Exhibit 10.9.1
MID OCEAN LIMITED
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1993 LONG TERM INCENTIVE AND SHARE AWARD PLAN
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MID OCEAN LIMITED
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1993 LONG TERM INCENTIVE AND SHARE AWARD PLAN
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Section Page
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1. Purposes......................................... 1
2. Definitions...................................... 1
3. Administration................................... 7
(a) Authority of the Committee................ 7
(b) Manner of Exercise of Committee
Authority................................. 10
(c) Limitation of Liability................... 10
4. Shares Subject to the Plan....................... 11
5. Specific Terms of Awards......................... 14
(a) General................................... 14
(b) Options................................... 15
(c) SARs...................................... 16
(d) Restricted Shares......................... 18
(e) Restricted Share Units.................... 20
(f) Performance Shares and Performance
Units..................................... 22
(g) Dividend Equivalents...................... 25
(h) Other Share-Based Awards.................. 25
6. Certain Provisions Applicable to Awards.......... 26
(a) Stand-Alone, Additional, Xxxxxx and
Substitute Awards......................... 26
(b) Terms of Awards........................... 27
(c) Form of Payment Under Awards.............. 28
(d) Nontransferability........................ 28
7. Director's Options............................... 29
(a) Annual Grant.............................. 29
(b) Exercisability............................ 29
(c) Time and Method of Exercise............... 29
(d) Nontransferability........................ 30
(e) Adjustments............................... 30
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Section Page
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(f) Administration...................................... 31
8. Director's Replacement Options............................. 32
9. General Provisions......................................... 32
(a) Compliance with Legal and Exchange
Requirements........................................ 32
(b) No Right to Continued Employment or
Service............................................. 33
(c) Taxes............................................... 34
(d) Changes to the Plan and Awards...................... 35
(e) No Rights to Awards; No Shareholder
Rights.............................................. 36
(f) Unfunded Status of Awards........................... 36
(g) Nonexclusivity of the Plan.......................... 37
(h) Not Compensation for Benefit Plans.................. 37
(i) No Fractional Shares................................ 37
(j) Governing Law....................................... 38
(k) Effective Date; Plan Termination.................... 38
(1) Titles and Headings................................. 39
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MID OCEAN LIMITED
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1993 LONG TERM INCENTIVE AND SHARE AWARD PLAN
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1. Purposes. The purposes of the 1993 Long Term Incentive and Share
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Award Plan are to advance the interests of Mid Ocean Limited and its
shareholders by providing a means to attract, retain, and motivate employees and
directors of the Company upon whose judgment, initiative and efforts the
continued success, growth and development of the Company is dependent.
2. Definitions. For purposes of the Plan, the following terms shall
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be defined as set forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a
participating employer under the Plan, provided that the Company directly or
indirectly owns at least 20% of the combined voting power of all classes of
shares of such entity or at least 20% of the ownership interests in such
entity.
(b) "Award" means any Option, SAR, Restricted Share, Restricted Share
Unit, Performance Share, Performance Unit, Dividend Equivalent, or Other
Share-
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Based Award granted to an Eligible Employee under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which
have been designated by such Eligible Employee in his or her most recent
written beneficiary designation filed with the Company to receive the
benefits specified under this Plan upon the death of the Eligible Employee,
or, if there is no designated Beneficiary or surviving designated
Beneficiary, then the person, persons, trust or trusts entitled by will or
the laws of descent and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.
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(g) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Plan; provided, however, that the Committee shall consist of two or more
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directors of the Company, each of whom is a "disinterested person" within the
meaning of Rule 16b-3 under the Exchange Act, to the extent applicable.
(h) "Company" means Mid Ocean Limited, a corporation organized under
the laws of the Cayman Islands, or any successor corporation.
(i) "Director" means a non-employee member of the Board.
(j) "Director's Option" means a NQSO granted to a Director under
Section 7.
(k) "Director's Replacement Option" means a NQSO granted to a Director
under Section 8.
