of directors with a diverse mix of skills, experience and backgrounds. | | | | Our Board and Board committees undertake a robust annual self-evaluation conducted by an outside third-party. | | | | Comprehensive director orientation program for new directors; existing Directors typically also attend as opportunity to deepen knowledge and enhance engagement. | | | | Ongoing Board education sessions on varied and diverse topics. | | | | Corporate Governance Committee responsible for advising the Board with respect to environmental and social risks and governance, stewardship and sustainability issues. |
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| Director and Officer Stock Ownership | | Independent directors’ stock ownership guidelines require owning Company shares having a value of at least three times their annual cash retainer. | | | | Each Co-CEO is required to own five times his base salary in Company shares. | | | | All other named executive officers, as well as Company senior management, must own Company shares having a value in excess of one times his or her base salary. | | | | Our executive officers and directors as a group own a substantial percentage of our outstanding common stock, which directly aligns the interests of our executive officers and directors with those of our other shareholders. |
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Corporate Governance Highlights
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| Compensation Governance | | Compensation Committee consisting entirely of independent directors oversees all aspects of our named executive officer compensation program. | | | | Periodic engagement of independent compensation consultant to advise regarding compensation program structure. | | | | Performance-based compensation is a majority of Co-CEOs’ potential compensation and a significant portion of our other named executive officers’ compensation. | | | | Annual shareholder advisory vote to approve named executive officer compensation. | | | | No employment agreements, severance agreements or change-in-control agreements with any of our executive officers. | | | | Double-trigger vesting provisions for all equity awards following a change of control. | | | | Executive Clawback Policy for executive officers and recoupment policy for performance awards applicable to senior management employees beyond the executive officers. | | | | Director compensation is reviewed annually by the Compensation Committee. | | | | Annual equity grant to directors is a substantial portion of their annual compensation. |
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| Ethics and Corporate Responsibilities | | Code of Ethics that applies to all officers, employees and directors, is rooted in our values and is designed to promote the highest standards of ethical conduct. | | | | Active and robust ethics and compliance program, which includes required regular employee training. | | | | Committed to corporate responsibility and sustainability and reports on our efforts are accessible on our website. |
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Overview of Board Nominees Overview of Board Nominees Election of 11 Directors The Board of Directors oversees the management of the Company on your behalf. The Board reviews AFG’s long-term strategic plans and exercises direct decision-making authority in key areas such as choosing the Co-Chief Executive Officers, setting the scope of their authority to manage the Company’s business day-to-day, and evaluating senior management performance. Upon the recommendation of the Corporate Governance Committee, the Board of Directors has nominated 11 individuals, each of whom is an incumbent director, to hold office until the next annual meeting of shareholders and until their successors are elected and qualified. If any of the nominees should become unable to serve as a director, the proxies will be voted for any substitute nominee designated by the Board of Directors but, in any event, no proxy may be voted for more than 11 nominees. Each nominee brings a strong and unique background and set of qualifications to the Board, giving the Board as a whole competence and experience in a wide variety of areas central to the Company’s businesses, including corporate governance and board service, executive management and entrepreneurial experience and insurance, finance, legal and accounting expertise. We believe that having multiple independent directors who have served through many insurance cycles (that often last upward of five to seven years) enhances their ability to effectively respond to ever-changing conditions in the property and casualty insurance industry.
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| The Board of Directors recommends that shareholders vote FOR the election of these 11 nominees as directors. |
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BOARD NOMINEES
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| Nominee | Independent | Audit Committee | Compensation Committee | Corporate Governance Committee | | Carl H. Lindner III | | | | | | S. Craig Lindner | | | | | | John B. Berding | | | | | | James E. Evans | | | | | | Gregory G. Joseph | | | | | | Mary Beth Martin | Yes | | | | | Amy Y. Murray | Yes | | | | | Roger K. Newport | Yes | | | | | Evans N. Nwankwo | Yes | | | | | William W. Verity | Yes | | | | | John I. Von Lehman | Yes | | | |
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| | Lead Independent Director | | Member | | Chair |
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The nominees for election to the Board of Directors are as follows:
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| Age | 70 Director Since | 1991 | Carl H. Lindner III Mr. Lindner has been Co-Chief Executive Officer since January 2005 and served as Co-President from 1996 until June 2023. Until 2010, for over ten years, Mr. Lindner served as President, and since 2010, Mr. Lindner has served as CEO of AFG’s Property and Casualty Insurance Group and has been principally responsible for the Company’s property and casualty insurance operations. The Board believes that Mr. Lindner’s familiarity with the Company as a whole, as well as his experience and expertise in its core property and casualty insurance businesses, makes his service on the Board of Directors extremely beneficial to the Company. |
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| Age | 69 Director Since | 1985 | S. Craig Lindner Mr. Lindner has been Co-Chief Executive Officer since January 2005 and served as Co-President from 1996 until June 2023. Mr. Lindner served as President of Great American Financial Resources, Inc., a subsidiary of the Company, for more than ten years prior to 2018 when he was elected Chief Executive Officer and was principally responsible for the Company’s annuity operations until their sale in 2021. Until 2011, for over ten years, Mr. Lindner served as President of American Money Management Corporation (“AMMC”), a subsidiary that provides investment services for the Company and certain of its affiliated companies, and Mr. Lindner continues to be primarily responsible for the Company’s investment portfolio. The Board believes that Mr. Lindner’s familiarity with the Company as a whole, as well as his experience and expertise in the Company’s investment portfolio, makes his service on the Board of Directors extremely beneficial to the Company. |
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| Age | 61 Director Since | 2008 | Gregory G. Joseph Mr. Joseph, an attorney, has been an executive and a principal of various automotive retailers in the Greater Cincinnati, Ohio area known as the Joseph Automotive Group for more than five years. Since 2005, Mr. Joseph has served on the Board of Trustees of Xavier University, a private university located in Cincinnati, Ohio. He served on the board of directors of Infinity Property & Casualty Corporation, an insurance company primarily offering personal automobile insurance, which was purchased by Kemper Corp. in 2018, from 2003 to 2008, the last two years as the lead director. Mr. Joseph’s previous service as a lead director of a publicly traded provider of insurance products provided him with significant knowledge of and experience in the business operations of a publicly-traded insurance holding company, which is beneficial to the Company in light of the many issues applicable to the insurance industry. Additionally, Mr. Joseph’s extensive background and experience at public and private businesses enable him to provide to the Board insights and advice on the broad variety of situations and issues that the Board faces. |
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| Age | 61 Director Since | 2012 | John B. Berding Mr. Berding was elected President of AFG in June 2023 and was elected President of AMMC in January 2011. Prior to his election as President, he held a number of investment-related executive positions with AMMC and other AFG subsidiaries. Mr. Berding has over 30 years of experience as an investment professional, and he has spent his entire career with the Company and its affiliates. The Board values Mr. Berding’s knowledge of financial markets and investment management as well as his specific knowledge of the Company’s investment portfolio and strategy and has determined that his ability to contribute his experience on a constant basis as a member of the Board are invaluable to the Company. |
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| Age | 78 Director Since | 1985 | James E. Evans Mr. Evans has served as an Executive Consultant to the Company since 2014. From 1994 through 2013, Mr. Evans served as Senior Vice President of the Company, and he also served as General Counsel until March 2012 when he was elected Executive Counsel. Prior to that, he served as Vice President and General Counsel of American Financial Corporation, the predecessor to AFG, beginning in 1976. Mr. Evans also previously served on the Boards of Directors of The Penn Central Corporation, Citicasters, Inc. and other companies affiliated with the Company. He began his career in the private practice of law with Keating Muething & Klekamp PLL in 1971. The Board believes that Mr. Evans’ many years of experience with complex legal and business issues involving the Company specifically, as well as his legal and business expertise generally, render his Board service invaluable to the Company. |
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| Age | 61 Director Since | 2019 | Mary Beth Martin Ms. Martin has served as the Executive Director of the Farmer Family Foundation in Cincinnati, Ohio since 2007. In that role, she manages the organization’s philanthropic goals and objectives, and oversees grant investments. For over 20 years, Ms. Martin previously served in the banking and commercial real estate industries where she led commercial real estate, private bank, trust, and asset management groups at regional banking institutions. Ms. Martin is active in her community and currently serves on the Board of Directors of a number of charitable organizations, including Accelerate Great Schools, where she also serves as Secretary and Treasurer, Teach for America Ohio and Ohio Excels. The Board believes that Ms. Martin’s management experience in various sectors as well as her financial, investment and commercial real estate experience will significantly benefit the Board of Directors. |
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| Age | 59 Director Since | 2021 | Amy Y. Murray Ms. Murray has over 35 years of leadership experience in the corporate world and in local and federal government. She most recently served as Deputy Assistant Secretary of Defense/Deputy, Industrial Policy (from June 2020 to January 2021) and Director of the Office of Small Business (from March 2020 to January 2021) for the U.S. Department of Defense. During 2011 and from 2013-2020, Ms. Murray was a member of the Cincinnati, Ohio City Council serving at various times as chair or vice chair of numerous committees, including the Economic Growth and Zoning Committee, the Major Transportation and Regional Cooperation Committee, the Budget and Finance Committee and the Law and Public Safety Committee. Also, from 2000-2014, she served as founder and chief consultant of The Japan Consulting Group which provides services regarding strategies for successful business relationships with Japanese companies, both in Japan and the United States. Prior to such time, Ms. Murray spent 14 years in various positions at the Procter & Gamble Company, a leading multinational manufacturer of consumer-packaged goods, including as a manager of Global Business Development for Asia and Global Customer Business Development. In addition, Ms. Murray completed the National Association of Corporate Directors’ Cyber-Risk Oversight Program and received the CERT Certificate in Cybersecurity Oversight issued by the Software Engineering Institute at Carnegie Mellon University. She is active in the community having served on the boards of several charitable organizations including Cincinnati Zoo and Botanical Society and Boy Scouts of America – Dan Beard Council The Board believes that Ms. Murray’s diverse skill set, including government affairs, public relations, corporate, financial consulting and community engagement will help to guide the Company through numerous opportunities in the years to come. |
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| Age | 59 Director Since | 2024 | Roger K. Newport Mr. Newport served as Chief Executive Officer and a Director of AK Steel Holding Corporation, a publicly-traded manufacturing company, from January 2016 until March 2020, when he retired in connection with the acquisition of AK Steel by Cleveland-Cliffs Inc. Prior to that, Mr. Newport served in other executive roles at AK Steel, including Executive Vice President, Finance and Chief Financial Officer, as well as Controller and Chief Accounting Officer. Mr. Newport served in a variety of other leadership positions since joining AK Steel in 1985, including Vice President, Business Planning and Development, and Assistant Treasurer, Investor Relations. In addition, since 2018, Mr. Newport has been a Director of Alliant Energy Corporation, an energy-services provider that operates as a regulated investor-owned public utility holding company. He currently serves on Alliant Energy’s Audit Committee, of which he previously served as Chair, and its Nominating and Governance Committee. Mr. Newport has been active in the community, having served on a variety of local and regional boards for organizations that serve the areas of academia, community development, and at-risk children and families. Mr. Newport’s experience as a principal executive officer, principal financial officer, principal accounting officer and controller qualifies him for membership on the Company’s Board, as well as an “audit committee financial expert” under SEC guidelines. He has significant leadership and financial experience with large and complex publicly-traded companies, which the Board believes is valuable to the Company. |
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| Age | 65 Director Since | 2020 | Evans N. Nwankwo Mr. Nwankwo has worked in the commercial construction industry for nearly 40 years and is the Founder and President of Megen Construction Company, one of the region’s premier builders. Megen Construction provides a full range of services including construction management, design/build, general contracting, estimating and program management, and was the first LEED Platinum builder in the State of Ohio. Megen Construction is a top-ten minority-owned business in Greater Cincinnati. Mr. Nwankwo is active in his community and around the world. He is the founder of NuWay Foundation, a charitable organization focused on improving the lives and economic conditions of the less fortunate in African villages through health, opportunity, pure water and education (H.O.P.E.). He is the Board Chairman of Ambassadors for Self Determination, a nonprofit organization focused on assisting regions of the world with their efforts towards self-determination of their governance. He has also served on the Board of Directors of a number of charitable organizations, including the American Red Cross (Cincinnati Chapter) and the University of Cincinnati College of Arts & Sciences. As a business owner, entrepreneur and first-generation immigrant, the Board believes that Mr. Nwankwo brings a distinctively unique and diverse perspective to risk assessment and management, which we believe is a valuable asset to our Board. |
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| Age | 65 Director Since | 2002 | William W. Verity Mr. Verity has been Chairman and CEO of Verity Investment Partners, an investment management company, since 2002, and prior to that, he was a Partner of Pathway Guidance LLC, an executive consulting firm. Previously, Mr. Verity was Chairman and CEO of ENCOR Holdings, Inc., which owned and operated several product and manufacturing companies, and he worked as an associate in corporate finance at Alex. Brown & Sons, an investment bank. He previously served on the Board of Directors of Chiquita Brands International, Inc., an international food products marketer and distributor. Mr. Verity’s position as the principal executive officer of a privately held company and his over 30 years of executive and Board experience with complex asset management issues, qualify him for membership on the Company’s Board and Corporate Governance and Compensation Committees. In addition, his executive consulting experience provides him with insight into high-level corporate governance, executive compensation matters and business management matters, all of which the Company and the Board deal with on a regular basis. |
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| Age | 71 Director Since | 2008 | John I. Von Lehman Mr. Von Lehman began his career as a certified public accountant for Haskins & Sells, a predecessor of Deloitte, LLP. For more than five years until his retirement in 2007, Mr. Von Lehman served as Executive Vice President, Chief Financial Officer, Secretary and a director of The Midland Company, an Ohio-based provider of specialty insurance products (“Midland”). He served on the Board of Directors and as Chairman of the Audit Committee of Ohio National Mutual Funds until 2016 and is involved with several Cincinnati-based charitable organizations. Mr. Von Lehman’s 18 years of service as CFO and director of another publicly traded provider of insurance products qualifies him for membership on the Company’s Board. Specifically, Mr. Von Lehman’s position at Midland provided him with significant knowledge of and experience in property and casualty insurance operations, investment portfolio oversight, capital management and allocation and public company financial statement preparation. In his capacity as a certified public accountant and Chief Financial Officer of Midland, Mr. Von Lehman developed significant experience in preparing, auditing, analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues that compare to those of the Company and which qualify him as an “audit committee financial expert” under SEC guidelines. The depth in his understanding of internal control over financial reporting and risk assessment skills that evolved in his experience with Midland constitute attributes that the Board believes benefit the Company. |
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SUMMARY OF ATTRIBUTES AND EXPERIENCE OF BOARD NOMINEES In considering each director nominee, the Board and the Corporate Governance Committee evaluated each individual’s background, qualifications, qualities and skills to serve as a director. The Board believes that each director nominee brings a unique and valuable mix of experience and attributes to the Board. The following matrix provides information regarding the director nominees, including certain areas of knowledge, skills and experience that the Board believes are relevant to our business and strategic goals. The type and degree of knowledge, skill and experience below varies among our directors. The matrix is a non-exclusive summary and does not include all knowledge, skills, experience or other attributes of our directors that may be relevant and valuable to their service on our Board; a director may possess other relevant and important knowledge, skills and experience not indicated in the matrix. Additional information on each director nominee, including some of their specific experience, qualifications, attributes or skills, is set forth in the biographies on pages 9 to 13 of this proxy statement. Ratification of Appointment of Independent Registered Public Accounting Firm The Company’s Audit Committee Charter requires that the Audit Committee appoint annually an independent registered public accounting firm to serve as auditors. In February 2024, the Audit Committee appointed Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for 2024. Although the Audit Committee has the sole authority to appoint auditors, shareholders are being asked to ratify this appointment. If the shareholders do not ratify the appointment, the Audit Committee will take that fact into consideration but may determine to continue to retain Ernst & Young. However, the Audit Committee in its discretion may engage a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company whether or not the shareholders ratify the appointment.
