EXHIBIT 10.1
STOCK OPTION AGREEMENTS -- EXECUTIVE OFFICERS
Each of the executive officers of Risk Capital Holdings, Inc. ("RCHI")
listed below has entered into Stock Option Agreements with RCHI that are
substantially identical in all material respects to the agreement, dated as of
September 19, 1995, between RCHI and Xxxx X. Xxxxx, a copy of which is being
filed herewith in this Exhibit 10.1, except for the terms indicated below:
EXECUTIVE OFFICER DATE OF GRANT* OPTION SHARES* OPTION PRICE*
----------------- ------------- ------------- ------------
Xxxx X. Xxxxx September 19, 1995 100,000 $20.00
(see attached
agreement)
November 19, 1996 74,000 $17.625
Xxxxx X. Xxxxx November 13, 1995 25,000 $21.00
November 19, 1996 39,500 $17.625
Xxxxxx X. Xxxxxxxx October 2, 1995 25,000 $21.25
November 19, 1996 39,500 $17.625
Xxxx X. Xxxxxxxx September 20, 1995 25,000 $20.00
November 19, 1996 39,500 $17.625
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* Such terms are defined in the attached agreement.
* * * *
RISK CAPITAL HOLDINGS, INC.
STOCK OPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is hereby
acknowledged, Risk Capital Holdings, Inc. (the "Company"), a Delaware
corporation, hereby grants to Xxxx X. Xxxxx, an officer of the Company on the
date hereof (the "Option Holder"), the option to purchase common stock, $.01 par
value per share, of the Company ("Shares"), upon the following terms:
WHEREAS, the following terms reflect the Company's 1995 Long Term
Incentive and Share Award Plan, as amended by the First Amendment thereto (the
"Plan");
(a) GRANT. The Option Holder is hereby granted an option (the
"Option") to purchase 100,000 Shares (the "Option Shares") pursuant to the Plan,
the terms of which are incorporated herein by reference. The Option is granted
as of September 19, 1995 (the "Date of Grant") and such grant is subject to the
terms and conditions herein and the terms and conditions of the applicable
provisions of the Plan. Such Option shall not be treated as an incentive stock
option under Section 422 of the Internal Revenue Code of 1986, as amended.
(b) STATUS OF OPTION SHARES. The Option Shares shall upon issue rank
equally in all respects with the other Shares.
(c) OPTION PRICE. The purchase price for the Option Shares shall be,
except as herein provided, $20.00 per Option Share, hereinafter sometimes
referred to as the "Option Price," payable immediately in full upon the exercise
of the Option.
(d) TERM OF OPTION. The Option may be exercised only during the
period (the "Option Period") commencing in accordance with paragraph (f) below
and shall continue for seven years from the date the Option, or portion thereof,
becomes exercisable; thereafter the Option Holder shall cease to have any rights
in respect thereof. The right to exercise the Option may be subject to sooner
termination in the event employment with the Company is terminated, as provided
in paragraph (j) below.
(e) NO RIGHTS OF SHAREHOLDER. The Option Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or in equity.
(f) EXERCISABILITY. One-fifth of the Options shall become
exercisable on each of the first, second, third, fourth and fifth anniversary of
the Date of Grant, subject to paragraph (j) below; provided that all such
options shall immediately become exercisable (1) to the extent provided in
paragraph (j) below and (2) upon a Change in Control. Subject to paragraph (j)
below, the Option may be exercised at any time or from time to time during the
Option Period in regard to all or any portion of the Option which is then
exercisable, as may be adjusted pursuant to paragraph (g) below.
"Change in Control" means and shall be deemed to have occurred if:
a. any person (within the meaning of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), other than a Permitted Person or Initial
Investor, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of Voting Securities representing 35%
or more of the total voting power of all the then outstanding Voting Securities;
or
b. any Initial Investor is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting
Securities representing 50% or more of the total voting power of all the then
outstanding Voting Securities; or
c. the individuals who, as of the Date of Grant, constitute the Board of
Directors of the Company together with those who become directors subsequent to
such date and whose recommendation, election or nomination for election to the
Board was approved by a vote of at least a majority of the directors then still
in office who either were directors as of such date or whose recommendation,
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the members of the Board; or
d. the required stockholders of the Company approve a merger,
consolidation, recapitalization, liquidation, sale or disposition by the Company
of all or substantially all of the Company's assets, or reorganization of the
Company (provided that all material regulatory approvals have been obtained), or
consummation of any such transaction, other than any such transaction which
would (x) result in at least 60% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after such
transaction being beneficially owned by the former stockholders of the Company
and (y) not otherwise be deemed a Change in Control under subparagraphs a, b, c
or e of this paragraph (f); or
e. the Board adopts a resolution to the effect that, for purposes hereof,
a Change in Control has occurred.