(l) "Dividend Equivalent" means a right, granted under Section 5(g),
to receive cash, Shares, or other property equal in value to dividends paid
with respect to a specified number of Shares. Dividend Equivalents may be
awarded on a free-standing basis or in connec-
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tion with another Award, and may be paid currently or on a deferred basis.
(m) "Eligible Employee" means an employee or underwriter of, or
underwriting consultant to, the Company or its Subsidiaries and Affiliates,
including any director who is an employee, who is responsible for or
contributes to the management, growth and/or profitability of the business of
the Company, its Subsidiaries or Affiliates.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(o) "Fair Market Value" means, with respect to Shares or other
property, the fair market value of such Shares or other property determined
by such methods or procedures as shall be established from time to time by
the Committee. Unless otherwise determined by the Committee in good faith,
the Fair Market Value of Shares as of any given date prior to the existence
of a public market for the Company's Shares shall mean the Company's book
value. Thereafter, unless otherwise deter-
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mined by the Committee in good faith, the Fair Market Value of Shares shall
mean the mean between the high and low selling prices per Share on the
immediately preceding date (or, if the Shares were not traded on that day,
the next preceding day that the Shares were traded).
(p) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(q) "NQSO" means any Option that is not an ISO.
(r) "Option" means a right, granted under Section 5(b), Section 7 or
Section 8, to purchase Shares.
(s) "Other Share-Based Award" means a right, granted under Section
5(h), that relates to or is valued by reference to Shares.
(t) "Participant" means an Eligible Employee or Director who has been
granted an Award, Director's Option or Director's Replacement Option under
the Plan.
(u) "Performance Share" means a performance share granted under
Section 5(f).
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(v) "Performance Unit" means a performance unit granted under Section
5(f).
(w) "Plan" means this 1993 Long Term Incentive and Share Award Plan.
(x) "Restricted Shares" means an Award of Shares under Section 5(d)
that may be subject to certain restrictions and to a risk of forfeiture.
(y) "Restricted Share Unit" means a right, granted under Section
5(e), to receive Shares or cash at the end of a specified deferral period.
(z) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(aa) "SAR" or "Share Appreciation Right" means the right, granted
under Section 5(c), to be paid an amount measured by the difference between
the exercise price of the right and the Fair Market Value of Shares on the
date of exercise of the right, with payment to be made in cash, Shares, or
property as specified in the Award or determined by the Committee.
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(bb) "Shares" means ordinary shares, $.20 par value per share, of the
Company.
(cc) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
shares possessing 50% or more of the total combined voting power of all
classes of shares in one of the other corporations in the chain.
3. Administration.
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(a) Authority of the Committee. Except as provided in Section 7,
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the Plan shall be administered by the Committee, and the Committee shall have
full and final authority to take the following actions, in each case subject
to and consistent with the provisions of the Plan:
(i) to select Eligible Employees to whom Awards may be
granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be
granted to each Eligible Employee;
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(iv) to determine the type and number of Awards to be granted, the
number of Shares to which an Award may relate, the terms and conditions of
any Award granted under the Plan (including, but not limited to, any
exercise price, xxxxx xxxxx, or purchase price, and any bases for
adjusting such exercise, grant or purchase price, any restriction or
condition, any schedule for lapse of restrictions or conditions relating
to transferability or forfeiture, exercisability, or settlement of an
Award, and waiver or accelerations thereof, and waivers of performance
conditions relating to an Award, based in each case on such considerations
as the Committee shall determine), and all other matters to be determined
in connection with an Award;
(v) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an Award
may be paid, in cash, Shares, other Awards, or other property, or an Award
may be canceled, forfeited, exchanged, or surrendered;
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(vi) to determine whether, to what extent, and under what
circumstances cash, Shares, other Awards, or other property payable with
respect to an Award will be deferred either automatically, at the election
of the Committee, or at the election of the Eligible Employee;
(vii) to prescribe the form of each Award Agreement, which need not
be identical for each Eligible Employee;
(viii) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement, or other instrument
hereunder; and
(x) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
neces-
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sary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall
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have sole discretion in exercising its authority under the Plan. Any action
of the Committee with respect to the Plan shall be final, conclusive, and
binding on all persons, including the Company, Subsidiaries, Affiliates,
Eligible Employees, any person claiming any rights under the Plan from or
through any Eligible Employee, and shareholders. The express grant of any
specific power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of the Company
or any Subsidiary or Affiliate the authority, subject to such terms as the
Committee shall determine, to perform administrative functions and, with
respect to Awards granted to persons not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee may determine,
to the extent permitted under Rule 16b-3 (if applicable) and applicable law.