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| The Board of Directors recommends that shareholders vote FOR the ratification of the Audit Committee’s appointment of Ernst & Young as our independent registered public accounting firm for 2024. |
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Audit Fees and Non-Audit Fees The following table presents fees for professional services performed by Ernst & Young for the years ended December 31, 2023 and 2022.
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| | 2023 | 2022 | | Audit fees(1) | $7,721,000 | $7,138,000 | | Audit related fees | 31,000 | 120,000 | | Tax fees(2) | 437,000 | 533,000 | | All other fees(3) | 588,000 | 550,000 | | Total | $8,777,000 | $8,341,000 |
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| (1) These aggregate fees were for audits of the financial statements (including services incurred to render an opinion under Section 404 of the Sarbanes-Oxley Act of 2002), subsidiary insurance company audits, reviews of SEC filings, and quarterly reviews. |
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| (2) These fees relate primarily to tax compliance engagements for preparation and review of foreign tax returns and certain collateralized loan obligations, in addition to other tax advisory services. |
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| (3) These fees relate primarily to agreed-upon procedure engagements for certain collateralized loan obligation structures managed by AFG. |
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Representatives of Ernst & Young are expected to be at the meeting and will be given the opportunity to make a statement if they so desire. They will also be available to respond to appropriate questions from shareholders. Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm The Audit Committee has adopted policies that require pre-approval for any audit and non-audit services to be provided to AFG by Ernst & Young LLP. The Audit Committee delegated authority to the Committee Chairperson to pre-approve certain non-audit services which arise between meetings of the Audit Committee. Pursuant to these procedures and delegation of authority, the Audit Committee was informed of and pre-approved any such audit and other services during 2023. No services were provided with respect to the de minimis waiver process provided by rules of the SEC. Advisory Vote on Compensation of our Named Executive Officers The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC (commonly referred to as “Say-on-Pay”). Our practice is to conduct this non-binding vote on an annual basis, and at our 2023 Annual Meeting, our shareholders overwhelmingly supported the continuation of this practice, with approximately 98% of the shares voted for annual advisory votes on the non-binding, advisory proposal as to the frequency of future Say-on-Pay votes. As described below under the heading “Compensation Discussion and Analysis” beginning on page 38 of this proxy statement, we seek to closely align the interests of our named executive officers with the interests of our shareholders. We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics with an overall goal of delivering sustained long-term shareholder value while aligning our executives’ interests with those of our shareholders. Further, our programs require that a substantial portion of each named executive officer’s compensation be contingent on delivering performance results that benefit our shareholders. Our compensation programs are designed to reward our named executive officers for achieving short-term and long-term strategic and operational goals designed to achieve increasing total shareholder return. Shareholders should note that, because the advisory vote on executive compensation occurs well after the beginning of the compensation year and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change our executive compensation programs in consideration of any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of shareholders.
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| The Board of Directors recommends that shareholders vote FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement. |
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The vote on this matter is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee. Nevertheless, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. Accordingly, we ask our shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure. Approval of Amended and Restated 2015 Stock Incentive Plan On March 22, 2024, the Board of Directors approved the Amended and Restated 2015 Stock Incentive Plan (which we refer to as the “Amended Plan”), subject to approval by shareholders. The Amended Plan, if approved by shareholders at the Annual Meeting, would amend and restate the 2015 Stock Incentive Plan (which we refer to as the “2015 Plan”). As of March 15, 2024, 1,834,914 shares were available for future grant under the 2015 Plan. If approved, these remaining 1,834,914 shares reserved under the 2015 Plan that have been unused at the time our shareholders approve the Amended Plan, along with an additional requested 495,086 shares, representing a total of 2,330,000 shares, will be available for future grants under the Amended Plan. Upon approval of the Amended Plan, no additional awards shall be made under the 2015 Plan.
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| The Board of Directors recommends a vote FOR the approval of the Amended and Restated 2015 Stock Incentive Plan. |
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While the Amended Plan is an “omnibus” stock plan providing for a variety of equity award vehicles, including stock options, stock appreciation rights (which we refer to as SARs), restricted stock awards, restricted stock units and stock awards, we have awarded solely restricted stock since 2016 and expect to continue to do so. If our shareholders do not approve the Amended Plan, the 2015 Plan will remain in effect in accordance with its terms, subject to its original expiration date of May 12, 2025. However, without approval of the Amended Plan by our shareholders, we will be unable to grant additional awards after such date. In this event, the Compensation Committee will be required to revise its compensation philosophy and formulate cash-based programs to attract, motivate, and retain our talent. The following provisions of the Amended Plan are designed to align plan awards with shareholder interests:
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| • | Double-Trigger Change in Control – Awards that are continued or converted into similar awards of the successor company will not accelerate vesting based solely on a change in control, and gross-ups are not provided to cover personal income taxes or excise taxes. |
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| • | not issued or delivered as a result of the net settlement of an outstanding stock option or stock appreciation right, as applicable, or |
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| • | purchased on the open market by the Company with cash proceeds received from the exercise of stock options. |
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| • | No Repricing of Stock Options or SARs – No repricing of options or SARs without the approval of shareholders. |
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| • | No Discounted Stock Options or SARs – No discounting of the exercise price or base price of stock options or SARs. |
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Dilution and Overhang Annual dilution is measured as the total number of shares subject to equity awards granted in a year, minus cancellations and other shares returned to the reserve that year, divided by total shares outstanding at the end of the year. Annual dilution from the 2015 Plan for 2023 was 0.175%. Overhang is another measure of the dilutive impact of equity programs. Overhang is equal to the number of shares subject to outstanding awards (640,930 shares, comprised of 586,048 shares underlying restricted stock and 54,882 underlying stock options) plus the number of shares available to be granted (2,330,000 shares, comprised of 1,834,914 remaining shares plus the additional 495,086 shares requested), divided by the total number of outstanding shares as of March 15, 2024 (83,856,402 shares). In addition, we have 46,518 shares issuable under our Non-Employee Directors Compensation Plan (our only other equity plan), and including these shares, as of March 15, 2024, our overhang was 3.54%. Burn Rate Burn rate is a measure of the number of shares subject to equity awards that we grant annually, which helps indicate the life expectancy of our equity plans and is another measure of shareholder dilution. We determine our value-adjusted burn rate by calculating the number of shares granted each year divided by shares outstanding. Our three-year average burn rate is 0.205%, and our burn rate for the past three calendar years has been as follows:
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SHARES UNDERLYING OUTSTANDING AWARDS Set forth in the below table are the number of shares underlying outstanding awards of restricted stock and stock options as of March 15, 2024. The Company has not issued any stock options since 2015.
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| Award Type | Shares Outstanding as of 3/15/2024 | Average Exercise Price | Weighted Average Remaining Term | | Restricted stock | 586,048 | N/A | N/A | | Stock Options | 54,882 | $48.32 | 0.7 years |
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The following is a summary of the Amended Plan. The full text of the Amended Plan is attached as Appendix A to this proxy statement, and the following summary is qualified in its entirety by reference to Appendix A. Administration and Eligibility The Board of Directors has designated the Compensation Committee as administrator of the Amended Plan. Each member of the Compensation Committee is a (i) “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1933, as amended, and (ii) an “independent director” within the meaning of the rules of the NYSE. The Compensation Committee has exclusive power to determine the employee participants in the Amended Plan, the level of participation of each participant and the terms and conditions of all awards. All full-time employees of the Company and its subsidiaries are eligible to participate in the Amended Plan. Limits on Plan Awards The number of shares available for issuance pursuant to awards under the Amended Plan is limited to the total number approved by shareholders. A participant may receive multiple awards under the Amended Plan, but no participant will receive awards representing more than 500,000 shares in any year. Types of Awards Restricted Stock A restricted stock award represents common shares that are issued subject to restrictions on transfer and vesting requirements as determined by the Compensation Committee. As discussed above, we have awarded solely restricted stock since 2016 and expect to continue to do so. Restricted stock awards generally provide for “cliff vesting” after four years. Subject to the transfer restrictions and vesting requirements of the award, the participant has the same rights as a shareholder, including all voting and dividend rights, during the restriction period, unless the Committee determines otherwise at the time of the grant. Stock Options Stock options granted under the Amended Plan may be either non-qualified stock options or incentive stock options qualifying under Section 422 of the Internal Revenue Code. The price of any stock option granted may not be less than the fair market value of the common shares on the date the option is granted. The option price may be paid in cash, common shares, through a broker-assisted cashless exercise or as otherwise permitted by the Compensation Committee. The Compensation Committee determines the terms of each stock option grant at the time of the grant with options generally terminating after a ten-year period from the date of the grant. The Compensation Committee specifies at the time each option is granted the time or times at which and in what proportions an option becomes vested and exercisable and the terms and conditions of termination of stock options upon death, disability or retirement. Generally, if an option holder’s employment terminates for any reason other than death, disability or retirement, stock options will cease vesting and will terminate on the earlier to occur of the stated expiration date or 90 days following termination of employment. SARs A SAR entitles the participant, upon settlement, to receive a payment based on the excess of the fair market value of a common share on the date of settlement over the base price of the right, multiplied by the applicable number of common shares. SARs may be granted on a stand-alone basis or in tandem with a related stock option. The base price may not be less than the fair market value of a common share on the date of grant. The Compensation Committee determines the vesting requirements and the payment and other terms of SAR, including the effect of termination of service of a participant and may accelerate the vesting of SARs at any time. Generally, all SARs terminate after the ten-year period from the date of the grant. SARs may be payable in cash or in common shares or in a combination of both. Stock Units An award of stock units provides the participant the right to receive a payment based on the value of a common share. Stock units may be subject to such vesting requirements, restrictions and payment conditions as the Compensation Committee determines are appropriate. Stock unit awards are payable in cash or in common shares or in a combination of both. Stock units may also be granted together with related dividend equivalent rights. Stock Awards A stock award represents common shares that are issued free of restrictions on transfer and free of forfeiture conditions and as to which the participant is entitled to all the rights of a shareholder. Vesting of Awards Vesting requirements for any awards under the Amended Plan may be based on the continued service of the participant for a specified time period, the attainment of specified performance goals established by the Compensation Committee, or both. Effect of Change of Control The Amended Plan provides for double-trigger change in control vesting provisions such that if awards are continued or converted into similar awards of the successor company, such awards will not result in accelerated vesting unless the participant is terminated without cause by the Company or for good reason by the participant within 18 months after the change in control. If awards are not continued or converted into similar awards of the successor company, then the awards will have accelerated vesting immediately prior to the change in control. Limited Transferability Except under an award agreement or as permitted by the Compensation Committee, awards granted under the Amended Plan are nontransferable except upon death by will or by the laws of descent or distribution or under a qualified domestic relations order. Adjustments for Corporate Changes In the event of recapitalizations, reclassifications or other specified events affecting the Company or common shares, appropriate and equitable adjustments may be made to the number and kind of common shares available for grant, as well as to other maximum limitations under the Amended Plan, and the number and kind of common shares or other rights and prices under outstanding awards. Term, Amendment and Termination The Amended Plan will expire on the tenth anniversary of the date of approval by shareholders unless terminated earlier by the Board of Directors. The Board may at any time and from time to time and in any respect amend or modify the Amended Plan. The Board may seek the approval of any amendment or modification by the Company’s shareholders to the extent it deems necessary or advisable in its sole discretion to the extent necessary to bring the plan or any outstanding awards into compliance with applicable law or stock exchange rules, to prevent adverse tax or accounting consequences to the Company or participants under Section 409A of the Code or accounting rules or for any other purpose. No amendment or modification of the Amended Plan will adversely affect any outstanding award without the consent of the participant or the permitted transferee of the award. Federal Income Tax Consequences Below is a summary of the principal U.S. federal income tax consequences to participants and to the Company of awards granted under the Amended Plan. This summary is not a complete analysis of all potential tax consequences relevant to participants and to the Company and does not describe tax consequences based on particular circumstances. The laws governing the tax consequences of these awards are highly technical and such laws are subject to change. Restricted Stock Awards, Restricted Stock Units and Other Stock-Based Awards