(i) "Initial Investors" means (A) X.L. Insurance Company, Ltd.;
(B) The Trident Partnership, L.P.; (C) Xxxxx & XxXxxxxx Risk Capital
Holdings, Ltd.; or (D) any majority-owned subsidiary or parent (or
equivalent in the case of a non-corporate entity) of the foregoing.
(ii) "Permitted Persons" means (A) the Company; (B) any Related
Party; or (C) any group (as defined in Rule 13d-3 under the Exchange Act)
comprised of any or all of the foregoing.
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(iii) "Related Party" means (A) a majority-owned subsidiary of the
Company; (B) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any majority-owned subsidiary of
the Company; or (C) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportion as their
ownership of Voting Securities.
(iv) "Voting Security" means any security of the Company which
carries the right to vote generally in the election of directors.
(g) ADJUSTMENTS FOR RECAPITALIZATION AND DIVIDENDS. In the event that,
prior to the expiration of the Option, 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, other securities of the Company or of
another corporation or other consideration, then in order to maintain the
proportionate interest of the Option Holder and preserve the value of the
Option, (i) there shall automatically be substituted for each Share subject to
the unexercised Option the number and kind of shares, other securities or other
consideration 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 the unexercised Option shall remain the same as
immediately prior to such event.
(h) NONTRANSFERABILITY. The Option may not be assigned or otherwise
transferred, disposed of or encumbered by the Option Holder, other than by will
or by the laws of descent and distribution. During the lifetime of the Option
Holder, the Option shall be exercisable only by the Option Holder or by his or
her guardian or legal representative. Notwithstanding the foregoing, the Option
may be transferred for no consideration by the Option Holder to members of his
or her "immediate family" or to a trust established for the exclusive benefit of
solely one or more members of the Option Holder's "immediate family." Any
Option held by the transferee will continue to be subject to the same terms and
conditions that were applicable to the Option immediately prior to the transfer,
except that the Option will be transferable by the transferee only by will or
the laws of descent and distribution. For purposes hereof, "immediate family"
means the Option Holder's children, stepchildren, grandchildren, parents,
stepparents, grandparents, spouse, siblings (including half brothers and
sisters), in-laws, and relationships arising because of legal adoption.
(i) EXERCISE OF OPTION. In order to exercise the Option, the Option
Holder shall submit to the Company an instrument in writing signed by the Option
Holder, specifying the number of Option Shares in respect of which the Option is
being exercised, accompanied by payment, in a manner acceptable to the Company,
of the Option Price for the Option Shares for which the Option is being
exercised. Payment to the Company in cash or Shares already owned by the Option
Holder (provided that the Option Holder has owned such Shares for a minimum
period of six months) and having a total Fair Market Value (as defined below)
equal to the exercise price, or in a combination of cash and such Shares, shall
be deemed acceptable. Option Shares will be
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issued accordingly by the Company within 15 business days, and a share
certificate dispatched to the Option Holder within 30 days.
The Company shall not be required to issue fractional Shares upon the
exercise of the Option. If any fractional interest in a Share would be
deliverable upon the exercise of the Option in whole or in part but for the
provisions of this paragraph, the Company, in lieu of delivering any such
fractional share therefor, shall pay a cash adjustment therefor in an amount
equal to their Fair Market Value (or if any Shares are not publicly traded, an
amount equal to the book value per share at the end of the most recent fiscal
quarter) multiplied by the fraction of the fractional share which would
otherwise have been issued hereunder. Anything to the contrary herein
notwithstanding, the Company shall not be obligated to issue any Option Shares
hereunder if the issuance of such Option Shares would violate the provision of
any applicable law, in which event the Company shall, as soon as practicable,
take whatever action it reasonably can so that such Option Shares may be issued
without resulting in such violations of law. For purposes hereof, Fair 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) on the principal exchange on
which the Shares are traded, as such prices are officially quoted on such
exchange.
(j) TERMINATION OF SERVICE. In the event the Option Holder ceases to be
an employee of the Company, (i) due to retirement after attainment of age 65,
(ii) due to death or disability, as determined under the Company's long-term
disability plan, or (iii) due to (A) termination by the Company without cause
(as defined in the Option Holder's employment agreement dated September 19,
1995) or (B) constructive termination (as defined below), the Option, to the
extent not already exercisable in full, shall become immediately and fully
exercisable at the time of such termination of service, and the Option may be
exercised at any time during the Option Period. Subject to paragraph (f) above,
if the Option Holder ceases to be an employee of the Company for any other
reason, the portion of the Option which is not then exercisable shall be
cancelled on the date service terminates, and the portion of the Option which is
then exercisable may be exercised at any time within six months after the date
of such termination, but not later than termination of the Option Period. For
purposes of this Option, service with Risk Capital Reinsurance Company, the
Company's wholly owned subsidiary, shall be considered to be service with the
Company. "Constructive termination" means the occurrence, with respect to the
Option Holder, of any of the following: (i) the assignment of duties
inconsistent with such Option Holder's position or a significant diminution in
his/her responsibilities; (ii) a reduction in such Option Holder's base salary
or bonus opportunity; (iii) the requirement that such Option Holder work at a
location outside of Fairfield County, Connecticut, or Westchester County, New
York; or (iv) the failure to secure the agreement of any successor corporation
or other entity to the Company to fully assume the Company's obligations under
the arrangements described herein.