(c) Limitation of Liability. Each member of the Committee shall be
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entitled to, in good faith, rely or
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act upon any report or other information furnished to him or her by any
officer or other employee of the Company or any Subsidiary or Affiliate, the
Company's independent certified public accountants, or other professional
retained by the Company to assist in the administration of the Plan. No
member of the Committee, nor any officer or employee of the Company acting on
behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company with respect to any such
action, determination, or interpretation.
4. Shares Subject to the Plan.
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(a) Subject to adjustment as hereinafter provided, the total number
of Shares reserved for issuance in connection with Awards, Director's Options
and Director's Replacement Options under the Plan shall be 2,250,000. No
Award, Director's Option or Director's Replacement Option may be granted if
the number of Shares to which such Award, Director's Option or Director's
Replacement Option relates, when added to the
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number of Shares previously issued under the Plan, exceeds the number of
Shares reserved under the preceding sentence. If any Shares subject to an
Award, Director's Option or Director's Replacement Option are forfeited,
cancelled, exchanged or surrendered or such Award, Director's Option or
Director's Replacement Option is settled in cash or otherwise terminates
without a distribution of Shares to the Participant, any Shares counted
against the number of Shares reserved and available under the Plan with
respect to such Award, Director's Option or Director's Replacement Option
shall, to the extent of any such forfeiture, settlement, termination,
cancellation, exchange or surrender, again be available for Awards,
Director's Options or Director's Replacement Options under the Plan;
provided, however, that in the case of forfeiture, cancellation, exchange or
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surrender of Restricted Shares or Restricted Share Units with respect to
which dividends or Dividend Equivalents have been paid or accrued, such
number of Shares shall not be available for Awards, Director's Options or
Director's Replacement Options unless, in the case of Shares with respect to
which dividends or Dividend Equivalents were accrued but unpaid, such
dividends and Dividend Equivalents are also forfeited, cancelled, exchanged
or surrendered. Upon the
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exercise of any Award granted in tandem with any other Awards, such related
Awards shall be cancelled to the extent of the number of Shares as to which
the Award is exercised.
(b) Any Shares distributed pursuant to an Award, Director's Option or
Director's Replacement Option may consist, in whole or in part, of authorized
and unissued Shares or treasury Shares including Shares acquired by purchase
in the open market or in private transactions.
(c) In the event that the Committee shall determine that any dividend
in Shares, recapitalization, Share split, reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange,
or other similar corporate transaction or event, affects the Shares such that
an adjustment is appropriate in order to prevent dilution or enlargement of
the rights of Eligible Employees under the Plan, then the Committee shall
make such equitable changes or adjustments as it deems appropriate and, in
such manner as it may deem equitable, adjust any or all of (i) the number and
kind of Shares which may thereafter be issued under the Plan, (ii) the number
and kind of Shares issued or issuable in respect of outstanding Awards,
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and (iii) the exercise price, xxxxx xxxxx, or purchase price relating to any
Award; provided, however, in each case that, with respect to ISOs, such
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adjustment shall be made in accordance with Section 424(h) of the Code,
unless the Committee determines otherwise. In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the
criteria and performance objectives included in, Awards in recognition of
unusual or non-recurring events (including, without limitation, events
described in the preceding sentence) affecting the Company or any Subsidiary
or Affiliate or the financial statements of the Company or any Subsidiary or
Affiliate, or in response to changes in applicable laws, regulations, or
accounting principles.
