EXHIBIT 10.24
ASPEN INSURANCE HOLDINGS LIMITED
NONQUALIFIED SHARE OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made effective as of the
day of , 2005 (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:
- - - - - - - -
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 $25.88 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 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, "2005 XXX Percentage" shall be equal
to the Company's actual XXX for the fiscal year ended December 31,
2005 (the "2005 Fiscal Year"), expressed as a percentage of the XXX
target for the 2005 Fiscal Year. The XXX target with respect to the
2005 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 2005
XXX Percentage. If the Company's 2005 XXX Percentage is 100% or
more, all of the Shares underlying the Option shall become Eligible
Shares. If the Company's 2005 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:
2005 XXX Percentage Percentage of Eligible Shares
------------------- -----------------------------
< 66.67% 0%
66.67% 10%
75% 32.50%
83.33% 55%
91.67% 77.50%
> = 100% 100%
Interim percentages to be interpolated linearly.
If the Company's 2005 XXX Percentage is less than 66.67% or if in
any case the Company's actual XXX for the 2005 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) Eligible Shares underlying the Option shall become vested 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 2005 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) 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 portion of the
Option that has vested shall be exercisable only as set forth in
Section 3; provided, however, that in the event the
2
Participant is terminated for Cause (as defined below), the portion
of the Option that has vested shall immediately be canceled without
consideration to the extent not previously exercised.
3. Exercise of Option.
(a) The portion of the Option that has vested shall become exercisable:
(i) Except as provided in Section 3(a)(ii), 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), on the second
anniversary of the Initial Vesting Date; or
(ii) In the event of the Participant's termination of Employment
(A) by the Company without Cause, (B) due to death or
Disability (as defined below) or (C) by the Participant with
Good Reason (as defined below), on the date of termination.
(b) At any time, the portion of the Option that has become vested and
exercisable pursuant to Section 2 and Section 3(a) is hereinafter
referred to as the "Exercisable Portion."
(c) Period of Exercise. Subject to the provisions of the Plan and this
Agreement, the Participant may exercise all or any part of the
Exercisable 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;
(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;
(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)
3
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 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).
(d) Method of Exercise.
(i) Subject to Section 3(b), the Exercisable Portion of the Option
may be exercised by delivering to the Company at its principal
office written
4
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 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 Exercisable 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(b). Any heir or legatee of the Participant shall
take rights herein granted subject to the terms and conditions
hereof.
5
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.
6. Transferability.
(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
6
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.
(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
7
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.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
ASPEN INSURANCE HOLDINGS LIMITED
By:
----------------------------
AGREED AND ACKNOWLEDGED AS
OF THE DATE FIRST ABOVE WRITTEN:
-------------------------------------
Participant
8
EXHIBIT A
---------
XXX TARGET FOR 2005 FISCAL YEAR
