Exhibit 10.7


Safety
Insurance Group, Inc.


2002
Management Omnibus Incentive Plan, as Amended


















 


Table
of Contents


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	 
	
  ARTICLE 1
  Establishment, Objectives, and Duration

  	
   

  	
  1

  
	 
	
  ARTICLE 2
  Definitions

  	
   

  	
  1

  
	 
	
  ARTICLE 3
  Administration

  	
   

  	
  5

  
	 
	
  ARTICLE 4 Shares
  Subject to the Plan and Maximum Awards

  	
   

  	
  5

  
	 
	
  ARTICLE 5
  Eligibility and Participation

  	
   

  	
  6

  
	 
	
  ARTICLE 6 Options

  	
   

  	
  7

  
	 
	
  ARTICLE 7 Stock
  Appreciation Rights

  	
   

  	
  8

  
	 
	
  ARTICLE 8
  Restricted Stock

  	
   

  	
  10

  
	 
	
  ARTICLE 9
  Termination of Service

  	
   

  	
  11

  
	 
	
  ARTICLE 10
  Restrictions on Shares

  	
   

  	
  12

  
	 
	
  ARTICLE 11
  Performance Measures

  	
   

  	
  12

  
	 
	
  ARTICLE 12
  Beneficiary Designation

  	
   

  	
  13

  
	 
	
  ARTICLE 13
  Rights of Participants

  	
   

  	
  13

  
	 
	
  ARTICLE 14
  Change in Control

  	
   

  	
  13

  
	 
	
  ARTICLE 15
  Amendment, Modification, and Termination

  	
   

  	
  14

  
	 
	
  ARTICLE 16
  Withholding

  	
   

  	
  15

  
	 
	
  ARTICLE 17
  Indemnification

  	
   

  	
  15

  
	 
	
  ARTICLE 18
  Successors

  	
   

  	
  15

  
	 
	
  ARTICLE 19 Legal
  Construction

  	
   

  	
  16

  
				



 



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Safety
Insurance Group, Inc.


2002
Management Omnibus Incentive Plan, as Amended


ARTICLE 1


Establishment, Objectives, and Duration


1.1          Establishment of the Plan. 
Safety Insurance Group, Inc., a corporation organized and existing under
Delaware law (hereinafter referred to as the “Company”), hereby establishes an
incentive compensation plan to be known as the “Safety Insurance Group, Inc.
2002 Management Omnibus Incentive Plan, as amended” (hereinafter referred to as
the “Plan”), as set forth in this document. 
The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, and Restricted Stock.


The Plan first became effective when approved
by the Board on June 25, 2002.  The Plan,
as amended, will become effective on May 19, 2006 if it is approved by the
stockholders at the 2006 annual meeting. 
The Plan shall remain in effect as provided in Section 1.3 hereof.


1.2          Objectives of the Plan. 
The objectives of the Plan are to optimize the profitability and growth
of the Company through incentives which are consistent with the Company’s goals
and which link the personal interests of Participants to those of the Company’s
shareholders; to provide Participants with an incentive for excellence in
individual performance; and to promote teamwork among Participants.


The Plan is further intended to provide flexibility to
the Company in its ability to motivate, attract, and retain the services of
Participants who make significant contributions to the Company’s success and to
allow Participants to share in the success of the Company.


1.3          Duration of the Plan. 
The Plan shall remain in effect, subject to the right of the Board to
amend or terminate the Plan at any time pursuant to Article 15 hereof, until
all Shares subject to it shall have been purchased or acquired according to the
Plan’s provisions.


ARTICLE 2


Definitions


Whenever used in the Plan, the following terms shall
have the meanings set forth below, and, when the meaning is intended, the
initial letter of the word shall be capitalized:



  
 
 









2.1          “Affiliate” means any person or entity which, at the time of
reference, directly, or indirectly through one or more intermediaries, controls
or is controlled by the Company.


2.2          “Award” means, individually or collectively, a grant under
this Plan of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, or Restricted Stock.