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Restricted stock that is subject to a substantial risk of forfeiture generally results in income recognition by the participant in an amount equal to the excess of the fair market value of the shares of stock over the purchase price, if any, of the restricted stock at the time the restrictions lapse. However, if permitted by the Company, a recipient of restricted stock may make an election under Section 83(b) of the Internal Revenue Code to instead be taxed on the excess of the fair market value of the shares granted, measured at the time of grant and determined without regard to any applicable risk of forfeiture or transfer restrictions, over the purchase price, if any, of such restricted stock. A participant who has been granted common shares that are not subject to a substantial risk of forfeiture for federal income tax purposes will realize ordinary income in an amount equal to the fair market value of the shares at the time of grant. A recipient of restricted stock units, performance awards or other stock-based awards (other than restricted stock) will generally recognize ordinary income at the time that the award is settled in an amount equal to the cash and/or fair market value of the shares received at settlement. In each of the foregoing cases, the Company will have a corresponding deduction at the same time the participant recognizes such income. Income and payroll taxes are required to be withheld on the amount of compensation attributable to the restricted stock, whether the income is paid in cash or shares. Options When a nonqualified stock option is granted, there are no income tax consequences for the option holder or the Company. When a nonqualified stock option is exercised, in general, the option holder recognizes compensation equal to the excess of the fair market value of the underlying ordinary shares on the date of exercise over the exercise price. The Company is entitled to a deduction equal to the compensation recognized by the option holder for the taxable year that ends with or within the taxable year in which the option holder recognized the compensation. When an incentive stock option is granted, there are no income tax consequences for the option holder or the Company. When an incentive stock option is exercised, the option holder does not recognize income, and the Company does not receive a deduction. The option holder, however, must treat the excess of the fair market value of the underlying ordinary shares on the date of exercise over the option price as an item of adjustment for purposes of the alternative minimum tax. If the option holder disposes of the underlying shares after the option holder has held the shares for at least two years after the incentive stock option was granted and one year after the incentive stock option was exercised, the amount the option holder receives upon the disposition over the exercise price is treated as long-term capital gain for the option holder. The Company is not entitled to a deduction. If the option holder makes a “disqualifying disposition” of the underlying shares by disposing of the shares before they have been held for at least two years after the date the incentive stock option was granted and one year after the date the incentive stock option was exercised, the option holder recognizes compensation income equal to the excess of the fair market value of the underlying shares on the date the incentive option was exercised or, if less, the amount received on the disposition minus the exercise price. The Company is entitled to a deduction equal to the compensation recognized by the option holder for our taxable year that ends with or within the taxable year in which the option holder recognized the compensation. SARs Upon the exercise of a SAR, the participant will recognize compensation income in an amount equal to the cash received plus the fair market value of any shares received from the exercise. The participant’s tax basis in the common shares received on exercise of the SAR will be equal to the compensation income recognized with respect to the common shares. The participant’s holding period for shares acquired after the exercise of a SAR begins on the exercise date. Income and payroll taxes are required to be withheld on the amount of compensation attributable to the exercise of the SAR, whether the income is paid in cash or shares. Upon the exercise of a SAR, the Company will generally be entitled to a deduction in the amount of the compensation income recognized by the participant. New Plan Benefits Because future awards under the Amended Plan will be granted in the discretion of the Compensation Committee, the type, number, recipients, and other terms of such awards cannot be determined at this time. Information regarding our recent practices with respect to stock-based compensation awarded under the Amended Plan is presented in the “Summary Compensation Table” and these related tables: “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” and “Options Exercised and Stock Vested,” elsewhere in this proxy statement, and in the “Compensation Discussion and Analysis,” section below. Management The directors, nominees for director and executive officers of the Company are as follows:
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| • | Oversees the Company’s stock incentive plans, incentive plans covering senior executive officers and deferred compensation plans. |
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| • | Has the sole authority to retain or obtain the advice of a compensation consultant, outside legal counsel and any other advisors for assistance in carrying out its responsibilities. |
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| • | Annual incentive target compensation; |
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| • | Long-term incentive target compensation; or |
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| • | Targeted value of equity compensation. |
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The Compensation Committee believes that the evaluation by certain institutional investors and proxy advisory firms of the Company’s pay-for-performance alignment is distorted by combining the compensation of the two Co-CEOs and representing that the combined compensation reflects “CEO” compensation. The Compensation Committee believes that this view skews compensation analysis and unfairly penalizes the Company for its leadership structure that the Board has determined is in the best interests of shareholders. As a result, when evaluating annual overall compensation to named executive officers, consistent with the approach of certain institutional investors and proxy advisory firms, the Compensation Committee considers the compensation of the highest-paid Co-CEO as “CEO compensation” and includes the other Co-CEO in its analysis as one of the three highest-paid, non-Chief Financial Officer officers. In addition, the Compensation Committee also compares the combined total compensation of the Co-CEOs compared to the compensation paid to the top two executives at the Company's peers when considering the reasonableness of Co-CEO compensation. Establishing Total Compensation Levels The Compensation Committee believes that compensation levels for the Co-CEOs should be based primarily upon the Committee’s assessment of the Co-CEOs’ leadership performance and potential to enhance long-term sustainable shareholder value. The Compensation Committee relies upon a combination of judgment and guidelines in determining the amount and mix of compensation elements for the Co-CEOs. The compensation levels for the other named executive officers are similarly determined by the Co-CEOs, and reviewed and approved by the Compensation Committee, again based primarily upon the assessment of each named executive officer’s leadership performance and potential to enhance long-term sustainable shareholder value. The Compensation Committee and the Co-CEOs analyze peer groups, including the Compensation Peer Group, and industry pay rates at least annually in reviewing the appropriateness and competitiveness of the Company’s compensation programs. In analyzing market pay levels among the Compensation Peer Group, the Compensation Committee factors into its analysis the variance in size (both in terms of revenues and market capitalization) among the companies. The Compensation Committee and the Co-CEOs have designed the executive compensation program that will attract, motivate, retain and reward the highest level of executive leadership possible and to align the interests of AFG’s executives with those of AFG’s shareholders. The Compensation Committee utilizes the peer and industry review as a point of reference for measurement and not as a determinative factor. Although the Company seeks to offer a level of total compensation to named executive officers that is competitive with the compensation paid by companies in the Compensation Peer Group, the Company does not target or benchmark a particular percentile with respect to our executives’ total pay packages or any individual components of pay. Rather, the compensation levels and performance of the companies in the Compensation Peer Group constitute one of the many factors considered by the Compensation Committee and described in this Compensation Discussion and Analysis. The Compensation Peer Group, which the Compensation Committee annually reviews and updates when appropriate, is designed to reflect the Company’s business mix and to consist of companies against which the Compensation Committee believes AFG competes for talent and for shareholder investment and in the marketplace for business. For 2023, following its assessment of the Compensation Peer Group, the only change was the removal of one company following its acquisition in 2022. The Compensation Committee added four companies to the group in 2022 based in part on Pay Governance’s feedback that the Company was among the smaller companies in its then-Compensation Peer Group. The Compensation Peer Group consists of the following companies:
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| • | base salary and annual performance-based cash awards; |
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| • | long-term incentive compensation; |
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| What We Do | | | | Compensation heavily weighted toward variable “at risk” short-term and long-term pay aligned with Company financial and stock performance | | | Double-trigger requirement for equity vesting upon a change of control | | | Four-year cliff vesting of equity awards with proportionate vesting upon a qualified retirement | | | Periodic engagement of independent compensation consultant | | | Robust share ownership guidelines for executive officers and non-employee directors | | | Incentive awards include absolute and relative performance metrics | | | Broad recoupment policy for performance awards that applies to senior management employees beyond executive officer group required by SEC/NYSE rules |
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| What We Don't Do | | | | No guaranteed minimums for performance-based cash incentives | | | No executive officer tax gross-ups for perquisites | | | No individual employment agreements or change of control agreements | | | No director or executive officer hedging and no pledging of common shares unless preapproved in limited circumstances | | | No plans that encourage excessive risk-taking |
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2023 Compensation Determinations and Results Overview of 2023 Compensation Determinations and Results AFG annually holds an advisory vote on the compensation of its named executive officers, commonly referred to as a Say-on-Pay vote. Our shareholders approved the compensation of our named executive officers, with approximately 95% of votes cast in 2023 in favor of our Say-on-Pay resolution. The Compensation Committee believes that the result of the advisory vote is valuable in assessing its compensation decisions and considers each year’s vote in its annual review and design of the Company’s executive compensation programs. The executive compensation program for 2023 was designed similarly to the program in 2022. In 2022, the named executive officers were rewarded for performance that included record Operating EPS, record underwriting profit, record premium production and record full-year pretax Specialty P&C Earnings. The Company’s strong 2022 results led to significant returns to shareholders as the Company paid $14.31 per share in dividends in 2022 which included $12.00 of special dividends. When reviewing total 2022 compensation paid to the named executive officers, the Compensation Committee determined that the Company’s strong Operating EPS and Specialty P&C Earnings and return on equity results merited the highest potential incentive compensation to be paid to its named executive officers in 2022. The performance metrics for the Co-CEOs under the Senior Executive Annual Bonus Plan (the “Annual Bonus Plan”) for 2023 were Operating EPS and Specialty P&C Earnings, the same metrics utilized for 2022. While the Compensation Committee recognized that repeating or exceeding 2022 results would require exceptional efforts by the entire organization, it established performance targets for Operating EPS and Specialty P&C Earnings for 2023 in the context of 2022’s exceptional Company performance. The performance targets for Operating EPS and Specialty P&C earnings for 2023 were approximately 11% and 12% higher, respectively, than the 2022 performance targets. When reviewing bonus award results for 2023, the Compensation Committee recognized that for 2023, the Company’s Operating EPS and Specialty P&C Earnings each fell below target. The Compensation Committee, however, concluded that overall 2023 results were very strong, specifically noting the Company’s core return on equity of 19.8%, combined ratio of 90.3%, growth in book value per share plus dividends of 16.6%, and the return of approximately $900 million to shareholders in 2023 through regular and special dividends and share repurchases. Despite these results, the Company fell short of the Operating EPS and Specialty P&C Earnings performance necessary to result in target payouts under the Annual Bonus Plan, resulting in a payment to the Co-CEOs of approximately 34% of target. 2023 Say-on-Pay Vote
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Compensation Committee Discussions with Co-CEOs Our Co-CEOs determine the compensation for the named executive officers other than themselves, which is annually reviewed and approved by Compensation Committee. The Compensation Committee makes recommendations to the Board and the Co-CEOs with respect to incentive-compensation plans and equity-based plans. Our Co-CEOs discuss with the Compensation Committee their evaluation of the Company’s performance, their performance, their current and potential future compensation levels, and the reported compensation of named executive officers at the Compensation Peer Group companies before the Compensation Committee determines annual and long-term incentive compensation for the Co-CEOs. Specifically, the Co-CEOs recommend consideration of AFG’s business plan in connection with annual compensation objectives and targets. The Compensation Committee considers this input in connection with its review and approval of corporate goals and objectives relevant to Co-CEO compensation, deliberation of Co-CEO performance in light of those goals and objectives, and determination of Co-CEO compensation levels based on this evaluation. The Co-CEOs believe that Mr. Berding, who was promoted to President of the Company in June 2023, plays a collaborative role with the Co-CEOs in the achievement of AFG’s business plan and budgeted targets. In recognition of this role, the compensation components for Mr. Berding are identical to those of the Co-CEOs. Base Salary The Company pays salaries designed to attract and retain superior leaders. After reviewing compiled data and materials as discussed above, the Compensation Committee determines annual base salaries for the Co-CEOs that are appropriate, in its subjective judgment, based on each Co-CEO’s responsibilities and performance and input from the Co-CEOs themselves. The Co-CEOs set salaries for the other named executive officers, which are reviewed and approved by the Compensation Committee. The Co-CEOs believe that such salaries are appropriate in light of the levels of responsibility of such officers and their individual contributions to the Company’s success. Annual Bonuses The Compensation Committee established the Annual Bonus Plan where participants can earn annual performance-based cash awards based on AFG’s current year performance. In 2023, all named executive officers other than Mr. Thompson participated in the Annual Bonus Plan. The Company believes that the overall performance of AFG is substantially related to the performance of its executives. In 2023, awards were based on two Company performance metrics, Operating EPS and Specialty Property and Casualty Earnings (Specialty P&C Earnings) and, for some participants, a subjective component determined by the Co-CEOs. Awards to the Co-CEOs and Mr. Berding under the Annual Bonus Plan for 2023 performance were based on Company performance metrics as measured by Operating EPS and Specialty P&C Earnings. The Operating EPS and Specialty P&C Earnings component target amounts represented 60% and 40%, respectively, of the total target award. Sixty-percent of the annual award for Mr. Hertzman and Mr. Weiss was based on Operating EPS with the remaining 40% subjectively determined by the Co-CEOs. If earned, the Company pays cash awards under the Senior Executive Annual Bonus Plan in the first quarter for the prior year’s performance. The Compensation Committee delineated levels of achievement under each Company performance component. For results below a defined threshold, no award would be earned for the relevant component. Thresholds were established for a minimum award, target award and maximum award. The Compensation Committee determined that exceeding the highest threshold under any component would reflect significant outperformance and merit payment of the maximum award amounts. The Compensation Committee established the performance metrics’ ranges for 2023 after reviewing the Company’s 2023 business plan prepared by management, approved by the Co-CEOs and reviewed with the Board of Directors. Results for each component are determined from the Company’s results reported consistent with past practice. The Annual Bonus Plan includes provisions for adjustments to performance thresholds in the event of a modification of the methodology of Company reporting for any measure. Any modification would result in an adjustment, as determined by the Compensation Committee, in a manner that provides for an identical award for the affected component based on identical adjusted results. Mr. Thompson’s cash incentive compensation was determined based on numerous objective factors contained in multiple annual and multi-year compensation programs applicable to Great American Insurance Company and the business units overseen by Mr. Thompson. Amounts paid to Mr. Thompson each year, including during 2023, represent business results from prior years which may have been affected by subsequent development of the business results. The bonus shown for Mr. Thompson reflects the amounts paid to him during 2023. Annual Bonus Plan – 2023 Targets and Maximums The target and maximum awards for each participant are set forth in the table below.