5. Specific Terms of Awards.
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(a) General. Awards may be granted on the terms and conditions set
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forth in this Section 5. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 9(d)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall determine, including terms
regarding forfeiture of Awards or continued exercis-
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ability of Awards in the event of termination of employment by the Eligible
Employee.
(b) Options. The Committee is authorized to grant Options, which
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may be NQSOs or ISOs, to Eligible Employees on the following terms and
conditions:
(i) Exercise Price. The exercise price per Share
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purchasable under an Option shall be determined by the Committee, and
the Committee may, without limitation, set an exercise price that is
based upon achievement of performance criteria if deemed appropriate
by the Committee.
(ii) Time and Method of Exercise. The Committee shall
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determine at the date of grant or thereafter the time or times at
which an Option may be exercised in whole or in part (including,
without limitation, upon achievement of performance criteria if deemed
appropriate by the Committee), the methods by which such exercise
price may be paid or deemed to be paid (including, without limitation,
broker-assisted exercise arrangements), the form of such payment
(including, without limitation, cash,
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Shares, notes or other property), and the methods by which Shares will be
delivered or deemed to be delivered to Eligible Employees.
(iii) ISOs. The terms of any ISO granted under the Plan shall comply
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in all respects with the provisions of Section 422 of the Code, including
but not limited to the requirement that no ISO shall be granted more than
ten years after the effective date of the Plan.
(c) SARs. The Committee is authorized to grant SARs (Share Appreciation
----
Rights) to Eligible Employees on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Eligible
----------------
Employee to whom it is granted a right to receive with respect to each
Share subject thereto, upon exercise thereof, the excess of (1) the Fair
Market Value of one Share on the date of exercise (or, if the Committee
shall so determine in the case of any such right, including, in the
Committee's discretion, one related to an ISO, the Fair Market Value of
one Share at any time during a specified period before or after the date
of exer-
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cise) over (2) the exercise price of the SAR as determined by the
Committee as of the date of grant of the SAR (or, in the case of an SAR
granted in tandem with an option, shall be equal to the exercise price of
the underlying Option).
(ii) Other Terms. The Committee shall determine, at the time
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of grant or thereafter, the time or times at which an SAR may be exercised
in whole or in part, the method of exercise, method of settlement, form of
consideration payable in settlement, method by which Shares will be
delivered or deemed to be delivered to Eligible Employees, whether or not
an SAR shall be in tandem with any other Award, and any other terms and
conditions of any SAR. Unless the Committee determines otherwise, an SAR
(1) granted in tandem with an NQSO may be granted at the time of grant of
the related NQSO or at any time thereafter or (2) granted in tandem with
an ISO may only be granted at the time of grant of the related ISO.
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(d) Restricted Shares. The Committee is authorized to grant Restricted
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Shares to Eligible Employees on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Shares shall be subject to
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such restrictions on transferability and other restrictions, if any, as
the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under
such circumstances (including, without limitation, upon achievement of
performance criteria if deemed appropriate by the Committee), in such
installments, or otherwise, as the Committee may determine. Except to the
extent restricted under the Award Agreement relating to the Restricted
Shares, an Eligible Employee granted Restricted Shares shall have all of
the rights of a shareholder including, without limitation, the right to
vote Restricted Shares and the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, at
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the date of grant or thereafter, upon termination of em-
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ployment during the applicable restriction period, Restricted Shares and
any accrued but unpaid dividends or Dividend Equivalents that are at that
time subject to restrictions shall be forfeited; provided, however, that
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the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Restricted Shares will be waived in
whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the
-----------------------
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Shares are registered in the name of
the Eligible Employee, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Shares, and the Company
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shall retain physical possession of the certificate.
(iv) Dividends. Dividends paid on Restricted Shares shall be either
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paid at the dividend payment date, or deferred for payment to such date as
determined by the Committee, in cash or in unrestricted Shares having a
Fair Market Value equal to the amount of such dividends. Shares
distributed in connection with a Share split or dividend in Shares, and
other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Shares with
respect to which such Shares or other property has been distributed.
