Exhibit 10.7
STOCK OPTION AGREEMENT
(Non-Qualified Stock Option)
          THIS AGREEMENT is made to be effective as of March 23, 2000, by and
between Ohio Casualty Corporation, an Ohio corporation (the “Company”), and the
undersigned director of Ohio Casualty Corporation (“Director”).
WITNESSETH:
          WHEREAS, the Board of Directors (the “Board”) has determined that
Director should be granted an option to acquire common shares of the Company,
upon the terms and conditions set forth in this Agreement, in lieu of being paid
any cash annual retainer for the year 2000;
          NOW, THEREFORE, in consideration of the premises, the parties named
above make the following agreement, intending to be legally bound thereby:
          1. Grant of Option. Subject to adjustment pursuant to Section 3 of
this Agreement, the Company hereby grants to Director an option (the “Option”)
to purchase 15,000 common shares, $.125 par value, of the Company (the
“Shares”). The Option is not intended to qualify as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
Anything contained in this Agreement to the contrary not withstanding, the
Option may not be exercised for a period of six months from the date of this
Agreement.
          2. Terms and Conditions of the Option.
               (a) Option Price. The purchase price (the “Option Price”) to be
paid by Director to the Company upon the exercise of the Option shall be $13.125
per Share, subject to adjustment as provided in Section 3 of this Agreement.
               (b) Vesting. Except as otherwise provided in this Agreement, the
Option shall vest as follows:
                    (i) Subject to Director’s continued service on the Board of
Directors (the “Board”) of the Company, the Option shall vest and become
exercisable with respect to (a) fifty percent (50%) of the Shares on the first
anniversary of the effective date of this Agreement and (b) fifty percent (50%)
of the Shares on the second anniversary of the effective date of this Agreement.
The portion of the Option which has become vested and exercisable pursuant to
this Section 2(b) is hereinafter referred to as the “Vested Portion” and the
remaining portion shall be the “Unvested Portion”.
                    (ii) Subject to the six-month holding period requirements of
Section 1 of this Agreement, if Director ceases to be a director of the Company
because of Director’s death, Disability (as defined below) or Retirement (as
defined below), any portion of

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the Option which is then not exercisable shall vest and become exercisable upon
such termination of service as a director of the Company for the period
specified in Section 2(c) below. For purposes of this Agreement, “Disability”
means a mental or physical condition which, in the opinion of the Board, renders
Director unable or incompetent to carry out the job responsibilities which
Director held or the tasks to which Director was assigned at the time the
disability was incurred, and which is expected to be permanent or for an
indefinite duration exceeding one year. For purposes of this Agreement,
“Retirement” shall mean the retirement from service on the Board after
(A) having attained the age of 65 and (B) having served at least 10 years as a
member of the Board.
                    (iii) If Director ceases to be a director of the Company for
any reason other than because of Director’s death, Disability or Retirement, the
Vested Portion of the Option will be exercisable upon termination of Director’s
status as a director of the Company for the period specified in Section 2(c)
below and the then Unvested Portion of the Option will terminate.
               (c) Exercise of the Option. Subject to the provisions of this
Agreement, including the six-month holding period provided in Section 1,
Director may exercise all or any part of the Vested Portion of the Option at any
time prior to the occurrence of the earliest event listed below:
                    (i) the tenth anniversary of the date of this Agreement;
                    (ii) twelve months following the date Director ceases to be
a director of the Company because of Director’s death, Disability or Retirement;
or
                    (iii) three months following the date Director ceases to be
a director of the Company for any reason other than because of Director’s death,
Disability or Retirement.
               (d) Method of Exercise. The Vested Portion of the Option may be
exercised by giving written notice of exercise to the Company in care of the
Treasurer of the Company stating the number of Shares subject to the Option
being purchased. Payment for all such Shares shall be made to the Company at the
time the Option is exercised in United States dollars in cash (including check,
bank draft or money order). Payment for such Shares also may be made (i) by
delivery of common shares of the Company already owned by Director and having a
Fair Market Value (as defined in Section 2(f) of this Agreement) on the date of
delivery equal to the Option Price for the Shares purchased, or (ii) by delivery
of the combination of cash and already-owned common shares of the Company. The
Board may, in its discretion, permit payment of the Option Price of the Shares
subject to the Option by delivery of a properly executed exercise notice
together with a copy of irrevocable instructions to deliver promptly to the
Company the amount of sale or loan proceeds to pay the Option Price. After
payment in full for the Shares purchased under the Option has been made, the
Company shall take all such action as is necessary to deliver appropriate share
certificates evidencing the Shares purchased upon exercise of the Option as
promptly thereafter as is reasonably practicable.

