Tower Group, Inc. 2004 Long Term Equity Compensation Plan (as amended and restated, effective May 15, 2008) Restricted Stock Units Award Agreement
EXHIBIT 10.63
Tower Group, Inc.
2004 Long Term Equity Compensation Plan
(as amended and restated, effective May 15, 2008)
2004 Long Term Equity Compensation Plan
(as amended and restated, effective May 15, 2008)
SECTION 1. AWARD OF RESTRICTED STOCK UNITS
(a) Restricted Stock Units. Subject to the terms and conditions set forth in the Notice of
Restricted Stock Units Award and this Restricted Stock Units Award Agreement (together, the
“Agreement”), the Company grants to the Grantee on the Grant Date the Restricted Stock Units (the
“RSUs” or “Award”) set forth in the Notice of Restricted Stock Units Award. The Award represents
the opportunity to receive Shares to the extent the RSUs are earned based on performance over the
Performance Period and the Grantee satisfies the requisite service requirements over the remaining
Period of Restriction. These performance and service conditions are described in Sections 2 and 3
hereof.
(b) Plan and Defined Terms. The RSUs are granted pursuant to the Plan, a copy of which the
Grantee acknowledges having received. All terms and conditions applicable to the RSUs set forth in
the Plan and not set forth herein are hereby incorporated herein by reference. To the extent any
provision hereof is inconsistent with a provision of the Plan, the provision of the Plan will
govern. All capitalized terms used in this Agreement and not otherwise defined herein shall have
the meanings ascribed to them in the Plan.
SECTION 2. DETERMINATION OF NUMBER OF RESTRICTED STOCK UNITS EARNED
(a) Performance Period. The number of Shares the Grantee has the opportunity to receive is
based on the number of RSUs earned over the Performance Period. The number of RSUs earned over the
Performance Period is determined pursuant to the formula in subsection (b) below.
(b) Formula. The number of RSUs earned during the Performance Period (“Earned RSUs”) will vary
from 0% to 200% of the target number of RSUs awarded, as provided in the Notice of Restricted Stock
Units Award (the “Target Award”). The number of Earned RSUs will equal (i) a percentage of the
Target Award based on the Company’s diluted operating earnings per share as of December 31, 20___,
and (ii) a percentage of the Target Award based on the Company’s diluted book value per share as of
December 31, 20___, determined in accordance with the tables set forth below (performance results
between levels will be interpolated):
| Diluted Operating Earnings Per Share | Shares Earned (% of Target) | |
| $___ and above | ___% |
|
| $— | ___% |
|
| $— | ___% |
|
| Diluted Operating Earnings Per Share | Shares Earned (% of Target) | |
| $— | __% |
|
| $— | __% |
|
| $__and below | __% |
|
| Diluted Book Value Per Share | Shares Earned (% of Target) | |
| $___ and above | ___% |
|
| $— | ___% |
|
| $— | ___% |
|
| $— | ___% |
|
| $— | ___% |
|
| $___ and below | ___% |
|
(c) Definitions. For purposes of Section 2(b) hereof, the Company’s “diluted operating
earnings per share” shall mean the Company’s diluted earnings per share as determined in accordance
with generally accepted accounting principles in the United States excluding gains and losses from
investments and extraordinary gains and losses and “diluted book value per share” shall mean the
Company’s total stockholders’ equity divided by the number of shares of common stock outstanding
plus the appropriate common stock equivalents of stock options, warrants and restricted stock using
the treasury stock method as determined in accordance with generally accepted accounting principles
in the United States.
SECTION 3. VESTING, FORFEITURE AND TRANSFER RESTRICTIONS
(a) Vesting and Delivery of Shares. The Award shall become vested as to 1/3 of the Earned RSUs
on each of December 31, 20___, December 31, 20___, and December 31, 20_. For avoidance of doubt, any
RSUs not earned in accordance with Section 2 are deemed forfeited as of the end of the Performance
Period and the Grantee will not be eligible to vest in such forfeited RSUs. Subject to the terms of
the Plan and Sections 3(b), 3(f), 3(g), and 5(a) hereof, upon or as soon as practicable after
vesting of any Earned RSUs hereunder (but in no event later than March 15th of the
calendar year following the end of the Period of Restriction applicable to such RSUs), payment with
respect to the vested RSUs shall be made in Shares (one Share for each RSU earned), free of all
restrictions otherwise imposed by this Agreement.