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For Mr. Hertzman and Mr. Weiss, 40% of the annual cash target award was determined under the discretionary component by the Co-CEOs based on the Co-CEOs’ evaluation of the named executive officers relative to overall performance for 2023. The determination for Mr. Hertzman and Mr. Weiss included a consideration of all factors deemed relevant, including, but not limited to: operational, qualitative measurements relating to the development and implementation of strategic initiatives and annual objectives; responses to unexpected developments; the development of management personnel; and the impact of any extraordinary transactions involving or affecting the Company and its subsidiaries. Annual Bonus Plan – 2023 Component Results and Awards The percentage achievement and award paid to each participant under each component of the Annual Bonus Plan is set forth below.
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Senior Executive Long Term Incentive Compensation Plan The Senior Executive Long Term Incentive Compensation Plan (the “Senior Executive LTIC”) rewards long-term Company performance through cash awards payable upon the achievement of three-year performance goals determined annually by the Compensation Committee. The Compensation Committee sets these three-year performance goals during the first quarter of each three-year period. As such, the Senior Executive LTIC performance goals for the 2021-2023 period discussed below were determined by the Compensation Committee in the first quarter of 2021. Awards under the Senior Executive LTIC utilize two evenly weighted performance criteria: book value per share growth versus the book value per share growth of the group of companies (the “plan companies”) and average annual return on equity growth. The book value per share calculations, for the Company and each plan company, are adjusted to add dividends and other capital distributions made on common shares, exclude accumulated other comprehensive income, and negate the effects of any accounting changes. The awards provide for such adjustments so that accounting changes do not artificially affect book value per share and so that other comprehensive income and the impact of distributions do not influence Company decisions like, for example, the timing and amount of dividends paid in a manner not consistent with a goal of continuing to increase shareholder value. Annual return on equity is defined as the percentage equal to the Company’s core operating earnings divided by the Company’s shareholders’ equity (excluding accumulated other comprehensive income), and the applicable percentage in determining award amounts, if any, is the average return on equity for each of the three years in the performance period. Awards granted under the Senior Executive LTIC to the Co-CEOs and Mr. Berding are provided in the table below. Each of the performance components are equally weighted with one-half of the target amounts and maximum amounts set forth below allocated to each of book value per share growth versus plan companies and average annual return on equity:
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| | | Three-Year Performance Period Ending | Potential Payments | | | Name | Grant Year | | Target ($) | Maximum ($) | | Carl H. Lindner III | 2021 | 12/31/2023 | 2,500,000 | 5,000,000 | | | 2022 | 12/31/2024 | 2,500,000 | 5,000,000 | | | 2023 | 12/31/2025 | 2,500,000 | 5,000,000 | | S. Craig Lindner | 2021 | 12/31/2023 | 2,500,000 | 5,000,000 | | | 2022 | 12/31/2024 | 2,500,000 | 5,000,000 | | | 2023 | 12/31/2025 | 2,500,000 | 5,000,000 | | John B. Berding | 2021 | 12/31/2023 | 1,250,000 | 2,500,000 | | | 2022 | 12/31/2024 | 1,250,000 | 2,500,000 | | | 2023 | 12/31/2025 | 1,600,000 | 3,200,000 |
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The Company’s growth in book value per share for the period from January 1, 2021 through December 31, 2023 placed it fourth in comparison to the plan companies (entitling each participant to 81% of the maximum award for this component). Each Co-CEO received an award of $2,023,810 and Mr. Berding received an award for this component of $1,011,905 for the performance period. Return on equity awards are based on average annual return on equity for the performance period. For the 2021-2023 performance period, if the return on equity percentage equaled or exceeded 14.5%, the participant would receive the maximum award amount attributed to this metric. If the return on equity percentage equals or is less than 10%, the participant would receive no award amount. For a return on equity greater than 10% but less than 14.5%, the award amount will be calculated by applying straight-line interpolation rounded to the nearest whole dollar amount. Each participant’s target award of 50% of the maximum award for the return on equity component would be earned if the Company’s return on equity equaled 12.25% for the three-year period. The Company’s annual average return on equity for 2021-2023 was 21.0%. Each participant was entitled to the maximum award for this component. Each Co-CEO received an award of $2,500,000, and Mr. Berding received an award for this component of $1,250,000. After combining the two components, each of the Co-CEOs received an award of $4,523,810 and Mr. Berding received an award of $2,261,905. These amounts represented 181% of the target award and 90.5% of the maximum award. Long-Term Equity Incentive Compensation—Broad-Based Equity Award The Compensation Committee believes long-term equity incentive compensation encourages management to focus on long-term Company performance and provides an opportunity for executive officers and certain designated key employees to increase their stake in the Company through equity awards that vest over time. The Compensation Committee believes that equity awards represent an important part of AFG’s performance-based compensation system and that equity awards align AFG’s senior executives’ interests with those of its shareholders. Equity awards are generally granted at a regularly scheduled Compensation Committee meeting in February after the market has had the opportunity to assess AFG’s announcement of results of the recently ended year and current year earnings guidance. Annual grants by the Compensation Committee consist of restricted shares awarded to executive officers and certain designated key employees. All restricted shares cliff-vest after four years and contain double-trigger vesting, which limits acceleration of awards to situations where a change in control is accompanied by a qualified termination of employment. In determining the value of annual grants to key employees, the Compensation Committee takes into consideration the dilutive effect to shareholders as well as the expense to AFG as stock-based awards vest. The Compensation Committee believes that several features present in stock-based awards give recipients substantial incentive to maximize AFG’s long-term success. Specifically, the Compensation Committee believes that, because all awards vest over time, with restricted stock awards “cliff” vesting in four years, these awards promote executive retention due to the potential for forfeiture of awards that have not fully vested upon departure from AFG. Equity award levels for participants are determined based on market and compensation peer company data, expense to AFG, the relative benefits to participants of such expense, the overall compensation level of participants and award amounts from previous years. Equity grants vary among participants based on their positions within the Company, and AFG believes that the consideration of these factors results in reasonable grant levels to its named executive officers and other employees. Restricted shares granted in 2023 to the named executive officers are set forth in the Grants of Plan-Based Awards Table on page 56 of this proxy statement. Perquisites and Other Personal Benefits Perquisites, such as insurance coverage, the personal use of corporate aircraft, certain entertainment expenses and administrative staff attending to occasional personal matters are made available to AFG’s executive officers. The amounts allocated for administrative matters are estimated based on the time spent and employment cost incurred. The Compensation Committee views the perquisites provided to the named executive officers together with all other compensation elements as a component of total compensation and believes that diminishing or eliminating any perquisites would require a corresponding increase in other compensation components. Therefore, the Compensation Committee believes these perquisites, as a component of total executive compensation, to be reasonable and consistent with the overall goal of offering competitive compensation programs. The benefits and the estimated costs to the Company of such benefits are included in the All Other Compensation table below on page 55. During 2023, as in prior years, the Company operated corporate aircraft used for the business travel of management and staff of the Company and its subsidiaries. The Board has encouraged the Co-CEOs to use corporate aircraft for all travel whenever practicable for productivity, security, health, safety and confidentiality reasons. Notwithstanding, the Compensation Committee and the Co-CEOs jointly acknowledge that personal aircraft use is a personal benefit. Each Co-CEO is provided a fixed number of hours per year for personal use (140 flight hours for 2023) to replace additional cash compensation that would have been paid. On certain occasions, an executive’s spouse, other family members or guests may fly on the corporate aircraft. The flight hour benefit has remained the same since 2020. For taxable benefits, the dollar amounts are included as taxable income to the named executive officers, and the Company does not provide tax gross-up payments for any perquisites. See footnote (2) to the “All Other Compensation” table below on page 55 for a discussion of the tax treatment of aircraft benefits. In addition to the flight hour limit, the Compensation Committee also limits the insurance benefit to $500,000 per year, and named executive officers reimburse the Company for any amounts exceeding the limit. The Company also maintains a Deferred Compensation Plan pursuant to which certain employees of AFG and its subsidiaries (currently those paid $110,000 or more annually) may defer up to 80% of their annual salary and/or bonus. For 2023, participants could elect to have the value of deferrals earn a fixed rate of interest, set annually by the Board of Directors (5.75% in 2023); or earn interest as determined by one or more publicly traded mutual funds. A deferral term of either a fixed number of years or upon termination of employment must be elected at the time of deferral. Under the plan, no federal or state income taxes are paid on deferred compensation. Rather, such taxes will be due upon receipt at the end of the deferral period. Retirement and Other Related Benefits
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| Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | | Carl H. Lindner III Co-Chief Executive Officer (Co-Principal Executive Officer) | 2023 | 1,250,000 | 1,500,054 | 5,308,570 | 1,785,524 | 9,844,148 | | | 2022 | 1,250,000 | 1,500,128 | 8,146,970 | 1,773,301 | 12,670,399 | | | 2021 | 1,250,000 | 1,500,100 | 8,183,145 | 1,516,337 | 12,449,582 | | S. Craig Lindner Co-Chief Executive Officer (Co-Principal Executive Officer) | 2023 | 1,250,000 | 1,500,054 | 5,308,570 | 1,855,942 | 9,914,566 | | | 2022 | 1,250,000 | 1,500,128 | 8,146,970 | 1,740,770 | 12,637,868 | | | 2021 | 1,250,000 | 1,500,100 | 8,183,145 | 1,408,494 | 12,341,739 | | John B. Berding President of AFG and American Money Management | 2023 | 1,050,000 | 3,125,187 | 2,859,005 | 276,300 | 7,310,492 | | | 2022 | 1,044,231 | 950,036 | 3,953,030 | 220,025 | 6,167,322 | | | 2021 | 1,020,000 | 950,093 | 3,819,246 | 181,372 | 5,970,711 | | Brian S. Hertzman Senior Vice President and Chief Financial Officer | 2023 | 500,000 | 320,128 | 261,812 | 110,629 | 1,192,569 | | | 2022 | 460,193 | 320,117 | 431,250 | 108,527 | 1,320,087 | | | 2021 | 436,153 | 285,061 | 400,000 | 85,229 | 1,206,443 | | David L. Thompson, Jr. President and Chief Operating Officer of Property & Casualty Insurance Group | 2023 | 700,000 | 500,018 | 632,775 | 174,234 | 2,007,027 | | | 2022 | 610,577 | 500,132 | 437,645 | 158,298 | 1,706,652 | | Mark A. Weiss Senior Vice President & General Counsel | 2023 | 540,000 | 320,128 | 226,432 | 79,785 | 1,166,345 |
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| (2) As noted in the narrative description of the non-employee Director compensation program preceding the table, non-Chair member annual retainers for the Corporate Governance Committee and the Compensation Committee were eliminated, and the Audit Committee non-Chair member annual retainer was decreased from $20,000 to $10,000, effective July 1, 2023. |
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| Name | Fees Earned or Paid in Cash ($) | Stock Award ($)(1) | All Other Compensation ($)(2) | Total ($) | | James E. Evans | 130,500 | 160,000 | 153,678 | 444,178 | | Terry S. Jacobs | 154,250 | 160,000 | — | 314,250 | | Gregory G. Joseph | 180,500 | 160,000 | — | 340,500 | | Mary Beth Martin | 149,250 | 160,000 | — | 309,250 | | Amy Y. Murray | 145,500 | 160,000 | — | 305,500 | | Evans N. Nwankwo | 138,000 | 160,000 | — | 298,000 | | William W. Verity | 148,500 | 160,000 | — | 308,500 | | John I. Von Lehman | 145,000 | 160,000 | — | 305,000 |
FINANCIAL STRENGTH:(5)
| Year | Summary Compensation Table Total Compensation for PEO ($)(1) | | Compensation Actually Paid to PEO ($)(2) | | Average Summary Compensation Table Total Compensation for Other NEOs ($)(3) | Average Compensation Actually Paid to Other NEOs ($)(2) | Value of Initial Fixed $100 Investment Based On: | | Net Income(5) (millions) ($) | Core EPS ($) | | | Carl H. Lindner III | S. Craig Lindner | Carl H. Lindner III | S. Craig Lindner | | | Total Shareholder Return ($) | Peer Group(4) Total Shareholder Return ($) | | | | 2023 | 9,844,148 | 9,914,566 | 9,311,061 | 9,381,479 | 2,919,108 | 2,775,385 | 167.51 | 164.49 | 852 | 10.56 | | 2022 | 12,670,399 | 12,637,868 | 13,456,927 | 13,424,396 | 2,854,120 | 3,133,065 | 181.22 | 148.53 | 898 | 11.63 | | 2021 | 12,449,582 | 12,341,739 | 16,851,687 | 16,743,844 | 2,639,597 | 4,137,031 | 163.26 | 124.95 | 1,995 | 11.59 | | 2020 | 9,631,170 | 9,596,241 | 8,637,205 | 8,602,276 | 1,991,354 | 1,659,485 | 83.81 | 106.33 | 732 | 8.44 |
FINANCIAL STRENGTH:(5)