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               (e) Tax Withholding. Director will pay to the Company the amount
of any taxes the Company is required by law to withhold with respect to the
exercise of the Option. Director may instruct the Company to withhold from the
Shares issuable upon exercise of the Option that number of Shares having a Fair
Market Value (as defined in Section 2(f) of this Agreement) on the date of
exercise equal to the amount of any taxes the Company is required by law to
withhold with respect to the exercise of the Option.
               (f) For purposes of this Agreement, “Fair Market Value” means, on
any given date, the closing price of the Company’s common shares, as reported on
The Nasdaq National Market, or on any securities exchange on which the common
shares are listed for such date, or if the Company’s common shares were not
traded on such date, on the next preceding date on which the Company’s common
shares were traded.
          3. Adjustments and Changes in the Shares.
          The following provisions shall apply to the Option:
               (a) Generally. In the event that the outstanding common shares of
the Company shall be changed into or exchanged for a different kind of shares,
other securities or other property of the Company or of another corporation or
for cash (whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares or otherwise) or if the number
of common shares of the Company shall be increased through the payment of a
share dividend, then unless such change results in the termination of the
Option, there shall be substituted for or added to each Share subject to the
Option, the number and kind of shares, other securities or other property and
the amount of cash into which each outstanding common share of the Company shall
be changed, or for which each such common share shall be exchanged, or to which
the holder of each such common share shall be entitled, as the case may be. The
Option shall also be appropriately amended as to the Option Price and other
terms as may be necessary to reflect the foregoing events. The number of Shares
that will become vested in accordance with Section 2(b) of this Agreement shall
be appropriately adjusted to reflect any such change in the outstanding common
shares of the Company. In the event there shall be any other change in the
number or kind of the outstanding shares of the Company, or of any shares, other
securities or other property (including cash) into which such shares shall have
been changed, or for which they shall have been exchanged, then if the Board, in
its sole discretion, shall determine that such change equitably requires an
adjustment in the Option, such adjustment shall be made by the Board in
accordance with such determination. Fractional shares resulting from any
adjustment in the Option pursuant to this Section 3(a) shall be rounded down to
the nearest whole number of shares.
               (b) Change in Control. In the event there is a Change in Control,
subject to the six month holding period, the Option shall become immediately
exercisable as of the date of the Change in Control, whether or not exercisable
under this Agreement. If the Option has been held for less than six months as of
the date of the Change in Control, the Option shall be cancelled by the Company
without consideration and shall terminate as of the date of the

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Change in Control. For purposes of this Section 3, a Change in Control shall be
deemed to have occurred on the earliest of the following dates:
                    (i) Unless such acquisition shall have been approved in
advance by the Board, the date any entity or person (including a “group” as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
shall have become the beneficial owner of, or shall have obtained voting control
over, twenty percent (20%) or more of the outstanding common shares of the
Company.
                    (ii) The date the shareholders of the Company approve a
definitive agreement (A) to merge or consolidate the Company with or into
another corporation, in which the Company is not the continuing or surviving
corporation or pursuant to which any common shares would be converted into cash,
securities or other property of another corporation, other than a merger of the
Company in which holders of common shares immediately prior to the merger have
the same proportionate ownership of common shares of the surviving corporation
immediately after the merger as immediately before, or (B) to sell or otherwise
dispose of substantially all the assets of the Company; or
                    (iii) The date there shall have been a change in a majority
of the Board within a twelve (12) month period; provided, however, that any new
director whose nomination for election by the Company’s shareholders was
approved, or who was appointed or elected to the Board, by the vote of
two-thirds of the directors then still in office who were in office at the
beginning of the twelve (12) month period shall not be counted in determining
whether there has been such a change in a majority of the Board.
               (c) No Restrictions on Company. The grant of this Option shall
not affect in any way the right of the Company to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
          4. Non-Assignability of Option. Unless otherwise permitted by the
Board, the Option shall not be assignable or otherwise transferable by Director
except by will or by the laws of descent and distribution. The Option may not be
exercised during the lifetime of Director except by Director or Director’s
guardian or legal representative.
          5. Buy Out of Option Grants. At any time after the Option becomes
exercisable, the Board shall have the right to elect, in its sole discretion and
without the consent of Director, to cancel the Option and pay to Director the
excess of the Fair Market Value of the Shares over the Option Price at the date
the Board provides written notice (the “Buy Out Notice”) of the intention to
exercise the right. A buy out pursuant to this Section 5 shall be completed by
the Company as promptly as possible after the date of the Buy Out Notice.
Payment of the buy out amount may be made in cash, in common shares of the
Company, or partly in cash and partly in common shares as the Board deems
advisable. To the extent payment is made in common shares, the number of common
shares shall be determined by dividing the amount of the payment to be made by
the Fair Market Value of a common share at the date of the Buy Out Notice.

