EXHIBIT 10.22
ASPEN INSURANCE HOLDINGS LIMITED
NONQUALIFIED SHARE OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made effective as of the
22nd day of December, 2004 (hereinafter called the "Date of Grant"), between
Aspen Insurance Holdings Limited, a Bermuda corporation (hereinafter called the
"Company"), and (hereinafter called the "Participant"):
R E C I T A L S:
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WHEREAS, the Company has adopted the Aspen Insurance Holdings
2003 Share Incentive Plan (the "Plan"), which Plan is incorporated herein by
reference and made a part of this Agreement. Capitalized terms not otherwise
defined herein shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the
best interests of the Company and its shareholders to grant the
performance-based option provided for herein to the Participant pursuant to the
Plan and the terms set forth herein.
NOW THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties agree as follows:
1. Grant of the Option. The Company hereby grants to the Participant the right
and option to purchase, on the terms and conditions hereinafter set forth,
all or any part of an aggregate of Shares (the "Option"), subject to
adjustment as set forth in the Plan. The purchase price of the Shares
subject to the Option shall be $24.44 per Share (the "Option Price"). The
Option is intended to be a non-qualified share option, and is not intended
to be treated as an option that complies with Section 422 of the Code.
2. Vesting. The Option shall become vested and exercisable only to the extent
that the Return on Equity (calculated as described in Section 2(a) below,
the "XXX") targets described below are achieved.
(a) For purposes of this agreement, "XXX" shall be equal to net income
determined under United States Generally Accepted Accounting Principles
("US GAAP") after deduction of the cost of all Awards granted under the
Plan as a percentage of weighted average shareholders' equity, which
shall be determined by the Board based on the Company's audited
financials under US GAAP.
(b) For purposes of this Agreement, "2004 XXX Percentage" shall be equal to
the Company's actual XXX for the fiscal year ended December 31, 2004
(the "2004 Fiscal Year"), expressed as a percentage of the XXX target
for the 2004 Fiscal Year. The XXX target with respect to the 2004 Fiscal
Year is set forth on Exhibit A, a copy of which is attached hereto and
incorporated herein by reference.
(c) The number of Shares underlying the Option that are eligible for vesting
(the "Eligible Shares") shall depend on the Company's 2004 XXX
Percentage. If the Company's 2004 XXX Percentage is 100% or more, all of
the Shares underlying the Option shall become Eligible Shares. If the
Company's 2004 XXX Percentage is less than 100% but not less than
66.67%, then a reduced number of Shares underlying the Option shall be
Eligible Shares as follows:
2004 XXX Percentage Percentage of Eligible Shares
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< 66.67% 0%
66.67% 10%
75% 32.50%
83.33% 55%
91.67% 77.50%
greater than or equal to 100% 100%
Interim percentages to be interpolated linearly.
If the Company's 2004 XXX Percentage is less than 66.67% or if in any
case the Company's actual XXX for the 2004 Fiscal Year is less than 10%,
none of the Shares underlying the Option shall become Eligible Shares
and the Option shall immediately be forfeited without consideration.
(d) Subject to the Participant's continued Employment with the Company
(which Employment shall not include the performance of services under a
notice of termination or resignation), Eligible Shares underlying the
Option shall become vested and exercisable in thirds, with (i) one-third
(1/3) becoming vested upon the later of (x) the date the Company's
outside auditors complete the audit of the Company's financial
statements containing the information necessary to compute the Company's
XXX for the 2004 Fiscal Year or (y) the date such XXX is approved by the
Board of Directors or an authorized committee thereof (the "Initial
Vesting Date"), (ii) one-third (1/3) becoming vested on the first
anniversary of the Initial Vesting Date, and (iii) one-third (1/3)
becoming vested on the second anniversary of the Initial Vesting Date.
(e) In connection with any event described in Section 10(a) of the Plan or
in the event of a change in applicable accounting rules, the Committee
shall make such adjustments in the terms of the Option, including but
not limited to the XXX targets, if any, as it shall determine shall be
necessary to equitably reflect such event in order to prevent dilution
or enlargement of the potential benefits of the Option. The Committee's
determination as to any such adjustment shall be final.
(f) At any time, the portion of the Option that has become vested and
exercisable as
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described above (or pursuant to Section 2(g) below) is hereinafter
referred to as the "Vested Portion."
(g) If the Participant's Employment with the Company is terminated for any
reason, the Option shall, to the extent not then vested, be canceled by
the Company without consideration and the Vested Portion of the Option
shall remain exercisable for the period set forth in Section 3(a);
provided, however, that in the event the Participant is terminated for
Cause (as defined below), the Vested Portion shall immediately be
canceled without consideration to the extent not previously exercised.
3. Exercise of Option.
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(a) Period of Exercise. Subject to the provisions of the Plan and this
Agreement, the Participant may exercise all or any part of the Vested
Portion of the Option at any time prior to the earliest to occur of:
(i) the tenth anniversary of the Date of Grant;
(ii) the first anniversary of the Participant's termination of
Employment due to death or Disability (as defined below);
(iii) the first anniversary of the Participant's termination of
Employment by the Company without Cause (for any reason other than
due to death or Disability) or by the Participant with Good Reason
(as defined below);
(iv) three months following the date of the Participant's termination
of Employment by the Participant for any reason (other than due to
death or Disability or Good Reason); and
(v) the date of the Participant's termination of Employment by the
Company for Cause.