(e) Restricted Share Units. The Committee is authorized to grant
----------------------
Restricted Share Units to Eligible Employees, subject to the following terms
and conditions:
(i) Award and Restrictions. Delivery of Shares or cash, as the case
----------------------
may be, will occur upon expiration of the deferral period specified for
Restricted Share Units by the
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Committee (or, if permitted by the Committee, as elected by the Eligible
Employee). In addition, Restricted Share Units shall be subject to such
restrictions as the Committee may impose, if any (including, without
limitation, the achievement of performance criteria if deemed appropriate
by the Committee), at the date of grant or thereafter, which restrictions
may lapse at the expiration of the deferral period or at earlier or later
specified times, separately or in combination, in installments or
otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee at
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date of grant or thereafter, upon termination of employment (as determined
under criteria established by the Committee) during the applicable
deferral period or portion thereof to which forfeiture conditions apply
(as provided in the Award Agreement evidencing the Restricted Share
Units), or upon failure to satisfy any other conditions precedent to the
delivery of Shares or cash to which such Restricted Share Units relate,
all Restricted Share Units that are at
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that time subject to deferral or restriction shall be forfeited; provided,
--------
however, that the Committee may provide, by rule or regulation or in any
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Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Share Units
will be waived in whole or in part in the event of termination resulting
from specified causes, and the Committee may in other cases waive in whole
or in part the forfeiture of Restricted Share Units.
(f) Performance Shares and Performance Units. The Committee is authorized
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to grant Performance Shares or Performance Units or both to Eligible
Employees on the following terms and conditions:
(i) Performance Period. The Committee shall determine a
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performance period (the "Performance Period") of one or more years and
shall determine the performance objectives for grants of Performance
Shares and Performance Units. Performance objectives may vary from
Eligible Employee to Eligible Employee and shall be based upon such
performance criteria as the Committee may deem appropriate. Per-
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formance Periods may overlap and Eligible Employees may participate
simultaneously with respect to Performance Shares and Performance Units
for which different Performance Periods are prescribed.
(ii) Award Value. At the beginning of a Performance Period, the
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Committee shall determine for each Eligible Employee or group of Eligible
Employees with respect to that Performance Period the range of number of
Shares, if any, in the case of Performance Shares, and the range of dollar
values, if any, in the case of Performance Units, which may be fixed or
may vary in accordance with such performance or other criteria specified
by the Committee, which shall be paid to an Eligible Employee as an Award
if the relevant measure of Company performance for the Performance Period
is met.
(iii) Significant Events. If during the course of a Performance
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Period there shall occur significant events as determined by the Committee
which the Committee expects to have a substantial effect on a performance
objective
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during such period, the Committee may revise such objective.
(iv) Forfeiture. Except as otherwise determined by the Committee, at
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the date of grant or thereafter, upon termination of employment during the
applicable Performance Period, Performance Shares and Performance Units
for which the Performance Period was prescribed shall be forfeited;
provided, however, that the Committee may provide, by rule or regulation
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or in any Award Agreement, or may determine in an individual case, that
restrictions or forfeiture conditions relating to Performance Shares and
Performance Units will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Performance Shares
and Performance Units.
(v) Payment. Each Performance Share or Performance Unit may be paid
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in whole Shares, or cash, or a combination of Shares and cash either as a
lump sum payment or in annual installments, all as the Committee shall
deter-
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mine, at the time of grant of the Performance Share or Performance Unit or
otherwise, commencing as soon as practicable after the end of the relevant
Performance Period.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
--------------------
Equivalents to Eligible Employees. The Committee may provide, at the date of
grant or thereafter, that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Shares,
or other investment vehicles as the Committee may specify, provided that
Dividend Equivalents (other than freestanding Dividend Equivalents) shall be
subject to all conditions and restrictions of the underlying Awards to which
they relate.