| (2) “Compensation actually paid” to our Co-CEOs and Other NEOs in each of 2023, 2022, 2021 and 2020 reflects the respective amounts set forth in the “Total” column of the Summary Compensation Table, as adjusted as set forth in the table below, in accordance with SEC rules. The dollar amounts reflected in the “Total” column of the Summary Compensation Table and above do not reflect the actual amount of compensation earned by or paid to our Co-CEOs and Other NEOs during the applicable year. For information regarding the decisions made by our management and Compensation Committee in regards to the NEO compensation for each fiscal year, please see the Compensation Discussion & Analysis section of this proxy statement. Fair value changes in stock awards for 2020 include the change in fair value of unvested stock option awards from December 31, 2019 to February 23, 2020. The Company has not awarded stock options since 2015. |
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Do I have an opportunity to cumulate my votes for director nominees? Cumulative voting allows a shareholder to multiply the number of shares owned on the record date by the number of directors to be elected and to cast the total for one nominee or distribute the votes among the nominees as the shareholder desires. Shareholders of the Company have cumulative voting rights in the election of directors if certain conditions are met. In order for cumulative voting to apply, notice of cumulative voting must be given in writing to the Company’s Secretary not less than 48 hours before the time fixed for the holding of the meeting. As of the date of this proxy statement, the Company has not received a notice from any shareholder requesting cumulative voting. If proper notice of cumulative voting is received by the Company, the 11 nominees who receive the greatest number of votes will be elected, subject to the tender of resignation and related procedures set forth above under, “What vote is required to approve each proposal” with respect to incumbent directors who fail to receive more votes in favor than votes withheld. The authority solicited by this proxy statement includes discretionary authority to cumulate votes in the election of directors. If cumulative voting is in effect with respect to the election of directors, the named proxies reserve the right to cumulate the votes represented by the proxies they receive and distribute such votes in accordance with their sole discretion, except that shareholders’ votes will not be cast for a nominee as to whom such shareholder instructs that such votes be cast “AGAINST” or “ABSTAIN.” Other Matters Copies of Annual Report on Form 10-K The Company makes available on its website all of its filings that are made electronically with the Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. To access these filings, go to the Company’s website (www.AFGinc.com), click on “Investor Relations” on the home page and select “Financial Information.” Copies of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, including financial statements and schedules, as filed with the SEC, are also available without charge to shareholders upon written request addressed to: Investor Relations American Financial Group, Inc. Great American Insurance Group Tower 301 East Fourth Street Cincinnati, Ohio 45202 Submitting Shareholder Proposals for the 2025 Annual Meeting of Shareholders Under the rules and regulations of the SEC, any proposal that a shareholder of the Company intends to present at the annual meeting of shareholders to be held in 2025 and which such shareholder desires to have included in the Company’s proxy materials for such meeting must be received by the Secretary of the Company not less than 120 calendar days before the one-year anniversary date of this year’s proxy statement, or December 5, 2024. Our Regulations, as they may be amended from time to time, may contain additional requirements for matters to be properly presented at annual meetings of shareholders. The proxy card used by AFG for the annual meeting typically grants authority to management to vote in its discretion on any matters that come before the meeting for which adequate notice has not been received. In order for a notice to be deemed adequate for the 2025 annual meeting, it must be received by February 18, 2025. Shareholders wishing to nominate a director candidate must provide written notice at least 90 and not more than 120 days prior to the annual meeting to the Secretary of the Company setting forth or accompanied by: (1) certain biographical, stock ownership and investment intent disclosures about the proposed nominee as set forth in the Regulations; (2) certain biographical, stock ownership and hedging or similar activity disclosures about the shareholder giving the notice and specified persons associated with such shareholder as set forth in the Regulations; (3) verification of the accuracy or completeness of any nomination information at the Company’s request; (4) a statement that a nomination that is inaccurate or incomplete in any manner shall be disregarded; (5) a representation that the shareholder was a record holder of the Company’s voting stock and intended to appear, in person or by proxy, at the meeting to make the nomination; and (6) the consent of each such nominee to serve as director if elected. In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees at the 2025 annual meeting must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than December 5, 2024. Appendix A AMENDED AND RESTATED 2015 STOCK INCENTIVE PLAN AMENDED AND RESTATED 2015 STOCK INCENTIVE PLAN ARTICLE 1 OBJECTIVES The objectives of this Amended and Restated 2015 Stock Incentive Plan (the “Plan”) are to enable American Financial Group, Inc. (the “Company”) to compete successfully in retaining and attracting key employees of outstanding ability, to stimulate the efforts of such employees toward the Company’s objectives and to align their interests with those of the Company’s shareholders. ARTICLE 2 DEFINITIONS For purposes of this Plan, the following terms shall have the following meanings: 2.1 "Affiliate" means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company. 2.2 “Award” means an award of a Stock Option, Stock Appreciation Right, Restricted Stock Award, Stock Unit Award or Stock Award granted under the Plan. 2.3 “Award Agreement” means a written or electronic agreement entered into between the Company and a Participant setting forth the terms and conditions of an Award granted to a Participant. 2.4 “Beneficial Owner” or “Beneficial Ownership” has the meaning given in Rule 13d-3 under the Exchange Act. 2.5 “Board” means the Board of Directors of the Company. 2.6 “Cause” has the meaning set forth in Section 12.2. 2.7 “Change in Control” has the meaning set forth in Section 11.2.1. 2.8 “Code” means the Internal Revenue Code of 1986, as amended, or any successor legislation. 2.9 “Committee” means a committee designated by the Board of the Company. The Committee shall be comprised of three or more directors, each of whom shall be (1) a “Non-Employee Director” as defined in Rule 16b-3 promulgated under the Exchange Act, and (2) an “independent director” under rules adopted by the New York Stock Exchange, in each case as such rules and sections may be amended, superseded or interpreted hereafter. 2.10 “Common Stock” means the Company’s common stock, no par value. 2.11 “Disability” means a Participant being considered “disabled” within the meaning of Section 409A(a)(2)(C) of the Code, unless otherwise provided in such Participant’s applicable Award Agreement. 2.12 “Eligible Employee” means any individual who performs services for the Company or any Subsidiary of the Company and is treated as an “employee” for federal income tax purposes. 2.13 “Exchange Act” means the Securities Exchange Act of 1934.
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2.14 “Fair Market Value” of a Share as of a given date shall (i) if the Common Stock is then traded on the New York Stock Exchange, be the average of the highest and lowest of the New York Stock Exchange composite tape market prices at which the Shares shall have been sold regular way on the date as of which fair market value is to be determined or (ii) if the Common Stock is not then traded on the New York Stock Exchange but is quoted on the Nasdaq National Market, be the average of the closing bid and asked prices for a Share on the date as of which Fair Market Value is to be determined, or, in the case of (i) or (ii) if there shall be no such sale on such date, the next preceding day on which such sales shall have occurred. If Common Stock is not listed on the New York Stock Exchange or Nasdaq National Market on the date as of which Fair Market Value is to be determined, the Committee shall determine in good faith the Fair Market Value in whatever manner it considers appropriate. In all events, for Awards intended to be exempt from Section 409A of the Code, Fair Market Value shall be determined by the Committee in accordance with Section 409A of the Code. 2.15 “Good Reason” has the meaning set forth in 11.2.3. 2.16 “Grant Date” means the date designated by the Committee as the date upon which an Award is granted. 2.17 “Incentive Option” means any Stock Option intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code or any successor provision. 2.18 “Non-Qualified Option” means any Stock Option that is not an Incentive Option. 2.19 “Lindner Family” has the meaning set forth in Section 11.2.2. 2.20 “Option Price” or “Exercise Price” means the price per Share at which Common Stock may be purchased upon the exercise of an Option. 2.21 “Participant” means a person to whom an Award has been granted pursuant to this Plan. 2.22 “Performance Award” means a Restricted Stock Award, a Stock Unit Award or a Stock Award, granted to a Participant under Article 10, which Award is subject to the achievement of Performance Objectives during a Performance Period. 2.23 “Performance Objectives” means the performance objectives established pursuant to this Plan for Participants who have received Performance Awards. 2.24 “Performance Period” means the period designated for the achievement of Performance Objectives. 2.25 [Reserved.] 2.26 [Reserved.] 2.27 “Restricted Stock Award” means a grant of Shares to an Eligible Employee under Article 7 that are issued subject to such vesting and transfer restrictions as the Committee shall determine and set forth in an Award Agreement. 2.28 “Retirement” means any termination of employment (other than by death or Disability) by an employee who is at least 65 years of age, or 55 years of age with at least ten years of employment with the Company or a Subsidiary of the Company. 2.29 “Share” means one share of the Common Stock. 2.30 “Stock Appreciation Right” means a contractual right granted to an Eligible Employee under Article 6 entitling such Eligible Employee to receive a payment, representing the difference between the base price per Share of the right and the Fair Market Value of a Share, at such time, and subject to such conditions, as are set forth in the Plan and the applicable Award Agreement. 2.31 “Stock Award” means a grant of Shares to an Eligible Employee under Article 9 that are issued free of vesting and transfer restrictions. 2.32 “Stock Option” or “Option” means the right to purchase Shares granted pursuant to this Plan. 2.33 “Stock Unit Award” means a contractual right granted to an Eligible Employee under Article 8 representing notional unit interests equal in value to a Share to be paid or distributed at such times, and subject to such conditions, as set forth in the Plan and the applicable Award Agreement. 2.34 “Subsidiary” has the meaning set forth in Section 424(f) of the Code. 2.35 “Term” means the period beginning on a Grant Date and ending on the expiration date of such Award. 2.36 “Transfer” means sale, assignment, pledge, encumbrance, alienation, attachment, charge or other disposition, whether or not for consideration; and the terms “Transferred”, “Transferable” and the like have corresponding meanings. ADMINISTRATION; PARTICIPATION AND AWARDS 3.1 The Committee. This Plan shall be administered and interpreted by the Committee. 3.2 Committee Authority. The Committee shall have such powers and authority as may be necessary or appropriate for the Committee to carry out its functions as described in the Plan. Subject to the express limitations of the Plan, the Committee shall have authority in its discretion to determine, after considering management’s recommendations with respect to Eligible Employees excluding the Company’s executive officers, the Eligible Employees to whom, and the time or times at which, Awards may be granted, the number of Shares, units or other rights subject to each Award, the exercise, base or purchase price of an Award (if any), the time or times at which an Award will become vested, exercisable or payable, the performance goals and other conditions of an Award, the duration of the Award, and all other terms of the Award. The Committee shall determine the terms and conditions of all Awards granted to Participants. Subject to the terms of the Plan, the Committee shall have the authority to amend the terms of an Award in any manner that is not inconsistent with the Plan, provided that no amendment may be made to any outstanding Award that would materially adversely affect the rights of the Participant with respect to such Award without the written consent of such Participant. The Committee shall also have discretionary authority to interpret the Plan, to make factual determinations under the Plan, and to make all other determinations necessary or advisable for Plan administration, including, without limitation, to correct any defect, to supply any omission or to reconcile any inconsistency in the Plan or any Award Agreement hereunder. The Committee may prescribe, amend, and rescind rules and regulations relating to the Plan. The Committee’s determinations under the Plan need not be uniform and may be made by the Committee selectively among Participants and Eligible Employees, whether or not such persons are similarly situated. The Committee shall, in its discretion, consider such factors as it deems relevant in making its interpretations, determinations and actions under the Plan including, without limitation, the recommendations or advice of any officer or employee of the Company or such attorneys, consultants, accountants or other advisors as it may select. All interpretations, determinations and actions by the Committee shall be final, conclusive, and binding upon all parties, including the Company, its shareholders and all Participants.