2.3          “Award Agreement” means an agreement entered into by the
Company and each Participant setting forth the terms and provisions applicable to
Awards granted under the Plan.


2.4          “Board” means the Board of Directors of the Company.


2.5          “Cause” means (i) the willful engaging by the Participant in
misconduct that is demonstrably injurious to the Company (monetarily or
otherwise), as determined by the Board in its sole discretion, (ii) the
Participant’s conviction of, or pleading guilty or nolo contendere to, a felony
involving moral turpitude, (iii) the Participant’s violation of any
confidentiality, non-solicitation, or non-competition covenant to which the
Participant is subject, or (iv) the Participant’s poor performance, as
determined by the Board, based on reasonable business objectives, after written
notice from the Company and a reasonable opportunity to correct such poor
performance.


2.6          “Change in Control” will be deemed to have occurred as of
the first day any of the following events occurs:


(a)           the
closing of any merger, combination, consolidation or similar business
transaction involving the Company in which the holders of Shares immediately
prior to such closing are not the holders, directly or indirectly, of a
majority of the ordinary voting securities of the surviving Person in such
transaction immediately after such closing;


(b)           the
closing of any sale or transfer by the Company of all or substantially all of
its assets to an acquiring Person in which the holders of Shares immediately
prior to such closing are not the holders of a majority of the ordinary voting
securities of the acquiring Person immediately after such closing; or


(c)           the
closing of any sale by the holders of Shares of an amount of Shares that equals
or exceeds a majority of the Shares immediately prior to such closing to a
Person in which the holders of the Shares immediately prior to such closing are
not the holders of a majority of the ordinary voting securities of such Person
immediately after such closing.


2.7          “Code” means the Internal Revenue Code of 1986, as amended
from time to time.


2.8          “Committee” means the Compensation Committee of the Board,
as specified in Article 3 herein, or such other Committee appointed by the
Board to administer the Plan with respect to grants of Awards.



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2.9          “Company” means Safety Insurance Group, Inc., a corporation
organized and existing under Delaware law, and any successor thereto as
provided in Article 19 herein.


2.10        “Consultant” means an independent contractor who is
performing consulting services for one or more entities in the Group and who is
not an employee of any entity in the Group.


2.11        “Director” means a member of the Board or a member of the
board of directors of an Affiliate.


2.12        “Disability” shall have the meaning ascribed to such term in
the long-term disability plan maintained by the Company, or if no such plan
exists, at the discretion of the Committee.


2.13        “Employee” means any employee of the Group, including any
employees who are also Directors. 
Nonemployee Directors and Consultants shall not be considered Employees
under this Plan.


2.14        “Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.


2.15        “Exercise Price” means the price at which a Share may be
purchased by a Participant pursuant to an Option.


2.16        “Fair Market Value” shall be determined in good faith by the
Committee.


2.17        “Freestanding SAR” means an SAR that is granted
independently of any Options, as described in Article 7 herein.


2.18        “Good Reason” means, with respect to an Employee, (a) a
material reduction in an Employee’s authority, perquisites, position or
responsibilities (other than such a reduction in perquisites which affects all
of the Company’s senior executives on a substantially equal or proportionate
basis), (b) the relocation of the Employee’s primary place of business or the
relocation of the Employee to another Company (or Affiliate) office more than
75 miles from the location of the Employee’s principal office, or, if
applicable, (c) the Employee’s employer’s willful, material violation of its
obligations under his or her employment agreement, in each case, after 60 days
prior written notice to the Employee’s employer and its board of directors and
the Employee’s employer’s failure thereafter to cure such reduction or
violation.


2.19        “Group” means the Company and the Affiliates.


2.20        “Incentive Stock Option” or “ISO”
means an option to purchase Shares granted under Article 6 herein and which is
designated as an Incentive Stock Option intended to meet the requirements of
Code Section 422.


2.21        “Named Executive Officer” means a Participant who, as of the
date of vesting and/or payout of an Award, as applicable, is one of the group
of “covered



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employees,” as defined in the regulations
promulgated under Code Section 162(m), or any successor statute.