(h) Other Share-Based Awards. The Committee is authorized, subject to
------------------------
limitations under applicable law, to grant to Eligible Employees such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, unrestricted shares awarded purely as a "bonus" and not subject
to any restrictions or
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conditions, other rights convertible or exchangeable into Shares, purchase
rights for Shares, Awards with value and payment contingent upon performance
of the Company or any other factors designated by the Committee, and Awards
valued by reference to the performance of specified Subsidiaries or
Affiliates. The Committee shall determine the terms and conditions of such
Awards at date of grant or thereafter. Xxxxxx delivered pursuant to an Award
in the nature of a purchase right granted under this Section 5(h) shall be
purchased for such consideration, paid for at such times, by such methods,
and in such forms, including, without limitation, cash, Shares, notes or
other property, as the Committee shall determine. Cash awards, as an element
of or supplement to any other Award under the Plan, shall also be authorized
pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
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(a) Stand-Alone, Additional, Xxxxxx and Substitute Awards. Awards
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granted under the Plan may, in the discretion of the Committee, be granted to
Eligible Employees either alone or in addition to, in tandem with, or in
exchange or substitution for, any other Award granted under the Plan or any
award granted under any other plan or agreement of the Company, any
Subsidiary
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or Affiliate, or any business entity to be acquired by the Company or a
Subsidiary or Affiliate, or any other right of an Eligible Employee to
receive payment from the Company or any Subsidiary or Affiliate. Awards may
be granted in addition to or in tandem with such other Awards or awards, and
may be granted either as of the same time as or a different time from the
grant of such other Awards or awards. The per Share exercise price of any
Option, xxxxx xxxxx of any SAR, or purchase price of any other Award
conferring a right to purchase Shares which is granted, in connection with
the substitution of awards granted under any other plan or agreement of the
Company or any Subsidiary or Affiliate or any business entity to be acquired
by the Company or any Subsidiary or Affiliate, shall be determined by the
Committee, in its discretion.
(b) Terms of Awards. The term of each Award granted to an Eligible
---------------
Employee shall be for such period as may be determined by the Committee;
provided, however, that in no event shall the term of any ISO or an SAR
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granted in tandem therewith exceed a period of ten years from the date of its
grant (or such shorter period as may be applicable under Section 422 of the
Code).
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(c) Form of Payment Under Awards. Subject to the terms of the Plan
----------------------------
and any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award
may be made in such forms as the Committee shall determine at the date of
grant or thereafter, including, without limitation, cash, Shares, or other
property, and may be made in a single payment or transfer, in installments,
or on a deferred basis. The Committee may make rules relating to installment
or deferred payments with respect to Awards, including the rate of interest
to be credited with respect to such payments.
(d) Nontransferability. Awards shall not be transferable by an
------------------
Eligible Employee except by will or the laws of descent and distribution
(except pursuant to a Beneficiary) and shall be exercisable during the
lifetime of an Eligible Employee only by such Eligible Employee or his
guardian or legal representative. An Eligible Employee's rights under the
Plan may not be pledged, mortgaged, hypothecated, or otherwise encumbered,
and shall not be subject to claims of the Eligible Employees creditors.
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7. Director's Options
------------------
(a) Annual Grant. On the date of each annual meeting of the Company's
------------
shareholders, beginning with the 1994 annual meeting, each Director in office
immediately following the meeting shall automatically be granted a NQSO to
purchase 1,500 Shares with an exercise price equal to 100 percent of the
Market Value of one Share at the date of grant; provided, however, that such
-------- -------
price shall be at least equal to the par value of a Share. For purposes of
Section 7, Market Value shall mean the mean between the high and low selling
prices per Share on the immediately preceding date (or, if the Shares were
not traded on that day, the next preceding day that the Shares were traded).
(b) Exercisability. Each Option granted to a Director under paragraph
--------------
(a) hereof shall become fully exercisable on the date which is six months
after the date of grant, and shall expire on the tenth anniversary of the
date of grant. Exercisability of a Director's Option shall not be dependent
upon the Director's continuing service on the Board.