(b) Termination of Employment; Forfeiture.
If the Grantee’s employment is terminated for any
reason other than death, Disability (as defined below) or termination by the Company (or a
Subsidiary, as applicable) without Cause (as defined below), the Grantee shall forfeit any RSUs
that are subject to a Period of Restriction (not vested) at the time of such termination of
employment. If the Grantee’s employment terminates due to the Grantee’s death or Disability, or if
the Grantee’s employment is terminated by the Company (or a Subsidiary, as applicable) without
Cause at any time during the Performance Period, then the Grantee will be deemed to have earned a prorated portion of the
Target Award and will receive a number of Shares equal to such amount as soon as
practicable (but no later than sixty (60) days) after the date of termination of employment. The amount of the
prorated award shall be determined by multiplying (i) the Target Award by (ii) a fraction, the numerator of which
is the number of full months that had elapsed during the Performance Period as of the date of employment termination and the denominator of which is 12. If the Grantee’s
employment terminates due to the Grantee’s death or Disability, or if the Grantee’s employment is
terminated by the Company (or a Subsidiary, as applicable) without Cause at any time after the
Performance Period but during the Period of
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Restriction applicable to any portion of this Award, then any Earned RSUs then subject to the
Period of Restriction shall immediately vest on the date of the Grantee’s termination of
employment, and payment with respect to such RSUs shall be made in Shares as soon as practicable
(but no later than sixty (60) days) after the date of termination of employment.
(c) Definition of “Cause.” If the Grantee has an employment agreement with the Company or a
Subsidiary, the term “Cause” shall have the meaning ascribed to such term in the Grantee’s
employment agreement. If the Grantee’s employment agreement does not define the term “Cause,” or if
the Grantee does not have an employment agreement with the Company or a Subsidiary, the term
“Cause” shall mean (i) the willful engaging by the Grantee in misconduct that is injurious to the
Company or a Subsidiary (monetarily or otherwise), (ii) the Grantee’s conviction of, or pleading
guilty or nolo contendere to, a crime involving moral turpitude or a felony, (iii) any serious or
continuing breach by the Grantee of any material term of any agreement with the Company or
Subsidiary or any confidentiality, non-solicitation, or non-competition covenant to which the
Grantee is subject, or (iv) the Grantee’s failure to perform, in a timely, professional and
competent manner, (A) the orders’ or requests of the Board; (B) the orders or requests of the CEO
or the Grantee’s direct supervisor; or (C) any material duties under any agreement with the Company
or a Subsidiary.
(d) Definition of “Disability.” The Grantee’s employment shall be deemed to have terminated
due to the Grantee’s Disability if, in the Company’s sole discretion, the Grantee becomes unable to
engage in any substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, and the Grantee is entitled to long-term disability
benefits under the Company’s long-term disability plan or policy, as in effect on the date of
termination of ▇▇▇▇▇▇▇’s employment, and as a result, the Grantee’s employment is terminated.
(e) Transfer Restrictions. During the applicable Period of Restriction, the RSUs may not be
sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed
of.