2.22        “Nonemployee Director” shall have the meaning ascribed to
such term in Rule 16b-3 of the Exchange Act.


2.23        “Nonqualified Stock Option” or “NQSO”
means an option to purchase Shares granted under Article 6 herein and which is
not intended to meet the requirements of Code Section 422.


2.24        “Option” means an Incentive Stock Option or a Nonqualified
Stock Option, as described in Article 6 herein.


2.25        “Outside Director” shall have the meaning ascribed to such
term under the regulations promulgated with respect to Code Section 162(m).


2.26        “Participant” means a current or former Employee, Director,
or Consultant who has outstanding an Award granted under the Plan.


2.27        “Performance-Based Exception” means the performance-based
exception from the tax deductibility limitations of Code Section 162(m).


2.28        “Period of Restriction” means the period during which the
transfer of Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the occurrence
of other events as determined by the Committee, at its discretion), and the
Shares are subject to a substantial risk of forfeiture, as provided in Article
8 herein.


2.29        “Person” shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a “group,” as defined in Section 13(d) thereof.


2.30        “Restricted Stock” means an Award granted to a Participant
pursuant to Article 8 herein.


2.31        “Shares” means the shares of common stock of the Company,
par value $0.01 per share, subject to adjustment pursuant to Section 4.2
herein.


2.32        “Stock Appreciation Right” or “SAR”
means an Award, granted alone or in connection with a related Option,
designated as an SAR, pursuant to the terms of Article 7 herein.


2.33        “Tandem SAR” means an SAR that is granted in connection with
a related Option pursuant to Article 7 herein.


2.34        “Termination of Service” means, if an Employee, termination
of employment with all entities in the Group, if a Director, termination of
service on the Board and the board of directors of any Affiliate, as applicable,
and if a Consultant, termination of the consulting relationship with all
entities in the Group.



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ARTICLE 3


Administration


3.1          The Committee.  The
Plan shall be administered by the Committee. 
To the extent the Company deems it to be necessary or desirable with
respect to any Awards made hereunder, the members of the Committee may be
limited to Nonemployee Directors or Outside Directors, who shall be appointed
from time to time by, and shall serve at the discretion of, the Board.


3.2          Authority of the Committee. 
Except as limited by law or by the Articles of Incorporation or the
By-laws of the Company, and subject to the provisions herein, the Committee
shall have full power to select the persons who shall participate in the Plan;
determine the sizes and types of Awards; determine the terms and conditions of
Awards in a manner consistent with the Plan; construe and interpret the Plan
and any agreement or instrument entered into under the Plan as they apply to
Participants; establish, amend, or waive rules and regulations for the Plan’s
administration as they apply to Participants; and (subject to the provisions of
Article 15 herein) amend the terms and conditions of any outstanding Award to
the extent such terms and conditions are within the discretion of the Committee
as provided in the Plan.  Further, the
Committee shall make all other determinations which may be necessary or
advisable for the administration of the Plan, as the Plan applies to
Participants.  As permitted by law, the
Committee may delegate its authority as identified herein.


3.3          Decisions Binding. 
All determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders and resolutions of the Board
shall be final, conclusive and binding on all persons, including the Company,
its shareholders, Affiliates, Participants, and their estates and
beneficiaries.


ARTICLE 4


Shares Subject to the Plan and Maximum Awards


4.1          Number of Shares Available for Grants.


(a)           Subject
to Section 4.2 herein, the maximum number of Shares that may be issued pursuant
to Awards under the Plan shall be 2,500,000. 
Shares underlying lapsed or forfeited Awards of Restricted Stock shall
not be treated as having been issued pursuant to an Award under the Plan.  Shares withheld from an Award of Restricted
Stock to satisfy tax withholding obligations shall be counted as Shares issued
pursuant to an Award under the Plan. 
Shares that are potentially deliverable under an Award that expires or
is canceled, forfeited, settled in cash or otherwise settled without the
delivery of Shares shall not be treated as having been issued under the
Plan.  Shares that are withheld to
satisfy the Exercise Price of an Option or tax withholding obligations related
to an Option or SAR shall not be deemed to be Shares issued under the Plan.