(c) Time and Method of Exercise. The exercise price of a Director's
---------------------------
Option shall be paid to the Com-
-30-
pany at the time of exercise either in cash, or in Shares already owned by
the optionee and having a total Market Value equal to the exercise price, or
in a combination of cash and such Shares.
(d) Nontransferability. No Director's Option granted under the Plan
------------------
shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the optionee, a Director's Option shall
be exercisable only by him or her or by his or her guardian or legal
representative.
(e) Adjustments. In the event that subsequent to the Effective Date
-----------
any dividend in Shares, recapitalization, Share split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other such change, affects the Shares such that they are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation,
then in order to maintain the proportionate interest of the Director and
preserve the value of the Director's Option, (i) there shall automatically be
substituted for each Share subject to an unexercised Director's Option and
each Share to be issued under Section 7(a) subsequent to such event the
-31-
number and kind of shares or other securities into which each outstanding
Share shall be changed or for which each such Share shall be exchanged, and
(ii) the exercise price shall be increased or decreased proportionately so
that the aggregate purchase price for the Shares subject to any unexercised
Director's Option shall remain the same as immediately prior to such event.
(f) Administration. To the extent the Plan relates to Director's
--------------
Options or Director's Replacement Options, it is intended to operate
automatically and not require administration. However, to the extent that
administration is necessary with respect to such grants, the Plan shall be
administered by the Secretary of the Company. Since the Director's Options
and Director's Replacement Options are awarded automatically, this function
will be limited to ministerial matters. The plan administrator will have no
discretion with respect to the selection of Director optionees, the
determination of the exercise price of Director's Options or Director's
Replacement Options, the timing of such grants or number of Shares covered by
the Director's Options or Director's Replacement Options.
-32-
8. Director's Replacement Options.
------------------------------
On the closing date of the exchange of shares of Mid Ocean Reinsurance
Company Ltd. ("Mid Ocean Reinsurance") for Shares, each Director shall be
granted a Director's Replacement Option (with a tandem stock appreciation right)
to purchase 1,500 Shares at a price equal to U.S. $16.67 per Share in
replacement of his existing option (and tandem stock appreciation right) to
purchase common stock of Mid Ocean Reinsurance (such existing option and tandem
stock appreciation right is referred to herein as a "Mid Ocean Reinsurance
Option"). Such a Director's Replacement Option (and tandem stock appreciation
right) shall be exercisable immediately at the time of grant, shall expire on
November 4, 2002, and shall otherwise have substantially the same terms as the
Mid Ocean Reinsurance Option it replaces, except that the exercise price of the
Director's Replacement option shall not be adjusted as a result of dividends
(other than dividends paid in Shares).
9. General Provisions.
------------------
(a) Compliance with Legal and Trading Requirements. The Plan, the
----------------------------------------------
granting and exercising of Awards, Director's Options and Director's
Replacement Options thereunder, and the other obligations of the Company
under the Plan and any Award Agreement, shall
-33-
be subject to all applicable Cayman Islands and U.S. federal and state laws,
rules and regulations and to such approvals by any regulatory or governmental
agency as may be required. The Company, in its discretion, may postpone the
issuance or delivery of Shares under any Award, Director's Option or
Director's Replacement Option until completion of such stock exchange or
market system listing or registration or qualification of such Shares or
other required action under any Cayman Islands or U.S. state or federal law,
rule or regulation as the Company may consider appropriate, and may require
any Participant to make such representations and furnish such information as
it may consider appropriate in connection with the issuance or delivery of
Shares in compliance with applicable laws, rules and regulations. No
provisions of the Plan shall be interpreted or construed to obligate the
Company to register any Shares under Cayman Islands or U.S. federal or state
law.
(b) No Right to Continued Employment or Service. Neither the Plan nor
-------------------------------------------
any action taken thereunder shall be construed as giving any employee or
director the right to be retained in the employ or service of the Company or
any of its Subsidiaries or Affiliates, nor
-34-
shall it interfere in any way with the right of the Company or any of its
Subsidiaries or Affiliates to terminate any employee's or director's
employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized
-----
to withhold from any Award granted, any payment relating to an Award under
the Plan, including from a distribution of Shares, or any payroll or other
payment to an Eligible Employee, amounts of withholding and other taxes due
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and Eligible
Employees to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of an Eligible Employee's tax
obligations.