If the Participant has entered into an employment or service agreement
with the Company or any of its Affiliates, the definition of "Cause" set
forth in such agreement shall apply for purposes of this Agreement.
Otherwise, "Cause" shall mean (i) Participant's engagement in misconduct
which is materially injurious to the Company or any of its Affiliates,
(ii) Participant's continued failure to substantially perform his or her
duties to the Company or any of its Affiliates, (iii) Participant's
repeated dishonesty in the performance of his or her duties to the
Company or any of its Affiliates, (iv) Participant's commission of an
act or acts constituting any (x) fraud against, or misappropriation or
embezzlement from the Company or any of its Affiliates, (y) crime
involving moral turpitude, or (z) criminal offense that could result in
a jail sentence of at least 30 days, (v) Participant's continued failure
to comply with the material applicable rules and regulations of any
regulatory authority with regulatory jurisdiction over the Company or
any of its Affiliates, or (vi) Participant's material breach of any
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confidentiality or non-competition covenant entered into between the
Participant and the Company, provided that, with respect to such a
breach of covenant that could be cured, the Participant did not promptly
cure such breach. The determination of the existence of Cause shall be
made by the Committee in good faith. Notwithstanding anything in this
Agreement to the contrary, if the Committee determines in good faith
that grounds for termination of the Participant's Employment for Cause
exist or existed at the time of termination of the Participant's
Employment for any reason, then, for all purposes, the Option shall be
treated as if such termination of the Participant's Employment were or
had been for Cause.
For purposes of this Agreement, "Disability" shall mean the inability of
a Participant to perform in all material respects his or her duties and
responsibilities to the Company, or any Affiliate of the Company, by
reason of a physical or mental disability or infirmity which inability
is reasonably expected to be permanent and has continued (i) for a
period of six consecutive months or (ii) such shorter period as the
Committee may determine in good faith. The Disability determination
shall be in the sole discretion of the Committee and a Participant (or
his or her representative) shall furnish the Committee with medical
evidence documenting the Participant's disability or infirmity, which is
reasonably satisfactory to the Committee.
For purposes of this Agreement, "Good Reason" shall mean (i) a reduction
in the Participant's annual base salary or annual bonus opportunity, or
the failure to pay or provide the same when due, (ii) a material
diminution in the Participant's duties, authority, responsibilities or
title, or the assignment to the Participant of duties or
responsibilities which are materially inconsistent with his position,
(iii) a material adverse change in the Participant's reporting
relationship, or (iv) the Company's requiring the Participant to be
based at any office or location more than fifty (50) miles from the
Participant's office at the time of the Effective Date; provided,
however, that no such event(s) shall constitute "Good Reason" unless the
Company shall have failed to cure such event(s) within 30 days after
receipt by the Company from the Participant of written notice describing
in detail such event(s).
(b) Method of Exercise.
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(i) Subject to Section 3(a), the Vested Portion of the Option may be
exercised by delivering to the Company at its principal office
written notice of intent to so exercise; provided that the
Option may be exercised with respect to whole Shares only. Such
notice shall specify the number of Shares for which an Option is
being exercised and the method of payment of the Option Price. The
Option Price for the Shares as to which the Option is exercised
shall be paid to the Company, as designated by the Committee,
pursuant to one or more of the following methods: (A) in cash or
its equivalent (e.g., by check); (B) in Shares having a Fair
Market Value equal to the aggregate Option Price for the Shares
being purchased and
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satisfying such other requirements as may be imposed by the
Committee; (C) partly in cash and partly in such Shares; or (D) by
delivery of irrevocable instructions to a broker to sell Shares
obtained upon the exercise of the Option and to deliver promptly
to the Company an amount out of the proceeds of such sale equal to
the aggregate Option Price for the Shares being purchased. No
Participant shall have any rights to dividends or other rights of
a shareholder with respect to Shares subject to the Option until
the Participant has given written notice of exercise of the
Option, paid in full for such Shares and, if applicable, has
satisfied any other conditions imposed by the Committee pursuant
to the Plan.
(ii) Notwithstanding any other provision of the Plan or this Agreement
to the contrary, the Option may not be exercised prior to the
completion of any registration or qualification of the Option or
the Shares under applicable state and federal securities or other
laws, or under any ruling or regulation of any governmental body
or national securities exchange that the Committee shall in its
sole discretion determine to be necessary or advisable.
(iii) Upon the Company's determination that the Option has been validly
exercised as to any of the Shares, the Company shall issue
certificates in the Participant's name for such Shares. However,
the Company shall not be liable to the Participant for damages
relating to any delays in issuing the certificates to him, any
loss of the certificates, or any mistakes or errors in the
issuance of the certificates or in the certificates themselves.