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(b)           Unless
the Committee determines that Code Section 162(m) will not apply to an Award,
or that an Award should not be designed to comply with the Performance-Based
Exception, the following limitations shall apply to grants of Awards under the
Plan:


(1)           Options:  The maximum
aggregate number of Shares with respect to which Options may be granted in any
one calendar year to any one Participant shall be 1,250,000;


(2)           SARs:  The maximum
aggregate number of Shares with respect to which Stock Appreciation Rights may
be granted in any one calendar year to any one Participant shall be 1,250,000;
and


(3)           Restricted Stock:  The
maximum aggregate number of Shares of Restricted Stock that may be granted in
any one calendar year to any one Participant shall be 1,250,000.


4.2          Adjustments in Authorized Shares.  In the event of any change in corporate
capitalization, such as a stock split or a stock dividend, or a corporate
transaction, such as any merger, consolidation, separation, including a
spin-off, or other distribution of stock or property of the Company, any
reorganization (whether or not such reorganization comes within the definition
of such term in Code Section 368) or any partial or complete liquidation of the
Company, an adjustment shall be made to the number and kind of Shares which may
be delivered pursuant to Section 4.1, to the number, kind and/or price of
Shares subject to outstanding Awards granted under the Plan, and to the
individual Award limitations set forth in subsections 4.1(b)(1) through
4.1(b)(3), as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of
rights; provided, however, that the number of Shares subject to any Award shall
always be rounded to the nearest whole number, with one-half (1⁄2) of a Share
rounded up to the next whole number.


ARTICLE 5


Eligibility and Participation


5.1          Eligibility.  Persons
eligible to participate in this Plan include all Employees, Directors and Consultants
of the Group, as determined by the Committee.


5.2          Actual Participation. 
Subject to the provisions of the Plan, the Committee may, from time to
time, select from all eligible Employees, Directors and Consultants those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.



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ARTICLE 6


Options


6.1          Grant of Options. 
Subject to the terms and provisions of the Plan, Options may be granted
to Participants in such number (subject to Article 4 herein), and upon such
terms, and at any time and from time to time as shall be determined by the
Committee; provided, however, that ISOs may be granted only to Employees.


6.2          Award Agreement.  Each
Option grant shall be evidenced by an Award Agreement that shall specify the
Exercise Price, the duration of the Option, the number of Shares to which the
Option pertains, and such other provisions as the Committee shall
determine.  The Award Agreement also
shall specify whether the Option is intended to be an ISO or an NQSO.


6.3          Exercise Price.  The
Exercise Price for each grant of an Option under this Plan shall be at least
equal to one hundred percent (100%) of the Fair Market Value of a Share on the
date the Option is granted.  However, in
the case of an ISO granted to a Participant who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any subsidiary, the Exercise
Price for each grant of an Option shall be not less than one hundred ten percent
(110%) of the Fair Market Value of a Share on the date the Option is
granted.  The Exercise Price will be
subject to adjustment in accordance with the provisions of Section 4.2 of the
Plan.


6.4          Duration of Options. 
Each Option granted to a Participant shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of its
grant.  However, in the case of an ISO
granted to a Participant who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any subsidiary, such Option shall not be exercisable
after the expiration of five (5) years from the date such Option is granted or
such shorter term as the Committee may determine.


6.5          Exercise of Options. 
Options granted under this Article 6 shall be exercisable at such times
and be subject to such restrictions and conditions as set forth in the Award
Agreement and as the Committee shall in each instance approve, which need not
be the same for each grant or for each Participant.


6.6          Payment.


(a)           Options
granted under this Article 6 shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.


(b)           The Exercise Price of any Option shall be
payable to the Company in full (i) in cash or its equivalent, (ii) if permitted
by the Committee, by tendering



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previously acquired Shares having an aggregate Fair Market Value at the
time of exercise equal to the total Exercise Price (provided that the Shares,
other than Shares purchased by the Participant on the open market, must have
been held by the Participant for at least six (6) months prior to their
tender), or (iii) by a combination of (i) and (ii).