(d) Changes to the Plan and Awards. The Board may amend, alter,
------------------------------
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of shareholders of the
Company or Participants, except that any such
-35-
amendment, alteration, suspension, discontinuation, or termination shall be
subject to the approval of the Company's shareholders within one year after
such Board action if such shareholder approval is required by any Cayman
Islands or U.S. federal law or regulation (including Rule 16b-3, if
applicable) or the rules of any stock exchange or automated quotation system
on which the Shares may then be listed or quoted; provided, however, that,
-------- -------
without the consent of an affected Participant, no amendment, alteration,
suspension, discontinuation, or termination of the Plan may impair the rights
or, in any other manner, adversely affect the rights of such Participant
under any Award, Director's Option or Director's Replacement Option
theretofore granted to him or her. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate any Award
theretofore granted any Award Agreement relating thereto; provided, however,
-------- -------
that, without the consent of an affected Eligible Employee, no such
amendment, alteration, suspension, discontinuation, or termination of any
Award may impair or adversely affect the rights of such Eligible Employee
under such Award. Notwithstanding the other provisions of this paragraph,
Section 7, Section 8 and the other provisions of this Plan applicable to
Direc-
-36-
tor's Options or Director's Replacement Options may not be amended more than
once every six months other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
(e) No Rights to Awards; No Shareholder Rights. No Eligible Employee
------------------------------------------
or employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Eligible Employees and
employees. No Award shall confer on any Eligible Employee any of the rights
of a shareholder of the Company unless and until Shares are duly issued or
transferred to the Eligible Employee in accordance with the terms of the
Award.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
-------------------------
"unfunded" plan for incentive compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, Director's Option or
Director's Replacement Option, nothing contained in the Plan or any Award,
Director's Option or Director's Replacement Option shall give any such
Participant any rights that are greater than those of a general creditor of
the Company; provided, however, that the Committee may authorize the creation
-------- -------
of trusts
-37-
or make other arrangements to meet the Company's obligations under the Plan
to deliver cash, Shares, other Awards, or other property pursuant to any
Award, which trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with
the consent of each affected Participant.
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by
--------------------------
the Board nor its submission to the shareholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of options and other awards otherwise than
under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this
----------------------------------
Plan shall be deemed salary or compensation for the purpose of computing
benefits under any benefit plan or other arrangement of the Company for the
benefit of its employees or directors unless the Company shall determine
otherwise.
-38-
(i) No Fractional Shares. No fractional Shares shall be issued or
--------------------
delivered pursuant to the Plan or any Award or Director's Option. In the case
of Awards to Eligible Employees, the Committee shall determine whether cash,
other Awards, or other property shall be issued or paid in lieu of such
fractional Shares or whether such fractional Shares or any rights thereto
shall be forfeited or otherwise eliminated. In the case of Director's
Options, cash shall be paid in lieu of such fractional shares.
(j) Governing Law. The validity, construction, and effect of the
-------------
Plan, any rules and regulations relating to the Plan, and any Award Agreement
shall be determined in accordance with the laws of New York without giving
effect to principles of conflict of laws.
(k) Effective Date; Plan Termination. The Plan shall become effective
--------------------------------
as of _______________________, (the "Effective Date") upon approval by the
affirmative votes of the holders of a majority of voting securities of the
Company. The Plan shall terminate as to future awards on the date which is
ten (10) years after the Effective Date, or, if earlier, at such time as no
Shares remain available for issuance pursuant to Sec-
-39-
tion 4 and the Company has no further obligations with respect to any Award,
Director's Option or Director's Replacement Option granted under the Plan.
(l) Titles and Headings. The titles and headings of the sections in
-------------------
the Plan are for convenience of reference only. the text of the Plan, rather
than such titles or headings, shall control.