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Payment of any such buy out amount shall be made net of any applicable foreign,
federal (including FICA), state and local withholding taxes.
          6. Restrictions on Transfers of Shares. Anything contained in this
Agreement or elsewhere to the contrary notwithstanding, the Company may postpone
the issuance and delivery of Shares upon any exercise of the Option until
completion of any stock exchange listing or registration or other qualification
of such Shares under any state or federal law, rule or regulation as the Company
may consider appropriate. The Company may require Director, when exercising the
Option, to make such representations and furnish such information as the Company
may consider appropriate in connection with the issuance of the Shares in
compliance with applicable law.
          Shares issued and delivered upon exercise of the Option shall be
subject to such restrictions on trading, including appropriate legending of
certificates to that effect, as the Company, in its discretion, shall determine
are necessary to satisfy applicable legal requirements and obligations.
          7. Rights of Director as a Shareholder. Director shall have no rights
as a shareholder of the Company with respect to any Shares of the Company
covered by the Option until the date of issuance of a certificate to Director.
          8. No Right to Continue as a Director. The grant of the Option shall
not confer upon Director any right to continue as a director of the Company nor
limit in any way the right of the Company’s shareholders to terminate Director’s
status as a director of the Company at any time.
          9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
          10. Rights and Remedies Cumulative. All rights and remedies of the
Company and of Director enumerated in this Agreement shall be cumulative and,
except as expressly provided otherwise in this Agreement, none shall exclude any
other rights or remedies allowed by law or in equity, and each may be exercised
and enforced concurrently.
          11. Captions. The captions contained in this Agreement are included
only for convenience of reference and do not define, limit, explain or modify
this Agreement or its interpretation, construction or meaning and are in no way
to be construed as a part of this agreement.
          12. Severability. If any provision of this Agreement or the
application of any provision hereof to any person or any circumstance shall be
determined to be invalid or unenforceable, then such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect. It is the intention of each party to this
Agreement that if any provision of this Agreement is susceptible of two or more
interpretations, one of

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which would render the provision enforceable and the other or others of which
would render the provision unenforceable, then the provision shall have the
meaning which renders it enforceable.
          13. Number and Gender. When used in this Agreement, the number and
gender of each pronoun shall be construed to be such number and gender as the
context, circumstances or its antecedent may require.
          14. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Director with respect to this stock option grant, and
this Agreement supersedes all prior agreements between the parties related to
this stock option grant. No officer, employee or other servant or agent of the
Company, and no servant or agent of Director is authorized to make any
representation, warranty or other promise not contained in this Agreement. No
change, termination or attempted waiver of any of the provisions of this
Agreement shall be binding upon any party hereto unless contained in a writing
signed by the party to be charged.
          15. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns (including subsequent, as well
as immediate, successors and assigns) of the parties.

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          By signing below, Director accepts this Option subject to all of the
terms and provisions set forth in this Agreement. Director hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Board upon any questions arising under this Agreement.
          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first above written.

              COMPANY
 
            OHIO CASUALTY CORPORATION
 
       
 
  By:  
 
 
       
 
  Title:  
 
 
            DIRECTOR:
 
                  Signature
 
             
 
  Name    
 
                  Street Address
 
                  City, State, Zip Code
 
                  Social Security Number

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