(c)           If
the Company’s shares are publicly traded, an Option may be exercised by means
of a cashless exercise with the assistance of a broker or by any other means
permitted by the Committee in accordance with such terms and conditions as the
Committee, in its sole discretion, shall determine to be consistent with the
Plan’s purpose and applicable law.


(d)           Subject
to any governing rules or regulations, as soon as practicable after receipt of
a written notification of exercise of an Option, provisions for full payment
therefor and satisfaction or provision for satisfaction of any tax withholding
or other obligations, the Company shall (i) deliver to the Participant, in the
Participant’s name or the name of the Participant’s designee, a Share
certificate or certificates in an appropriate amount based upon the number of
Shares purchased under the Option, or (ii) cause to be issued in the
Participant’s name or the name of the Participant’s designee, in book-entry
form, an appropriate number of Shares based upon the number of Shares purchased
under the Option.


6.7          Nontransferability of Options.


(a)           Incentive Stock Options. 
No ISO granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, during the lifetime of a
Participant, all ISOs granted to such Participant under the Plan shall be
exercisable only by such Participant.


(b)           Nonqualified Stock Options. 
Except as otherwise provided in a Participant’s Award Agreement, no NQSO
granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.  Further,
except as otherwise provided in a Participant’s Award Agreement, during the
lifetime of a Participant, all NQSOs granted to such Participant under the Plan
shall be exercisable only by such Participant.


ARTICLE 7


Stock Appreciation Rights


7.1          Grant of SARs.


(a)           Subject
to the terms and conditions of the Plan, SARs may be granted to Participants at
any time and from time to time as shall be determined by the Committee.  The Committee may grant Freestanding SARs,
Tandem SARs, or any combination of these forms of SAR.



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(b)           The
Committee shall have complete discretion in determining the number of SARs
granted to each Participant (subject to Article 4 herein) and, consistent with
the provisions of the Plan, in determining the terms and conditions pertaining
to such SARs.


(c)           The
grant price of a Freestanding SAR shall equal the Fair Market Value of a Share
on the date of grant of the SAR.  The
grant price of Tandem SARs shall equal the Exercise Price of the related
Option.


7.2          Exercise of Tandem SARs.


(a)           Tandem
SARs may be exercised for all or part of the Shares subject to the related
Option upon the surrender of the right to exercise the equivalent portion of
the related Option.  A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.


(b)           Notwithstanding
any other provision of this Plan to the contrary, with respect to a Tandem SAR
granted in connection with an ISO: (i) the Tandem SAR will expire no later than
the expiration of the underlying ISO; (ii) the value of the payout with respect
to the Tandem SAR may be for no more than one hundred percent (100%) of the
difference between the Exercise Price of the underlying ISO and the Fair Market
Value of the Shares subject to the underlying ISO at the time the Tandem SAR is
exercised; and (iii) the Tandem SAR may be exercised only when the Fair
Market Value of the Shares subject to the ISO exceeds the Exercise Price of the
ISO.


7.3          Exercise of Freestanding SARs.  Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them and sets forth in the Award Agreement.


7.4          SAR Agreement.  Each
SAR grant shall be evidenced by an Award Agreement that shall specify the grant
price, the term of the SAR, and such other provisions as the Committee shall
determine.


7.5          Term of SARs.  The
term of an SAR granted under the Plan shall be determined by the Committee, in
its sole discretion; provided, however, that such term shall not exceed ten
(10) years.


7.6          Payment of SAR Amount. 
Upon exercise of an SAR, a Participant shall be entitled to receive
payment from the Company in an amount determined by multiplying:


(a)           the
difference between the Fair Market Value of a Share on the date of exercise
over the grant price; by


(b)           the
number of Shares with respect to which the SAR is exercised.


At the discretion of the Committee, the payment upon
SAR exercise may be in cash, in Shares of equivalent value, or in some
combination thereof.