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3.3 Delegation of Authority. To the extent permitted by applicable law and the rules of any exchanges upon which the Shares may be listed, the Committee may, by resolution, authorize one or both of the Co-Chief Executive Officers (or the Chief Executive Officer in the event that only one person serves in such capacity) (an “Authorized Officer”) to do one or both of the following on the same basis as the Committee: (i) to designate Participants to be recipients of Awards under this Plan, and (ii) to determine the size of any such Awards; provided, however, that (A) the Committee shall not delegate such responsibilities to any Awards granted to a Participant who is an executive officer or a more than 10% beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act, and (B) the resolution providing for such authorization sets forth the maximum total number of Shares the Authorized Officer(s) may grant. In no event shall any such delegation of authority be permitted with respect to Awards to any person who is a covered employee under Section 162(m) of the Code. The Committee shall also be permitted to delegate to any appropriate officer or employee of the Company responsibility for performing certain ministerial functions under the Plan. In the event that the Committee’s authority is delegated in accordance with the foregoing, all provisions of the Plan relating to the Committee shall be interpreted in a manner consistent with the foregoing by treating any such reference as a reference to such officer or employee for such purpose. Any action undertaken in accordance with the Committee’s delegation of authority under this Plan shall have the same force and effect as if such action was undertaken directly by the Committee and shall be deemed for all purposes of the Plan to have been taken by the Committee. 3.4 Rule 16b-3. The provisions of the Plan are intended to ensure that no transaction under the Plan is subject to (and not exempt from) the short-swing recovery rules of Section 16(b) of the Exchange Act and shall be construed and interpreted in a manner so as to comply with such rules. Notwithstanding the foregoing and any other provision of the Plan to the contrary, if for any reason the Committee does not meet the requirements of Rule 16b-3 of the Exchange Act, such noncompliance with the requirements of Rule 16b-3 of the Exchange Act shall not affect the validity of Awards, interpretations or other actions of the Committee. 3.5 Designation of Participants. All Eligible Employees are eligible to be designated by the Committee to receive Awards and become Participants under the Plan. The Committee has the authority, in its discretion, to determine and designate from time to time those Eligible Employees who are to be granted Awards, the types of Awards to be granted and the number of Shares or rights subject to Awards granted under the Plan. In selecting Eligible Employees to be Participants and in determining the type and amount of Awards to be granted under the Plan, the Committee shall consider any and all factors that it deems relevant or appropriate. ARTICLE 4 SHARES SUBJECT TO PLAN 4.1 Shares. Subject to adjustment as provided in Section 4.2, the number of Shares which may be issued under this Plan shall not exceed two million, three hundred and thirty thousand (2,330,000) Shares. Shares issued and sold under the Plan may be either authorized but unissued Shares or Shares held in the Company’s treasury. To the extent that any Award involving the issuance of Shares is forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements or other conditions of the Award, or is otherwise terminated without an issuance of Shares being made thereunder, the Shares covered thereby will no longer be counted against the foregoing maximum Share limitations and may again be made subject to Awards under the Plan pursuant to such limitations. Any Awards or portions of Awards that are settled in cash and not in Shares shall not be counted against the foregoing maximum Share limitations. The number of Shares subject to Awards granted under the Plan to any single Participant shall not exceed, in the aggregate, 500,000 Shares per year (subject to adjustment as provided in Section 4.2). The number of Shares subject to Stock Options and Stock Appreciation Rights granted under the Plan to any single Participant shall not exceed, in the aggregate, 500,000 Shares per fiscal year (subject to adjustment as provided in Section 4.2). The number of Shares available for Awards under the Plan shall be reduced by (i) the total number of Stock Options that have been exercised, regardless of whether any of the Shares underlying such Stock Options are actually issued to the Participant as the result of a net exercise or settlement, and (ii) any Shares issued pursuant to the Plan used to pay any Exercise Price, purchase price or tax withholding obligation with respect to any Awards. In addition, the Company may not use the cash proceeds it receives from Stock Option exercises to repurchase Shares on the open market for reuse under the Plan. If Stock Appreciation Rights are granted, the full number of shares subject to the Stock Appreciation Rights shall be considered issued under the Plan, without regard to the number of shares issued upon exercise of the Stock Appreciation Rights and without regard to any cash settlement of the Stock Appreciation Rights. 4.2 Adjustment Provisions. If there shall occur any change with respect to the outstanding Shares by reason of any recapitalization, reclassification, stock dividend, extraordinary dividend, stock split, reverse stock split or other distribution with respect to the Shares, or any merger, reorganization, consolidation, combination, spin-off or other similar corporate change or transaction, or any other change affecting the Common Stock, the Committee may, in the manner and to the extent that it deems appropriate and equitable to the Participants and consistent with the terms of the Plan, cause an adjustment to be made in (i) the maximum number and kind of Shares provided in Section 4.1, (ii) the number and kind of Shares, units or other rights subject to then outstanding Awards, (iii) the exercise or base price for each Share, unit or other right subject to then outstanding Awards, and (iv) any other terms of an Award that are affected by the event. Notwithstanding the foregoing, in the case of Incentive Stock Options, any such adjustments shall, to the extent practicable, be made in a manner consistent with the requirements of Section 424(a) of the Code; and, in the case of Options and Stock Appreciation Rights such adjustments shall be in compliance with Section 409A of the Code. Any such adjustment made by the Committee shall be conclusive and binding for all purposes under the Plan. 4.3 Minimum Vesting Conditions. Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan shall vest or be paid out no earlier than the first anniversary of the date on which the Award is granted, and the Performance Period for any Performance Awards shall be not less than
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one-year; provided, however, that the following Awards shall not be subject to the foregoing minimum vesting requirement: any (i) Shares delivered in lieu of fully vested cash obligations, (ii) any additional Awards the Board or the Committee may grant, up to a maximum of five percent (5%) of the available Share reserve authorized for issuance under the Plan pursuant to Section 4.1 (subject to adjustment under Section 4.2); and, provided further, that the foregoing restrictions do not apply to the Board’s or the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, Disability, or termination of employment or upon a Change in Control pursuant to Section 11.1, under an Award Agreement or otherwise. STOCK OPTIONS 5.1 Grants. Each Option granted shall be designated as either a Non-Qualified Option or an Incentive Option. One or more Stock Options may be granted to any Eligible Employee. 5.2 Incentive Options. Any Option designated by the Committee as an Incentive Option will be subject to the general provisions applicable to all Options granted under the Plan plus the following specific provisions: 5.2.1 If an Incentive Option is granted to a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) common stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates, then (a) the Option Price must equal at least 110% of the Fair Market Value on the Grant Date; and (b) the term of the Option shall not be greater than five years from the Grant Date. 5.2.2 The aggregate Fair Market Value of Shares, determined at the Grant Date, with respect to which Incentive Options that may become exercisable for the first time during any calendar year under this Plan, or any other plan maintained by the Company and its Subsidiaries, shall not exceed $100,000 determined in accordance with Section 422(d) of the Code. To the extent that the aggregate Fair Market Value of Shares with respect to which Incentive Options become exercisable for the first time by any individual during any calendar year, under all plans of the Company and its Subsidiaries, exceeds $100,000, such Options shall be treated as Non-Qualified Options. 5.2.3 Notwithstanding anything in this Plan to the contrary, no term of this Plan relating to Incentive Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Option under Section 422 of the Code. 5.2.4 Subject to adjustment as provided in Section 4.2, the maximum number of Shares available under the Plan for issuance as Incentive Options shall be the full number of Shares reserved for issuance under Section 4. 5.2.5 Notwithstanding anything in this Plan to the contrary, no term of this Plan relating to Incentive Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Option under Section 422 of the Code. 5.3 Terms of Options. Except as otherwise required by Section 5.2 and subject to Section 5.6 and Article 12, the terms and conditions of Options granted under this Plan shall be established by the Committee and provided in the Award Agreement, including that (i) no Option may be granted for an Option Price less than 100% of Fair Market Value on the Grant Date; and (ii) no Option shall be exercisable more than ten years after its Grant Date. The Committee shall, in its discretion, prescribe the time or times at which, or the conditions upon which, a Stock Option or portion of a Stock Option shall become vested and/or exercisable, and may accelerate the vesting or exercisability of any Stock Option at any time 5.4 Exercise of Options. Except as otherwise provided in the Award Agreement or as otherwise approved by the Committee, any Participant entitled to exercise an Option in whole or in part, may do so by delivering a written notice of exercise to the Company, which shall specify the number of Shares for which an Option is being exercised and the Grant Date of the Option being exercised. The Option Price for each share of Stock purchased upon the exercise of any Option shall be paid at the time of such exercise. Except as otherwise provided in the Award Agreement or as approved by the Committee, and subject to applicable law, the Option Price and any withholding taxes shall be payable in cash, by promissory note, or by tendering, by either actual delivery of shares or by attestation, Shares (including Shares that would otherwise be distributable upon the exercise of the Option) valued at Fair Market Value as of the day of exercise, or in any combination thereof. 5.5 Limited Transferability of Options. Except as otherwise provided in Section 14.6, no Stock Option shall be Transferable or exercisable by any person other than the Participant except (i) upon the Participant’s death or Disability, in accordance with the terms and conditions provided in the Award Agreement, or (ii) in the case of Non-Qualified Options only, for the Transfer of all or part of the Stock Option to a Participant’s “family member” (as defined for purposes of and as set forth in the Form S-8 registration statement under the Securities Act of 1933, as amended), as may be approved by the Committee in its sole and absolute discretion at the time of the proposed Transfer. The Transfer of a Non-Qualified Option may be subject to such terms and conditions as the Committee may in its discretion impose from time to time. Subsequent Transfers of a Non-Qualified Option shall be prohibited other than in accordance with the terms and conditions provided in the Award Agreement. 5.6 Termination of Stock Options. During any period of continuous employment or business relationship with the Company or any Subsidiary of the Company, a Stock Option will be terminated only if it is fully exercised or if it has expired by its terms or by the terms of this Plan, including this Section 5.6. For purposes of this Plan, any leave of absence approved by the Company or the Subsidiary of the Company shall not be deemed to be a termination of employment. The terms and conditions of termination of Stock Options by reason of a Participant’s death, Disability or Retirement shall be determined by the Committee and set forth in the Award Agreement. Unless otherwise set forth in an Award Agreement or determined by the Committee at or after grant, if a Participant’s employment by the Company or any Subsidiary of the Company terminates for any reason other than death, Disability or Retirement, the Stock Option will cease vesting as of the date of such termination of employment, and the Stock Option will terminate on the earlier to occur of the stated expiration date or 90 days after termination of the employment.
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5.7 Repricing and Reloading Prohibited. Subject to the anti-dilution adjustment provisions contained in Section 4.2, without the prior approval of the Company’s shareholders, evidenced by a majority of votes cast, neither the Committee nor the Board shall (i) cause or allow the cancellation, substitution or amendment of a Stock Option or Stock Appreciation Right that would have the effect of reducing the Exercise Price of such Stock Option or Stock Appreciation Right previously granted under the Plan, or otherwise approve any modification to such Stock Option or Stock Appreciation Right that would be treated as a “repricing” under the then applicable accounting rules or rules, regulations or listing requirements adopted by the New York Stock Exchange, (ii) cause any Stock Option or Stock Appreciation right to be purchased by the Company for cash for less than the exercise price of the Stock Option or base price of the Stock Appreciation Right (i.e., an “underwater” Stock Option or Stock Appreciation Right), or (iii) grant any Stock Option or Stock Appreciation Right containing any provision entitling the Participant to the automatic grant of additional Stock Options or Stock Appreciation Rights in connection with the exercise of the original Stock Option or Stock Appreciation Right, respectively. ARTICLE 6 STOCK APPRECIATION RIGHTS 6.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right may be granted to any Eligible Employee selected by the Committee. Stock Appreciation Rights may be granted on a basis that allows for the exercise of the right by the Participant or that provides for the automatic payment of the right upon a specified date or event. Stock Appreciation Rights shall be exercisable or payable at such time or times and upon conditions as may be approved by the Committee, provided that the Committee may accelerate the exercisability or payment of a Stock Appreciation Right at any time. 6.2 Freestanding Stock Appreciation Rights. A Stock Appreciation Right may be granted without any related Stock Option and may be subject to such vesting and exercisability requirements as specified by the Committee in an Award Agreement. Such vesting and exercisability requirements may be based on the continued service of the Participant with the Company or its Subsidiaries for a specified time period (or periods) or on the attainment of specified performance goals established by the Committee in its discretion. A Stock Appreciation Right will be exercisable or payable at such time or times as determined by the Committee, provided that the maximum term of a Stock Appreciation Right shall be ten years from the Grant Date. The base price of a Stock Appreciation Right granted without any related Stock Option shall be determined by the Committee in its sole discretion; provided, however, that the base price per Share of any such freestanding Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the Shares on the Grant Date. 6.3 Tandem Stock Option/Stock Appreciation Rights. A Stock Appreciation Right may be granted in tandem with a Stock Option, either at the time of grant or at any time thereafter during the term of the Stock Option. A tandem Stock Option/Stock Appreciation Right will entitle the holder to elect, as to all or any portion of the number of Shares subject to such Stock Option/Stock Appreciation Right, to exercise either the Stock Option or the Stock Appreciation Right, resulting in the reduction of the corresponding number of Shares subject to the right so exercised as well as the tandem right not so exercised. A Stock Appreciation Right granted in tandem with a Stock Option hereunder shall have a base price per Share equal to the Exercise Price of the Stock Option, will be vested and exercisable at the same time or times that a related Stock Option is vested and exercisable, and will expire no later than the time at which the related Stock Option expires. 6.4 Payment of Stock Appreciation Rights. A Stock Appreciation Right will entitle the holder, upon exercise or other payment of the Stock Appreciation Right, as applicable, to receive an amount determined by multiplying: (i) the excess of the Fair Market Value of a Share on the date of exercise or payment of the Stock Appreciation Right over the base price of such Stock Appreciation Right, by (ii) the number of Shares as to which such Stock Appreciation Right is exercised or paid. Subject to the requirements of Section 409A of the Code, payment of the amount determined under the foregoing may be made, as approved by the Committee and set forth in the Award Agreement, in Shares valued at their Fair Market Value on the date of exercise or payment, in cash, or in a combination of Shares and cash, subject to applicable tax withholding requirements. 6.5 No Rights as Shareholder. If a Participant is to receive Shares (as opposed to cash) under a Stock Appreciation Award, the Participant shall not have any rights as a shareholder with respect to such Shares subject to a Stock Appreciation Right Award until such time as Shares are delivered to the Participant pursuant to the terms of the Award Agreement. 6.6 Repricing and Reloading Prohibited. Subject to the anti-dilution adjustment provisions contained in Section 4.2, without the prior approval of the Company’s shareholders, evidenced by a majority of votes cast, neither the Committee nor the Board shall (i) cause the cancellation, substitution or amendment of a Stock Appreciation Right that would have the effect of reducing the base price of such a Stock Appreciation Right previously granted under the Plan, or otherwise approve any modification to such a Stock Appreciation Right that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the New York Stock Exchange, or (ii) grant any Stock Appreciation Right containing any provision entitling the Participant to the automatic grant of additional Stock Appreciation Rights in connection with the exercise of the original Stock Appreciation Right. ARTICLE 7 RESTRICTED STOCK AWARDS 7.1 Grant of Restricted Stock Awards. A Restricted Stock Award may be granted to any Eligible Employee selected by the Committee. The Committee may require the payment by the Participant of a specified purchase price in connection with any Restricted Stock Award. 7.2 Vesting Requirements. The restrictions imposed on Shares granted under a Restricted Stock Award shall lapse in accordance with the vesting requirements specified by the Committee in the Award Agreement, provided that the Committee may accelerate the vesting of a Restricted Stock Award at any time. Such vesting requirements may be based on the continued employment of the Participant with the Company or its Subsidiaries for a specified time period (or periods) or on the attainment of specified performance goals established by the Committee in its discretion. If the vesting requirements of a Restricted Stock Award are not satisfied, the Award shall be forfeited and the Shares subject to the Award shall be returned to the Company.
