Cincinnati Financial Corporation

Annual Incentive Compensation Plan of 2009

(amended as of March 2, 2012)

 

1.Purpose. The purpose of the Cincinnati Financial Corporation Annual Incentive
Compensation Plan of 2009 is to provide the executive officers of Cincinnati
Financial Corporation and its subsidiaries on a consolidated basis with bonus
compensation based upon the achievement of pre-established Performance Goals, as
well as to maximize the Company's income tax deduction for the amount of the
annual compensation paid to the President and Chief Executive Officer and the
four most highly compensated officers other than the President and Chief
Executive Officer, pursuant to Section 162(m) of the Internal Revenue Code.

 

2.Definitions. For purposes of the Plan, the following terms are defined as set
forth below:

 

a.“Award” means the incentive compensation to which a Participant may become
entitled upon the achievement of the Performance Goals.

b.“Board” means the board of directors of the Company.

c.“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor thereto.

d.“Commission” means the Securities and Exchange Commission or any
successor agency.

e.“Committee” means the compensation committee of the Board or a subcommittee
thereof, any successor thereto or such other committee or subcommittee as may be
designated by the Board to administer the Plan, which shall at all times consist
of two or more outside directors, as defined under Section 162(m) of the
Internal Revenue Code and the treasury regulations issued thereunder.

f.“Company” means Cincinnati Financial Corporation, a corporation organized
under the laws of the State of Ohio, or any successor thereto and its
subsidiaries on a consolidated basis.

g.“Participant” means the executive officers of the Company, including the
president and chief executive officer and the four most highly compensated
officers of the Company (other than the president and chief executive officer),
as more fully described by the regulations adopted by the Commission under the
Securities' Exchange Act of 1934.

h.“Peer Group” means the companies designated by the Committee from time to time
as the Company’s peer group.

i.“Performance Goals” means the objectives for the Company as established by the
Company within the first 90 days of each calendar year. The Performance Goals
are intended to constitute “performance-based” compensation with the meaning of
Section 162(m) of the Code, or any amended or successor provision.

j.“Performance Year” means the calendar year ending December 31 in which the
performance goal shall be measured.

k.“Plan” means the Cincinnati Financial Corporation Annual Incentive
Compensation Plan of 2009, which is the amended and restated Cincinnati
Financial Corporation 2006 Incentive Compensation Plan.

 

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l.“Value Creation Ratio” equals the total of: 1) the rate of growth in book
value per share plus 2) the ratio of dividends declared per share to beginning
book value per share.

 

3.Administration of Plan. The Plan shall be administered by the Company's
Committee. The Committee shall have full power, authority and discretion to
administer and interpret the Plan and to establish rules for its administration.
The Committee, in making any determination under or referred to in the Plan,
shall be entitled to rely on opinions, reports or statements of officers,
employees, legal counsel and the public accountants of the Company, and upon the
published financial reports of the Company's Peer Group.

 

4.Effective Date of Plan. The Plan shall go into effect on the date of approval
by the Company's Board, conditioned upon shareholder approval at the next Annual
Meeting of Shareholders.

 

5.Awards. Each Award under the Plan shall be evidenced by a written agreement in
a form prescribed by the Committee that sets for the terms, conditions and
limitations for the Award (Award Agreement). Each Participant is eligible to
receive an Award of up to $2 million annually pursuant to achievement of the
Performance Goal.

 

6.Performance Goals.

a.Awards under the Plan shall be earned upon the achievement by the Company of
the Performance Goal set forth in the award agreement. The Committee may
establish the Performance Goal for the Performance Year based on one or more of
the following performance objectives: total shareholder return, return on
equity, return on economic capital, change in operating income, underwriting
profitability, revenue, expenses, earnings per share, operating earnings per
share, or Value Creation Ratio. Performance Goals may be numeric or a comparison
to the peer group.

b.As soon as practicable either before or within 90 days after the beginning of
each calendar year, the Committee shall establish written targets for the
Performance Goal.

c.Notwithstanding anything to the contrary in this Plan, the Committee retains
complete negative discretion (within the meaning of the applicable rules of the
Internal Revenue Service under Section 162(m) of the Code) to reduce the amount
of or eliminate part or all of the Award otherwise earned by the Participant
upon the attainment of the Performance Goal in light of factors deemed
appropriate by the Committee, but in no event may the Committee increase the
amount of the Award payable to a Participant upon the achievement of the
Performance Goal.

 

7.Determination and Payment of Award. Awards shall be determined by the
Committee and paid by the Company as soon as practicable after the Committee is
able to certify that the Performance Goal established under Section 6 was in
fact achieved. In no event shall the Awards be paid later than two months and 15
days following the close of the calendar year in which the Performance Goal is
achieved.