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7.7          Nontransferability of SARs. 
Except as otherwise provided in a Participant’s Award Agreement, no SAR
granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.  Further,
except as otherwise provided in a Participant’s Award Agreement, during the
lifetime of a Participant, all SARs granted to such Participant under the Plan
shall be exercisable only by such Participant.


ARTICLE 8


Restricted Stock


8.1          Grant of Restricted Stock. 
Subject to the terms and provisions of the Plan, the Committee, at any
time and from time to time, may grant Shares of Restricted Stock to
Participants in such amounts as the Committee shall determine.


8.2          Restricted Stock Agreement. 
Each Restricted Stock grant shall be evidenced by an Award Agreement
that shall specify the Period(s) of Restriction, the number of Shares of
Restricted Stock granted, and such other provisions as the Committee shall
determine.


8.3          Transferability. 
Except as provided in this Article 8, the Shares of Restricted Stock
granted herein may not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated until the end of the applicable Period of Restriction
established by the Committee and specified in the Award Agreement, or upon
earlier satisfaction of any other conditions, as specified by the Committee in
its sole discretion and set forth in the Award Agreement.  During the lifetime of a Participant, all
rights with respect to the Restricted Stock granted to such Participant under
the Plan shall be available only to such Participant.


8.4          Restrictions.


(a)           Subject
to the terms hereof, the Committee shall impose such conditions and/or
restrictions on any Shares of Restricted Stock granted pursuant to the Plan as
it may deem advisable and as are set forth in the Award Agreement including,
without limitation, a requirement that Participants pay a stipulated purchase
price for each Share of Restricted Stock, restrictions based upon the
achievement of specific performance goals (Company-wide, divisional, and/or
individual), time-based restrictions on vesting following the attainment of the
performance goals, and/or restrictions under applicable federal or state
securities laws.


(b)           The
Company shall retain the certificates representing Shares of Restricted Stock
in the Company’s possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.


(c)           Except
as otherwise provided in this Article 8, Shares of Restricted Stock covered by
each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.



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8.5          Voting Rights.  During
the Period of Restriction, subject to any limitations imposed under the By-laws
of the Company, Participants holding Shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those Shares.


8.6          Dividends and Other Distributions.  Subject to the Committee’s right to determine
otherwise at the time of grant, during the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may receive or be credited
with regular dividends paid with respect to the underlying Shares while they
are so held.  The Committee may apply any
restrictions to the dividends that the Committee deems appropriate and as are
set forth in the Award Agreement. 
Without limiting the generality of the preceding sentence, if the grant
or vesting of Restricted Stock awarded to a Named Executive Officer is designed
to comply with the requirements of the Performance-Based Exception, the
Committee may apply any restrictions it deems appropriate to the payment of dividends
declared with respect to such Restricted Stock, such that the dividends and/or
the Restricted Stock maintain eligibility for the Performance-Based Exception.


ARTICLE 9


Termination of Service


Each Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise Options and SARs, and receive unvested Shares of Restricted
Stock, following Termination of Service with the Group.  Such provisions shall be determined in the
sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Awards issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
Termination of Service; provided, however, that the following shall automatically
apply to the extent different provisions are not set forth in a Participant’s
Award Agreement:


(a)           If
the Termination of Service is by the Company for Cause, by a Nonemployee
Director or Consultant for any reason, or by an Employee without Good Reason,
all previously unexercised Options and SARs shall expire and all unvested
Restricted Stock shall be forfeited upon the date of Termination of Service.


(b)           If
the Participant is an Employee and the Termination of Service is by the
Participant for Good Reason, all previously unexercised Options and SARs may be
exercised for a period of three (3) months after the date of the Participant’s
Termination of Service and all unvested Restricted Stock shall be forfeited as
of such date.


(c)           If
the Termination of Service is a result of the Participant’s death or
Disability, all previously unexercised Options and SARs may be exercised for a
period of 12 months after the date of the Participant’s Termination of Service
and all unvested Restricted Stock shall vest.