(f) Employment Agreement. Notwithstanding the foregoing, if the terms of any employment or
other agreement between the Grantee and the Company or a Subsidiary provides more favorable terms
concerning the impact of the Grantee’s termination of employment on the Grantee’s Award, the terms
of such employment or other agreement shall govern, subject to the following modifications. If the
Grantee’s employment terminates during the Performance Period, and the employment agreement or
other agreement provides for the acceleration of vesting of the Award
upon such termination, then the Grantee will be deemed to have had a termination of employment without Cause
and shall earn a prorated
portion of the Target
Award and will receive a
number of Shares equal to such amount as soon as practicable
(but no later than sixty (60) days) after the date of
termination. The amount of the prorated award shall be determined by multiplying (i)
the Target Award by (ii) a fraction, the numerator of which is the number of full months that had elapsed during the Performance Period as of the date of
employment termination and the denominator of which is 12. If the Grantee’s employment
terminates after the Performance Period, and the employment or other agreement provides for the
acceleration of vesting of the Award, then any Earned RSUs then subject to the Period of
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Restriction shall immediately vest on the date of the Grantee’s termination of employment, and
payment with respect to such RSUs shall be made in Shares as soon as practicable (but no later than sixty (60) days) after the date of
termination.
(g) Six Month Delay for Specified Employees. To the extent Grantee is a “specified employee,”
as defined in Section 409A(a)(2)(B)(i) of the Code, notwithstanding the timing of payment provided
in any other section of this Agreement, no payment, distribution or benefit under this Agreement
that constitutes a distribution of “deferred compensation” (within the meaning of Treasury
Regulation Section 1.409A-1(b)) upon “separation from service” (within the meaning of Treasury
Regulation Section 1.409A-1(h)), after taking into account all available exemptions, that would
otherwise be payable during the six-month period after such separation from service, will be made
during such six-month period, and any such payment, distribution or benefit will instead be paid on
the first business day after such six-month period.
SECTION 4. RIGHTS OF THE GRANTEE
The Grantee shall not have any privileges of a holder of Shares of the Company with respect to
the Shares payable hereunder, including without limitation any right to vote such Shares, to
receive dividends, to receive Dividend Equivalents, or to receive other distributions in respect
thereof, until the date of the issuance of Shares to the Grantee. Nothing in the Agreement shall
confer upon the Grantee any right to continue as an employee of the Company or any Subsidiary or to
interfere in any way with any right of the Company to terminate the Grantee’s employment at any
time.
SECTION 5. MISCELLANEOUS PROVISIONS
(a) Tax Withholding. In accordance with Article 17 of the Plan (or a successer provision), the
Committee shall have the power and the right to deduct or withhold, or require the Grantee to remit
to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the
Grantee’s FICA obligations) required by law to be withheld with respect to this Award. The Grantee
may elect that, upon the lapse of a Performance Period, the withholding requirement be satisfied by
directing the Company to withhold from the Shares that would otherwise be delivered hereunder a
number of Shares having a Fair Market Value equal to the minimum statutory withholding that could
be imposed on the transaction. Any such election by a Grantee shall be irrevocable, made in writing
and signed by the Grantee.
(b) Ratification of Actions. By accepting this Agreement, the Grantee and each person claiming
under or through the Grantee shall be conclusively deemed to have indicated the Grantee’s
acceptance and ratification of, and consent to, any action taken under the Plan or this Agreement
by the Company, the Board, the Committee or any designee thereof.
(c) Notice. Any notice to be served hereunder shall be given personally in writing to the
Grantee or to the Secretary of the Company (as the case may be) or shall be couriered or posted by
registered mail to the Company (to the attention of its Secretary) at its principal executive
office or to the Grantee at the address that he most recently provided in writing to the Company.
Any such notice sent by post shall be deemed served three days after it is posted, and, in proving
such service, it shall be sufficient to prove that the notice was properly addressed and put in the
post or couriered.
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(d) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, as such laws are applied to contracts entered into and performed in
such jurisdiction, without giving effect to conflicts of law principles.
(e) Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.
(f) Modification or Amendment. This Agreement may only be modified or amended by written
agreement executed by the parties hereto; provided, however, that the adjustments permitted
pursuant to Section 4.3 of the Plan (or a successor provision) may be made without such written
agreement.
(g) Severability. In the event any provision of this Agreement shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of
this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid
provision had not been included.
(h) References to Plan. All references to the Plan shall be deemed references to the Plan as
may be amended from time to time.
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