(k) OBLIGATIONS AS TO CAPITAL. The Company agrees that it will at all
times maintain authorized and unissued share capital sufficient to fulfill all
of its obligations under the Option.
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(l) TRANSFER OF SHARES. The Option, the Option Shares, or any interest in
either, may be sold, assigned, pledged, hypothecated, encumbered, or transferred
or disposed of in any other manner, in whole or in part, only in compliance with
the terms, conditions and restrictions as set forth in the governing instruments
of the Company, applicable United States federal and state securities laws and
the terms and conditions hereof. Each certificate for Option Shares issued upon
exercise of the Option, unless at the time of exercise such Option Shares are
registered under the Securities Act of 1933, as amended, shall bear the
following legend or such other legend as the Company deems appropriate:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the 'Act'), and may not be offered,
sold or otherwise transferred except (i) in compliance with the provisions
of any applicable state securities or 'Blue Sky' laws and (ii) (A) pursuant
to an effective registration under the Act, (B) in compliance with Rule 144
under the Act, (C) inside the United States to a Qualified Institutional
Buyer in compliance with Rule 144A under the Act, (D) outside the United
States in compliance with Rule 904 of Regulation S under the Act or
(E) inside the United States to an institutional 'accredited investor' as
defined in Rule 501(a)(1), (2), (3) or (7) under the Act in a transaction
which, in the opinion of counsel reasonably satisfactory to the Company,
qualifies as an exempt transaction under the Act and the rules and
regulations promulgated thereunder."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend or such other legend deemed appropriate by the
Company shall also bear such legend unless, in the opinion of counsel for the
Company, the securities represented thereby need no longer be subject to the
restrictions set forth herein. The provisions of this paragraph (l) shall be
binding upon all subsequent holders of certificates bearing the above legend and
all subsequent holders of the Option, if any.
(m) EXPENSES OF ISSUANCE OF OPTION SHARES. The issuance of stock
certificates upon the exercise of the Option in whole or in part, shall be
without charge to the Option Holder. The Company shall pay, and indemnify the
Option Holder from and against any issuance, stamp or documentary taxes (other
than transfer taxes) or charges imposed by any governmental body, agency or
official (other than income taxes) or by reason of the exercise of the Option in
whole or in part or the resulting issuance of the Option Shares.
(n) WITHHOLDING. The Option Holder agrees to make appropriate
arrangements with the Company for satisfaction of any applicable tax withholding
requirements, or similar requirements, arising out of the Option.
(o) REFERENCES. References herein to rights and obligations of the Option
Holder shall apply, where appropriate, to the Option Holder's legal
representative or estate without regard to whether specific reference to such
legal representative or estate is contained in a particular provision of this
Option.
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(p) SETTLEMENT OF DISPUTES. Any dispute between the parties arising from
or relating to the terms of this Option shall be resolved by arbitration held in
the State of Connecticut in accordance with the rules of the American
Arbitration Association. All costs associated with any arbitration, including
all legal expenses, for both parties shall be borne by the Company.
(q) NO MITIGATION. To the extent that the vesting of any portion of the
Option is accelerated upon a Change in Control or upon a termination of service
as provided herein, neither the Option, nor any Option Shares nor any interest
in either, shall be reduced by any compensation received by the Option Holder in
connection with any other employment.
(r) NOTICES. Any notice required or permitted to be given under this
agreement shall be in writing and shall be deemed to have been given when
delivered personally or by courier, or sent by certified or registered mail,
postage prepaid, return receipt requested, duly addressed to the party concerned
at the address indicated below or to such changed address as such party may
subsequently by similar process give notice of:
If to the Company:
Risk Capital Holdings, Inc.
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Secretary
If to the Option Holder:
Xxxx X. Xxxxx
[address of Option Holder]
(s) GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.
(t) ENTIRE AGREEMENT. This agreement constitutes the entire
agreement among the parties relating to the subject matter hereof, and any
previous agreement or understanding among the parties with respect thereto is
superseded by this agreement.
(u) COUNTERPARTS. This agreement may be executed in two
counterparts, each of which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this agreement as of
the Date of Grant.
RISK CAPITAL HOLDINGS, INC.
By:/s/ Xxxxx X. Xxxxx
------------------------
Xxxxx X. Xxxxx
Managing Director, General Counsel and
Secretary
/s/ Xxxx X. Xxxxx
------------------------
Xxxx X. Xxxxx
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