 11
 
 









(d)           If
the Termination of Service is by the Company for any reason other than Cause or
the Participant’s Disability, all previously unexercised Options and SARs may
be exercised for a period of three (3) months after the date of the Participant’s
Termination of Service and all unvested Restricted Stock which was not granted
during the year in which such Termination of Service occurs shall vest.  Any Restricted Stock granted during the year
of Termination of Service shall be forfeited.


ARTICLE 10


Restrictions on Shares


All Shares
acquired pursuant Awards granted hereunder, and Participants’ right to exercise
Options and SARS and/or receive Shares upon exercise or vesting of an Award,
shall be subject to all applicable restrictions contained in the Company’s By-laws,
shareholders agreement or insider trading policy, and any other restrictions
imposed by the Committee, including, without limitation, restrictions under
applicable securities laws, under the requirements of any stock exchange or
market upon which such Shares are then listed and/or traded, and restrictions
under any blue sky or state securities laws applicable to such Shares.


ARTICLE 11


Performance Measures


If Awards under the Plan are subject to Code Section
162(m) and the Committee determines that such Awards should be designed to
comply with the Performance-Based Exception, the performance measure(s), the
attainment of which determine the degree of payout and/or vesting, to be used
for purposes of such Awards shall be chosen from among earnings per share,
economic value added, market share (actual or targeted growth), net income
(before or after taxes), operating income, return on assets (actual or targeted
growth), return on capital (actual or targeted growth), return on equity
(actual or targeted growth), return on investment (actual or targeted growth),
gross or net underwriting results, revenue (actual or targeted growth), share
price, stock price growth, total shareholder return, or such other performance
measures as are approved by the Committee and the Company’s shareholders.


The Committee shall have the discretion to adjust the
determinations of the degree of attainment of the pre-established performance
goals; provided, however, that Awards which are designed to qualify for the
Performance-Based Exception, and which are held by Named Executive Officers,
may not be adjusted upward (the Committee shall retain the discretion to adjust
such Awards downward).


In the event that applicable tax laws change to permit
the Committee to alter the governing performance measures without obtaining
shareholder approval of such changes, the Committee shall have sole discretion
to make such changes without obtaining shareholder approval.  In addition, Awards that are not intended to
qualify for the Performance-Based Exception may be based on these or such other
performance measures as the Committee may determine.



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ARTICLE 12


Beneficiary Designation


Subject to the terms and conditions of the Plan and
applicable Award Agreement, each Participant may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit.  Each such designation shall revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
during the Participant’s lifetime with the party chosen by the Company, from
time to time, to administer the Plan.  In
the absence of any such designation, benefits remaining unpaid at the
Participant’s death shall be paid to the Participant’s estate.


ARTICLE 13


Rights of Participants


13.1        Continued Service. 
Nothing in the Plan shall:


(a)           interfere
with or limit in any way the right of the Company to terminate any Participant’s
employment, service as a Director, or service as a Consultant with the Group at
any time, or


(b)           confer
upon any Participant any right to continue in the service of any member of the
Group as an Employee, Director or Consultant.


13.2        Participation. 
Participation is determined by the Committee. No person shall have the
right to be selected to receive an Award under the Plan, or, having been so
selected, to be selected to receive a future Award.


ARTICLE 14


Change in Control


14.1        Treatment of Outstanding Awards.  Upon the occurrence of a Change in Control,
unless otherwise specifically prohibited under applicable laws, or by the rules
and regulations of any governing governmental agencies or national securities
exchanges:


(a)           any
and all Options and SARs granted hereunder shall become immediately
exercisable; and


(b)           any
restriction periods and restrictions imposed on Restricted Stock shall lapse.


14.2        Termination, Amendment, and Modifications of Change-in-Control
Provisions.  Notwithstanding
any other provision of this Plan or any Award Agreement



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provision, the provisions of this Article 14
may not be terminated, amended, or modified on or after the date of a Change in
Control to affect adversely any Award theretofore granted under the Plan
without the prior written consent of the Participant with respect to said
Participant’s outstanding Awards; provided, however, that the Board, upon
recommendation of the Committee, may terminate, amend, or modify this Article
14 at any time and from time to time prior to the date of a Change in Control.