 

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If a Participant terminates employment with the Company due to death or
retirement during a calendar year in which the Performance Goal is achieved the
Participant may be entitled to the payment of the Award at the discretion of the
Company. In no event shall an Award be paid later than two months and fifteen
days following the close of the calendar year in which the Performance Goal is
achieved.

 

8.Forfeiture and Recoupment of Awards. If at any time the Committee reasonably
believes that a Participant has committed an act of embezzlement, fraud,
dishonesty, nonpayment of any obligation owed to the company, breach of
fiduciary duty or deliberate disregard of the Company’s rules resulting in loss,
damage or injury to the company, any outstanding Award under the Plan shall be
forfeited. In addition, if any Participant engaged in an act of embezzlement,
fraud or breach of fiduciary duty during the Participant’s employment that
contributes to an obligation to restate the Company’s financial statements, the
Participant shall be required to repay to the Company in cash and upon the
demand, any award paid under this Plan based on performance of any period for
which the Company’s financial statements are restated. Repayment of awards is in
addition to and separate from any other relief available to the Company due to
the Participant’s misconduct. Any determination by the Committee with respect to
the foregoing shall be final, conclusive and binding on all interested parties.

 

9.Miscellaneous.

a.Acceleration of Awards. Unless otherwise expressly provided in an applicable
Award agreement and notwithstanding any other provision of the Plan to the
contrary, if a Participant’s employment with the Company or one of its
subsidiaries is terminated by action of the employing entity within 12 months
after the effective date of a Change in Control, then any outstanding Award held
by such Participant as of the date of termination shall become fully vested, and
the restrictions and other conditions applicable to any such Award held by such
Participant as of the date of termination, including vesting requirements, shall
lapse, and such Awards shall become free of all restrictions and fully vested.
For this purpose, a “Change in Control” means the event which shall be deemed to
have occurred if either (i) after the date this Plan is adopted by the Company’s
shareholders, without prior approval of the Board, any person, entity or group
becomes a beneficial owner, directly or indirectly, of securities of the Company
representing 20percent or more of the combined voting power of the Company’s
then outstanding securities; or (ii) without prior approval of the Board, as a
result of, or in connection with, or within two years following, a tender or
exchange offer for the voting stock of the Company, a merger or other business
combination to which the Company is a party, the sale or other disposition of
all or substantially all of the assets of the Company, a reorganization of the
Company, or a proxy contest in connection with the election of members of the
Board, the persons who were directors of the Company immediately prior to any
such transactions cease to constitute a majority of the Board or of the board of
directors of any successor to the Company (except for resignation due to death,
disability or normal retirement.) For purposes of the definition in the
preceding sentence, any terms which are defined by rules promulgated by the
Securities and Exchange Commission shall have the meanings specified in such
definitions from time to time.

 

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b.Participant Rights. No Participant shall have any claim or right to be granted
an award under the Plan and there shall be no obligation on behalf of the
Company or the Committee for uniformity of treatment among Participants. Awards
under the Plan may not be attached, assigned or alienated in any manner.

c.Not an Employment Obligation. Neither the adoption of the Plan nor the
granting of Awards under the Plan (or any other action taken hereunder) shall
confer upon any Participant any right to be continued employment nor shall
interfere in any way with the right of the Company to terminate the employment
of any Participant at any time.

d.Income Tax Withholding. The Company shall have the right to deduct from any
award to be paid under the Plan any federal, state or local taxes required by
law to be withheld with respect to such payment.

e.Governing Law. The Plan shall be governed by the laws of the State of Ohio and
by applicable Federal Laws, excluding any conflicts or choice of law, rule or
principle that might otherwise refer construction or interpretation of the Plan
to the substantive law of another jurisdiction. Unless other provided in an
Award, Participants are deemed to submit to the exclusive jurisdiction and venue
of the federal or state courts of Ohio, to resolve any and all issues that may
arise out of or relate to the Plan or any related Award.

f.Amendment, Modification and Termination. The Board of the Company may amend,
modify or terminate the Plan at any time, except that no such amendment or
modification shall affect awards previously granted. Any such amendment or
modification shall be effective at such date as the Board may determine.

g.Severability. If any provision of the Plan is held invalid or unenforceable,
the invalidity or unenforceability shall not affect the remaining parts of the
Plan, and the Plan shall be enforced and construed as of such provision had not
been included.

h.Interpretation. The Plan is designed and intended to comply with Section
162(m) of the Code, and all provisions hereof shall be construed in a manner to
so comply.

 

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