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7.3 Restrictions. Shares granted under any Restricted Stock Award may not be transferred, assigned or subject to any encumbrance, pledge, or charge until all applicable restrictions are removed or have expired, unless otherwise allowed by the Committee. Failure to satisfy any applicable restrictions shall result in the subject shares of the Restricted Stock Award being forfeited and returned to the Company. The Committee may require in an Award Agreement that certificates representing the shares granted under a Restricted Stock Award bear a legend making appropriate reference to the restrictions imposed, and that certificates representing the shares granted or sold under a Restricted Stock Award will remain in the physical custody of an escrow holder until all restrictions are removed or have expired. Alternatively, the shares granted under a Restricted Stock Award may be held in an uncertificated form, registered in the name of the Participant but held by the Company until all restrictions are removed or have expired. 7.4 Section 83(b) Election. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award, the Participant shall file, within 30 days following the Grant Date, a copy of such election with the Company and with the Internal Revenue Service, in accordance with the regulations under Section 83 of the Code. The Committee may provide in an Award Agreement that the Restricted Stock Award is conditioned upon the Participant’s making or refraining from making an election with respect to the Award under Section 83(b) of the Code. ARTICLE 8 STOCK UNIT AWARDS 8.1 Grant of Stock Unit Awards. A Stock Unit Award may be granted to any Eligible Employee selected by the Committee. The value of each stock unit under a Stock Unit Award is equal to the Fair Market Value of a Share on the applicable date or time period of determination, as specified by the Committee. A Stock Unit Award shall be subject to such restrictions and conditions as the Committee shall determine. 8.2 Vesting of Stock Unit Awards. On the Date of Grant, the Committee shall in its discretion determine any vesting requirements with respect to a Stock Unit Award, which shall be set forth in the Award Agreement, provided that the Committee may accelerate the vesting of a Stock Unit Award at any time. Vesting requirements may be based on the continued employment of the Participant with the Company or its Subsidiaries for a specified time period (or periods) or on the attainment of specified performance goals established by the Committee in its discretion. A Stock Unit Award may also be granted on a fully vested basis, with a deferred payment date. 8.3 Payment of Stock Unit Awards. A Stock Unit Award shall become payable to a Participant at the time or times determined by the Committee and set forth in the Award Agreement, which shall be made within 60 days following the vesting of the Award. Payment of a Stock Unit Award may be made, at the discretion of the Committee, in cash or in Shares, or in a combination of cash and Shares, subject to applicable tax withholding requirements. Any cash payment of a Stock Unit Award shall be made based upon the Fair Market Value of the Common Stock, determined on such date or over such time period as determined by the Committee. 8.4 No Rights as Shareholder. The Participant shall not have any rights as a shareholder with respect to the shares subject to a Stock Unit Award until such time as Shares are delivered to the Participant pursuant to the terms of the Award Agreement. ARTICLE 9 STOCK AWARDS 9.1 Grant of Stock Awards. A Stock Award may be granted to any Eligible Employee selected by the Committee. A Stock Award may be granted for past services, in lieu of bonus or other cash compensation or for any other valid purpose as determined by the Committee. A Stock Award granted to an Eligible Employee represents Shares that are issued without restrictions on transfer and other incidents of ownership and free of forfeiture conditions, except as otherwise provided in the Plan and the Award Agreement. The Committee may, in connection with any Stock Award, require the payment of a specified purchase price. 9.2 Rights as Shareholder. Subject to the foregoing provisions of this Article 9 and the applicable Award Agreement, upon the issuance of the Shares under a Stock Award the Participant shall have all rights of a shareholder with respect to the Shares, including the right to vote the shares and receive all dividends and other distributions paid or made with respect to such Shares. ARTICLE 10 PERFORMANCE AWARDS 10.1 General. Performance Awards may be granted to Eligible Employees in such form and having such terms and conditions as the Committee shall deem appropriate. The provisions of separate Performance Awards, including the determination of the Committee with respect to the form of payout of Performance Awards, shall be set forth in separate Award Agreements, which agreements need not be identical. 10.2 Value of Performance Awards. In addition to any other non-performance terms included in the Award Agreement, the Committee shall set the applicable Performance Objectives in its discretion, which objectives, depending on the extent to which they are met, will determine the value of a Performance Award, and the amount, if any, that will be paid out to the Participant. 10.3 Earning of Performance Awards. Upon the expiration of the applicable Performance Period or other non-performance-based vesting period, if longer, the holder of a Performance Award shall be entitled to receive payout on the value of the Performance Award earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Objectives have been achieved and any other non-performance-based terms met. 10.4 Form and Timing of Payment of Performance Awards. Payment of earned Performance Awards shall be as determined by the Committee at the Grant Date and shall be evidenced in the Award Agreement. Subject to the terms of the Plan and the Award Agreement, the Committee, in its sole discretion, may pay earned Performance Awards in the form of cash, Shares or other Awards (or in a combination cash, Shares or other Awards) equal to the value of the earned Performance Awards, payable at the close of the applicable Performance Period, or within 60 days after the end of the Performance Period. Any cash, Shares, or other Awards issued in connection with a Performance Award may be issued subject to any restrictions deemed appropriate by the Committee. 10.5 Termination of Service. Except as provided by the Committee in an Award Agreement or otherwise, if, prior to the time that the applicable Performance Period has expired, a Participant’s employment with the Company terminates for any reason, all of such Participant’s Performance Awards shall be forfeited by the Participant to the Company for no consideration. 10.6 Performance Objectives. 10.6.1 Each Performance Award shall specify the Performance Objectives that must be achieved before such Award shall become earned. The Committee shall establish the applicable Performance Objectives for a Performance Award in writing not later than ninety (90) days after the commencement of the Performance Period or, if earlier, the date as of which twenty-five percent (25%) of the Performance Period has elapsed. The Company may also specify a minimum acceptable level of achievement below which no payment will be made and may set forth a formula for determining the amount of any payment to be made if performance is at or above such minimum acceptable level but falls short of the maximum achievement of the specified Performance Objectives.
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10.6.2 Performance Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of an individual Participant or a Subsidiary, division, department, business unit, or function of or within the Company, or any combination thereof as determined by the Committee. Performance Objectives may be measured on an absolute or relative basis. Relative performance may be measured by comparison to a peer company or group of peer companies or other companies, by comparison between one or more Subsidiaries, divisions, departments, business units, or functions, or by comparison to a financial market index or indices or any combination thereof. 10.6.3 The Committee shall adjust Performance Objectives and the related minimum acceptable level of achievement if, in the sole judgment of the Committee, events or transactions have occurred after the applicable Grant Date of a Performance Award that are unrelated to the performance of the Company or Participant and result in a distortion of the Performance Objectives or the related minimum acceptable level of achievement. Potential transactions or events giving rise to adjustment include, but are not limited to, (i) restructurings, discontinued operations, extraordinary items or events, and other unusual or nonrecurring charges; (ii) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; and (iii) a change in tax law or accounting standards required by generally accepted accounting principles. ARTICLE 11 EXTRAORDINARY EVENTS 11.1 Except as provided by the Committee in an Award Agreement, if during the term of an Award, there shall occur a Change in Control: 11.1. If an outstanding Award (A) is assumed by a successor entity (or affiliate thereto) or continued or (B) is replaced with an equity award that (i) preserves the existing value of the Award at the time of the Change in Control, (ii) provides for subsequent payout in accordance with a vesting schedule and Performance Objectives, as applicable, that are the same or more favorable to the Participants than the vesting schedule and Performance Objectives applicable to such Award as determined in the sole discretion of the Committee, and (iii) are exempt from or in compliance with Section 409A, then such Award or such substitute thereof shall remain outstanding and be governed by their respective terms and the provisions of the Award Agreement and the Plan (or such successor plan) subject to Section 11.1.3 below. 11.1.2 If an outstanding Award is not assumed, continued or replaced in accordance with Section 11.1.1 above, then upon the Change in Control the following treatment (referred to as “Change-in-Control Treatment”) shall apply to such Award: (A) outstanding Stock Options and Stock Appreciation Rights shall immediately vest and become exercisable; (B) such restrictions and other conditions applicable to outstanding Restricted Stock Awards, Stock Unit Awards or Stock Awards, including vesting requirements, shall immediately lapse and such Awards shall be free of all restrictions and fully vested; and (C) outstanding Performance Awards shall immediately vest and shall be payable within 30 days as if the Performance Objectives have been achieved at the target (or if no target, the maximum) performance level. 11.1.3 If (A) an outstanding Award is assumed, continued or replaced in accordance with Section 11.1.1 above and (B) a Participant’s employment with the Company is terminated by the Company for any reasons other than Cause or by such Participant for Good Reason, in each case, within the 18 month period commencing as of the closing of the Change in Control, then, as of the date of such Participant’s termination, the Change-in-Control Treatment set forth in Section 11.1.2 above shall apply to all assumed, continued or replaced Awards of such Participant then outstanding. 11.2 For purposes of this Article 11, the terms below shall be defined as follows: 11.2.1 Change in Control means: (a) The direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries, taken as a whole; (b) The dissolution or liquidation of the Company or the consummation of any merger, other than a merger for the purpose of the redomestication of the Company (not involving an event set forth in Section 11.2.1(c) or 11.2.1(d)), consolidation, exchange or other transaction in which the Company is not the surviving corporation or in which the outstanding Shares of the Company are converted into cash, other securities or other property; (c) The acquisition of Beneficial Ownership of 25% or more of the outstanding Shares by any “person” within the meaning of Section 14(d) of the Exchange Act, excluding for purposes of this Section 11.2.1(c), the Lindner Family; or (d) during any period of one year after January 1, 2024, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board. 11.2.2 “Lindner Family” means, collectively, the wife of the late Carl H. Lindner, Jr. and all of the lineal descendants of the late Carl H. Lindner, Jr. and his wife, and the spouses of such lineal descendants, as well as trusts, family limited partnerships or other entities established by or for the benefit of such persons, and limited liability companies of which the majority of membership interests are held by the estate of the late Carl H. Lindner, Jr., his wife or any of the lineal descendants of the late Carl H. Lindner, Jr. and his wife or the spouses of such lineal descendants, or any trusts or family limited partnerships established by or for the benefit of such persons.