ARTICLE 15


Amendment, Modification, and Termination


15.1        Amendment, Modification, and Termination.  The Board may at any time and from time to
time, alter, amend, suspend or terminate the Plan or any Award hereunder in
whole or in part; provided, however, that no amendment which requires
shareholder approval in order for the Plan to continue to comply with any
applicable tax or securities or the rules of any securities exchange on which
the securities of the Company are listed, shall be effective unless such
amendment shall be approved by the requisite vote of shareholders of the
Company entitled to vote thereon; provided further that no such shall
alteration, amendment, suspension or termination shall adversely affect any
Award hereunder without the consent of the Participant to whom such Award shall
have been made.


15.2        Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events.  The
Committee may make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section 4.2 hereof)
affecting the Company or the financial statements of the Company or of changes
in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan; provided that no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan’s meeting the requirements, if applicable, of Code Section 162(m), as
amended from time to time.


15.3        Compliance with Code Section 162(m).  At all times when Code Section 162(m) is
applicable, all Awards granted under this Plan to Named Executive Officers, or
to Participants who will likely become Named Executive Officers at the time of
vesting or payment, shall be awarded and administered to comply with the
requirements of Code Section 162(m), unless the Committee determines that such
compliance is not desired.  In addition,
if changes are made to Code Section 162(m) or the regulations promulgated
thereunder to permit greater flexibility with respect to any Award or Awards
available under the Plan, the Committee may, subject to this Article 15, make
any adjustments it deems appropriate.



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ARTICLE 16


Withholding


16.1        Tax Withholding.  The
Company shall have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount (in cash or Shares) sufficient
to satisfy any taxes required by federal, state, or local law or regulation to
be withheld with respect to any taxable event arising as a result of this Plan.


16.2        Share Withholding. 
Participants may elect, subject to the approval of the Committee, to
satisfy all or part of such withholding requirement by having the Company
withhold Shares having a Fair Market Value equal to the amount to be withheld
up to the minimum statutory total tax withholding rate (or such other rate that
will not result in a negative accounting impact).  All such elections shall be irrevocable, made
in writing, signed by the Participant, and shall be subject to any restrictions
or limitations that the Committee, in its sole discretion, deems appropriate.


ARTICLE 17


Indemnification


Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company to the fullest extent permitted by applicable law against and from any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof, with
the Company’s approval, or paid by him or her in satisfaction of any judgment
in any such action, suit, or proceeding against him or her, provided he or she
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own
behalf.  The foregoing right of
indemnification is subject to the person having been successful in the legal
proceedings or having acted in good faith and what is reasonably believed to be
a lawful manner in the Company’s best interests.  The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company’s Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.


ARTICLE 18


Successors


All obligations of the Company under the Plan with
respect to Awards granted hereunder shall be binding on any successor to the
Company, whether the existence of



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such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.


ARTICLE 19


Legal Construction


19.1        Gender and Number. 
Except where otherwise indicated by the context, any masculine term used
herein also shall include the feminine; the plural shall include the singular
and the singular shall include the plural.


19.2        Severability.  In the
event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included.


19.3        Requirements of Law. 
The granting of Awards and the issuance of Shares under the Plan shall
be subject to, and may be made contingent upon satisfaction of, all applicable
laws, rules, and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.


19.4        Governing Law.  To the
extent not preempted by federal law, the Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the state of
New York, excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of this Plan to the substantive
law of another jurisdiction.


19.5        Code Section 409A Compliance.  To the extent applicable, it is intended that
this Plan and any Awards granted hereunder comply with the requirements of
Section 409A of the Code and any related regulations or other guidance
promulgated with respect to such Section by the U.S. Department of the Treasury
or the Internal Revenue Service (“Section 409A”).  Any provision that would cause the Plan or
any Award granted hereunder to fail to satisfy Section 409A shall have no force
or effect until amended to comply with Section 409A, which amendment may be
retroactive to the extent permitted by Section 409A.



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