(iv) In the event of the Participant's death, subject to Section
6, the Vested Portion of the Option shall remain exercisable by
the Participant's executor or administrator, or the person or
persons to whom the Participant's rights under this Agreement
shall pass by will or by the laws of descent and distribution as
the case may be, to the extent set forth in Section 3(a). Any heir
or legatee of the Participant shall take rights herein granted
subject to the terms and conditions hereof.
4. No Right to Continued Employment. The granting of the Option evidenced
hereby and this Agreement shall impose no obligation on the Company or
any Affiliate to continue the Employment of the Participant and shall
not lessen or affect the Company's or its Affiliate's right to
terminate the Employment of such Participant.
5. Legend on Certificates. The certificates representing the Shares
purchased by exercise of the Option shall be subject to such stop
transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock
exchange upon which such Shares are listed, and any applicable laws,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
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6. Transferability.
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(a) The Option may not be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by the Participant otherwise than by
will or by the laws of descent and distribution, and any such purported
assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate; provided that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer
or encumbrance; provided, further, that, upon written request by the
Participant, the Committee may, subject to such rules as the Committee
may adopt, permit the Option to be transferred by the Participant to (i)
the Participant's spouse, children or grandchildren (including adopted
and stepchildren and grandchildren) (collectively, the "Immediate
Family"); (ii) a trust primarily for the benefit of the Participant
and/or members of his or her Immediate Family (a "Family Trust"); or
(iii) a partnership or limited liability company or other entity whose
only partners or other equity owners are a Family Trust, the Participant
and/or his or her Immediate Family members (each transferee described in
clauses (i), (ii) and (iii) above is hereinafter referred to as a
"Permitted Transferee"). The request by the Participant shall describe
the terms and conditions of the proposed transfer and the Committee
shall notify the Participant in writing if such a transfer will be
permitted.
(b) Following a permitted transfer described in Section 6(a) above, all
terms of the Option shall apply to the Permitted Transferee and any
reference in the Plan and in the Agreement to a Participant shall be
deemed to refer to the Permitted Transferee, except that (i) Permitted
Transferees shall not be entitled to transfer the Option, other than by
will or the laws of descent and distribution, (ii) Permitted Transferees
shall not be entitled to exercise any transferred Option unless there
shall be in effect a registration statement on an appropriate form
covering the shares to be acquired pursuant to the exercise of such
Option if the Committee determines that such a registration statement is
necessary or appropriate, (iii) the Committee or the Company shall not
be required to provide any notice to a Permitted Transferee, whether or
not such notice is or would otherwise have been required to be given to
the Participant under the Plan or otherwise; provided that, if such
notice is not provided to the Permitted Transferee, such notices are
delivered by the Company to the Participant and (iv) the consequences of
termination of the Participant's Employment under the terms of the Plan
and the Agreement shall continue to be applied with respect to the
Participant, following which the transferred Option shall be exercisable
by the Permitted Transferee only to the extent, and for the periods,
specified in the Plan and the Agreement. No permitted transfer of the
Option to heirs or legatees of the Participant shall be effective to
bind the Company unless the Committee shall have been furnished with
written notice thereof and a copy of such evidence as the Committee may
deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions
hereof.
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(c) Except as otherwise described in this Section 6, during the
Participant's lifetime, the Option is exercisable only by the
Participant.
7. Withholding. The Participant may be required to pay to the Company or any
Affiliate and the Company shall have the right and is hereby authorized to
withhold, any applicable withholding taxes in respect of the Option, its
exercise or any payment or transfer under or with respect to the Option and
to take such other action as may be necessary in the opinion of the
Committee to satisfy all obligations for the payment of such withholding
taxes.
8. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise
of an Option, the Participant will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
9. Notices. Any notice necessary under this Agreement shall be addressed to the
Company in care of its Secretary at the principal executive office of the
Company and to the Participant at the address appearing in the personnel
records of the Company for the Participant or to either party at such other
address as either party hereto may hereafter designate in writing to the
other. Any such notice shall be deemed effective upon receipt thereof by the
addressee.
10. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF BERMUDA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
11. Option Subject to Plan. By entering into this Agreement the Participant
agrees and acknowledges that the Participant has received and read a copy of
the Plan. The Option is subject to the Plan (including without limitation
the arbitration provision), and the terms and provisions of the Plan, as it
may be amended from time to time, are hereby incorporated herein by
reference. In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the applicable terms
and provisions of the Plan will govern and prevail.
12. Rights as a Shareholder. The Participant shall have no rights as a
shareholder, and shall not receive dividends, with respect to any Shares
subject to the Option until the Option has been exercised and Share
certificates have been issued to the Participant.
13. Fiscal Year. If the Company's fiscal year is changed to other than a
calendar year, the references to calendar year in this Agreement shall be
adjusted to appropriately reflect the change.
14. Signature in Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
ASPEN INSURANCE HOLDINGS LIMITED
By:
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AGREED AND ACKNOWLEDGED AS
OF THE DATE FIRST ABOVE WRITTEN:
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Participant
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EXHIBIT A
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XXX TARGET FOR 2004 FISCAL YEAR