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11.2.3 “Good Reason” means, with respect to any Participant, unless otherwise provided in the applicable Award Agreement, without the Participant’s written consent, (A) the Company’s requiring a material change in the Participant’s principal place of employment as it existed immediately prior to the Change in Control, except for reasonably required travel on the Company’s business that is not materially greater than such travel requirements prior to the Change in Control (for this purpose, a change of 35 or fewer miles from the location at which the Participant worked immediately prior to the Change in Control shall not be considered a material change in the Participant’s principal place of employment); (B) a material reduction in the Participant’s benefits or compensation (within the meaning of Treasury Regulation § 1.409A-1(n)(2)(ii)(A)(2)) as in effect immediately prior to the Change in Control; or (C) a material reduction in the Participant’s job responsibilities, authority, position or duties with the Company as in effect immediately prior to the Change in Control. A termination for Good Reason must be communicated by the Participant to the Company by written notice that specifies the event or events claimed to provide a basis for termination for Good Reason; provided that the Participant’s written notice must be tendered within ninety (90) days of the occurrence of such event or events and provided further that the Company shall have failed to reasonably remedy such act or omission within thirty (30) days following its receipt of such Participant notice. A Participant’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder if the Participant actually terminates employment within six months after the Company’s failure to timely remedy or, if earlier, prior to the 18 month anniversary of the Change in Control. ARTICLE 12 FORFEITURE EVENTS 12.1 General. Notwithstanding anything to the contrary in the Plan, the Committee may specify in an Award Agreement at the time of the Award that the Participant’s rights, payments and benefits with respect to an Award shall be subject to termination, reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of employment for Cause, violation of material Company policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company. In addition, if at the time of such violation such Participant has exercised Stock Options or any other Award but has not received the Shares to be issued, the Committee may void the Award. Any such actions by the Company shall be in addition to any other rights or remedies available to the Company and the Subsidiaries of the Company in such circumstances. 12.2 Termination for Cause. Notwithstanding anything to the contrary in the Plan, if a Participant’s employment with the Company or any Subsidiary of the Company shall be terminated for “Cause,” the Company may, in its sole discretion, immediately terminate such Participant’s right to any further payments, vesting or exercisability with respect to any Award in its entirety. For purposes of the Plan: 12.2.1 If a Participant is party to an employment (or similar) agreement with the Company or any Subsidiary of the Company that defines the term “Cause,” such definition shall apply for purposes of the Plan; or 12.2.2 If Section 12.2.1 does not apply, termination for “Cause” shall mean termination of employment as a result of a violation of any Company policy, procedure or guideline, or engaging in any of the following forms of misconduct: conviction for, or plea of guilty or nolo contendere to, a charge of commission of any felony or of any misdemeanor involving dishonesty or moral turpitude; theft or misuse of the Company’s property or time; use of alcohol or controlled substances on the Company’s premises or appearing on such premises while intoxicated or under the influence of drugs not prescribed by a physician, or after having abused prescribed medications; illegal use of any controlled substance; illegal gambling on the Company’s premises; discriminatory or harassing behavior, whether or not illegal under federal, state or local law; willful misconduct; or falsifying any document or making any false or misleading statement relating to employment by the Company; acts or omissions that injure the economic or ethical welfare of the Company by misconduct or inattention to duties and responsibilities; acts or omissions harmful to the reputation of the Company; a material violation of a Company policy, including without limitation the Code of Ethics; a violation of any contractual, statutory or common law duty of loyalty to the Company; or the failure to meet the Company’s performance expectations, as determined by the Company in its sole discretion. The term “Company” in the immediately preceding sentence will be interpreted to include any Subsidiary of the Company, as appropriate. 12.3 The Company shall have the power to determine whether the Participant has been terminated for Cause and the date upon which such termination for Cause occurs. Any such determination shall be final, conclusive and binding upon the Participant. In addition, if the Company shall reasonably determine that a Participant has committed or may have committed any act which could constitute the basis for a termination of such Participant’s employment for Cause, the Company may suspend the Participant’s rights to exercise any options, receive any payment or vest in any right with respect to any Award pending a determination by the Company of whether an act has been committed which could constitute the basis for a termination for “Cause” as provided in Section 12.2. ARTICLE 13 TERMINATION OR AMENDMENT OF THIS PLAN 13.1 The Board may at any time amend, suspend, or terminate the Plan; provided, however, that no amendments by the Board shall, without further approval of the shareholders of the Company: 13.1.1 Change the definition of Eligible Employees; 13.1.2 Except as provided in Article 4, increase the number of Shares which may be subject to all Awards or to Incentive Options granted under the Plan; or increase the maximum number of Shares with respect to which all Awards or with respect to which Stock Options and Stock Appreciation Rights may be granted to any Participant during any fiscal year; 13.1.3 Cause any Option granted as an Incentive Stock Option to fail to qualify as an “Incentive Stock Option” as defined by Section 422 of the Code; or 13.1.4 Be necessary or advisable, as determined by the Board, for purposes of complying with Section 422 of the Code, the listing requirements of the New York Stock Exchange or Nasdaq National Market or other exchange or market or for any other purpose; provided further, no amendment to the Plan or to any Award shall materially adversely affect the rights of any Participant with respect to an Award then outstanding without the consent of such Participant. Notwithstanding the foregoing, subject to the limitations of applicable law, if any, and without an affected Participant’s consent, the Board or the Committee may amend the terms of the Plan or any one or more Awards from time to time to the extent necessary to bring such Awards into compliance with applicable law or stock exchange rules or to prevent adverse tax or accounting consequences to the Company or Participants under Section 409A of the Code or accounting rules.
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13.2 This Plan shall continue in effect until the expiration of all Awards granted under the Plan unless terminated earlier in accordance with this Article 13; provided, however, that it shall otherwise terminate and no Awards shall be granted after the tenth anniversary of the date of approval of the Plan by the Company’s shareholders as set forth in Section 14.1. ARTICLE 14 GENERAL PROVISIONS 14.1 Shareholder Approval. This Plan became effective on the date that the Company's shareholders approve this Plan if such shareholder approval occurs before the first anniversary of the date the Plan is adopted by the Board (the “Effective Date”). 14.2 Award Agreements. An Award under the Plan shall be evidenced by an Award Agreement in a written or electronic form approved by the Committee setting forth the number of Shares, units or rights subject to the Award, the Exercise Price, base price, or purchase price of the Award, the time or times at which an Award will become vested, exercisable or payable and the term of the Award. The Award Agreement may also set forth the effect on an Award of termination of employment under certain circumstances, as well as any other terms or conditions as determined by the Committee. The Award Agreement shall be subject to and incorporate, by reference or otherwise, all of the applicable terms and conditions of the Plan, and may also set forth other terms and conditions applicable to the Award as determined by the Committee consistent with the limitations of the Plan. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. The grant of an Award under the Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in the Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the Award Agreement. The Committee need not require the execution of an Award Agreement by a Participant, in which case, acceptance of the Award by the Participant shall constitute agreement by the Participant to the terms, conditions, restrictions and limitations set forth in the Plan and the Award Agreement as well as the administrative guidelines of the Company in effect from time to time. 14.3 Clawback/recoupment. Any Award granted under the Plan may be subject to reduction, cancellation, forfeiture or recoupment to the extent required by Company policy, applicable law or listed company rules, or to the extent otherwise provided in an Award Agreement at the time of grant. 14.4 Rights as Shareholder. Subject to the terms and conditions of this Plan and the applicable Award Agreement, an Award (other than a Stock Option or Stock Appreciation Right) may, if so determined by the Committee, provide the Participant with the right the right to receive dividend payments or dividend equivalent payments with respect to Shares subject to the Award (both before and after the Shares subject to the Award are earned, vested or acquired), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Shares, as determined by the Committee; provided, however, that in the case of any performance-based Awards, any associated dividends or dividend equivalent payments will not be paid unless and until the corresponding portion of the underlying Award is earned. With respect to an Award of Restricted Shares, subject to the terms and conditions of this Plan and the applicable Award Agreement, the Committee may provide the Participant with the right to vote the Shares underlying such Award (both before and after the Shares subject to the Award are earned, vested or acquired). 14.5 Deferrals. The Committee may permit recipients of Awards to defer the distribution of all or part of any Award in accordance with Section 409A of the Code, if applicable, and such terms and conditions as the Committee shall establish. 14.6 No Loans. No loans from the Company to Participants shall be permitted in connection with the Plan. 14.7 Transfer; Assignment. Except as otherwise provided in the Award Agreement and except as otherwise provided below, Awards under the Plan shall not be Transferable by the Participant or exercisable by any person other than the Participant, and Awards under the Plan shall not be subject in any manner to assignment, alienation, pledge, encumbrance or charge: 14.7.1 During the lifetime of a Participant, an Award is not transferable voluntarily or by operation of law and may be exercised only by such individual; 14.7.2 Upon the disability of a Participant, an Award of Stock Options or Stock Appreciation Rights may be exercised by the Participant’s legal representative; 14.7.3 Upon the death of a Participant, an Award may be transferred to the beneficiaries or heirs of the Participant by will or by the laws of descent and distribution; and 14.7.4 An Award may be transferred pursuant to a qualified domestic relations order as defined by the Code or Title I of ERISA. Notwithstanding the foregoing, the Committee may, with respect to particular Awards, establish or modify the terms of the Award to allow the Award to be transferred at the request of a Participant (only to the extent permissible by law and, in the case of an Incentive Option, to the extent permissible under Section 422 of the Code) to family members, charities, trusts or other estate planning vehicles established by a Participant or as to which a Participant is a grantor or to lineal descendants of a Participant or otherwise for personal and tax planning purposes of a Participant. If the Committee allows such transfer, such Awards shall not be exercisable for a period of six months following the action of the Committee. 14.8 Securities Laws. No Shares will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by Federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to the grant or exercise of an Award, the Company may require the Participant to take any reasonable action to meet such requirements. The Committee may impose such conditions on any Shares issuable under the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, under the requirements of any exchange upon which such shares of the same class are then listed, and under any blue sky or other securities laws applicable to such shares. The Committee may also require the Participant to represent and warrant at the time of issuance or transfer that the Shares are being acquired only for investment purposes and without any current intention to sell or distribute such shares. 14.9 No Right to Continued Employment. Neither the establishment of the Plan nor the granting of any Award hereunder shall confer upon any Eligible Employee any right to continue in the employ of the Company or any Subsidiary of the Company, or interfere in any way with the right of the Company or any Subsidiary of the Company to terminate such employment at any time. 14.10 No Rights as Shareholder. Except as otherwise provided in Section 1.1 or an Award Agreement, Participant shall have no rights as a holder of Shares with respect to any unissued securities covered by an Award until the date the Participant becomes the holder of record of such securities.
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14.11 Other Plans. The value of, or income arising from, any Awards issued under this Plan shall not be treated as compensation for purposes of any pension, profit sharing, life insurance, disability or other retirement or welfare benefit plan now maintained or hereafter adopted by the Company or any Subsidiary of the Company, unless such plan specifically provides to the contrary. 14.12 Unfunded Plan. The adoption of the Plan and any reservation of Shares or cash amounts by the Company to discharge its obligations hereunder shall not be deemed to create a trust or other funded arrangement. Except upon the issuance of Common Stock pursuant to an Award, any rights of a Participant under the Plan shall be those of a general unsecured creditor of the Company, and neither a Participant nor the Participant’s permitted transferees or estate shall have any other interest in any assets of the Company by virtue of the Plan. Notwithstanding the foregoing, the Company shall have the right to implement or set aside funds in a grantor trust, subject to the claims of the Company’s creditors or otherwise, to discharge its obligations under the Plan. 14.13 Withholding of Taxes. The Participant shall be responsible for payment of any taxes or similar charges required by law to be withheld from an Award or an amount paid in satisfaction of an Award, which shall be paid by the Participant on or prior to the payment or other event that results in taxable income in respect of an Award. The Award Agreement may specify the manner in which the withholding obligation shall be satisfied with respect to the particular type of Award. The Company and its subsidiaries shall have the right to deduct from any payment to be made pursuant to the Plan, or to require prior to the issuance or delivery of any Shares or the payment of cash under the Plan, any taxes (whether federal, state, local or foreign) to be withheld. Any satisfaction of tax obligations through the withholding of Shares may only be up to the statutory minimum tax rate, or such higher rates of up to maximum applicable withholding rates as may be permitted by the Committee. 14.14 Code Section 409A Compliance. Each Award granted under this Plan is intended to be either exempt from or in compliance with the requirements of Section 409A of the Code, and the Plan shall be interpreted accordingly. Without limiting the foregoing, no amount shall be deferred, accelerated, extended, paid out, settled, adjusted, substituted, exchanged or modified in a manner that would cause the Award to fail to satisfy the conditions of an applicable exception from the requirements of Section 409A of the Code or otherwise would subject the Participant to the additional tax imposed under Section 409A of the Code. If the Participant is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of the Participant’s separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), any Award, to the extent such Award constitutes non-qualified deferred compensation subject to Section 409A of the Code and required to be delayed pursuant to Section 409A(2)(B)(i) of the Code (after taking into account any exclusions applicable to such payments under Section 409A of the Code), shall not be made until the first business day after (i) the expiration of six (6) months from the Participant’s separation from service or (ii) if earlier, the date of Participant’s death. 14.15 Severability. If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions of the Plan or such Award Agreement shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction. 14.16 Liability. No employee of the Company and no member of the Committee or the Board shall be liable for any action or determination taken or made in good faith with respect to the Plan or any Award granted hereunder and, to the fullest extent permitted by law, all employees and members of the Committee or the Board shall be indemnified by the Company for any liability and expenses which may occur through any claim or cause of action arising under or in connection with this Plan or any Awards granted under this Plan. 14.17 Governing Law. This Plan and actions taken in connection with it shall be governed by the laws of Ohio, without regard to the principles of conflict of laws. The Plan is not intended to be governed by the Employment Retirement Income Security Act of 1974, and shall be so construed and administered. As approved by the Board of Directors on March 22, 2024