EXHIBIT 10.9
DARWIN PROFESSIONAL UNDERWRITERS, INC.
STOCK AND UNIT PLAN
FOR NONEMPL0YEE DIRECTORS
(as amended effective January 25, 2007)
1. Introduction
This Darwin Professional Underwriters, Inc. Stock and Unit Plan for Nonemployee
Directors (the “Plan”) is intended to advance the interests of the Company and
its shareholders by paying part or all of the compensation of the Company’s
nonemployee directors in the form of an economic equivalent of an equity
interest in the Company. The Plan provides for the conversion of at least
50 percent and up to 100 percent of the Director Fees otherwise payable each
year to a director into units of measurement relating to the value of the
Company’s Common Stock, and for payment to the director of the value of such
units after five calendar years (or upon termination from service on the Board,
if earlier), so that a director will normally receive payment under the Plan
each successive year in respect of the fees originally converted into units in
the year preceding the fifth calendar year prior to the year of payment. The
Plan also provides for a one-time grant of Restricted Stock to each nonemployee
director serving on the Board at the time the Plan is adopted. The Plan shall
become effective with respect to Director Fees earned in 2006.
2. Definitions
(a) “Annual Meeting” means the Company’s annual meeting of shareholders.
(b) “Board” means the Board of Directors of the Company.
(c) “Common Stock” means the shares of common stock of the Company, par value
$0.01.
(d) “Company” means Darwin Professional Underwriters, Inc., a Delaware
corporation.
(e) “Conversion Date” means the first business day following the conclusion of
an Annual Meeting; provided that the initial Conversion Date under the Plan
shall be the first business day following the date the Plan is adopted.
(f) “Director Fees” means the annual retainer fee or fees earned by the
Participant for his service on the Board.
(g) “Fair Market Value” of Common Stock as of a given date means the mean of the
high and low sales prices of the Common Stock on the relevant date as reported
on the stock exchange or market on which the Common Stock are primarily traded,
or, if no sale is made on such date, then Fair Market Value is the weighted
average of the mean of the high and low sales prices of the Common Stock on the
next preceding day and the next succeeding day on which such sales were made as
reported on the stock exchange or market on which the Common Stock are primarily
traded; provided, however, that the Fair Market Value for the award of
Restricted Stock or the conversion into Share Units following the adoption of
the Plan shall be based upon the offering price for Common Stock in the
Company’s initial public offering.
(h) “Mandatory Conversion” means the required conversion of 50 percent of a
Participant’s Director Fees into a Share Unit Award pursuant to Section 6
hereof.

 

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(i) “Participant” means a member of the Board who is not an employee of the
Company, any of its affiliates or Alleghany Corporation.
(j) “Realization Date” means, with respect to each Share Unit allocated to a
Participant’s Share Unit Account, the first business day following the earlier
of (i) the first business day of the sixth calendar year after such Share Unit
is awarded to the Participant, or (ii) either upon the date the Participant
ceases to be a member of the Board or upon a change in control.
(k) “Restricted Stock” means Common Stock which are subject to potential
forfeiture and restrictions on transfer as provided in Section 5 hereof.
(l) “Share Unit” means a non-voting unit of measurement based on the value of a
whole or a fraction of a share of Common Stock, which entitles a participant to
receive payment in accordance with the terms of the Plan.
(m) “Share Unit Account” means a book account maintained by the Company
reflecting the Share Units allocated to a Participant pursuant to Section 6
hereof as a result of the Participant’s Mandatory Conversions and Voluntary
Conversions and such additional Share Units as shall be credited thereto in
respect of dividends paid on Common Stock.
(n) “Share Unit Award” means an award under Section 6 hereof of Share Units.
(o) “Voluntary Conversion” means the conversion based on the election of the
Participant of all or part of a Participant’s Director Fees otherwise payable to
the Participant in cash into a Share Unit Award pursuant to Section 6 hereof.
3. Common Stock Subject to the Plan
(a) Number of Shares
Subject to the following provisions of this Section 3, the aggregate number of
Common Stock that may be issued under the Plan is 130,000 shares of Common
Stock. The Common Stock to be delivered under the Plan will be made available
from authorized but unissued Common Stock or from reacquired shares.
To the extent that any Share Unit Award or award of Restricted Stock is
forfeited or terminated for any reason or is not paid in Common Stock, the
number of Common Stock covered thereby shall not be charged against the
foregoing maximum share limitation.
(b) Adjustments
If there shall occur any recapitalization, reclassification, share dividend,
share split, reverse share split, or other distribution with respect to the
Common Stock, or other change in corporate structure affecting the Common Stock,
the Board may, in the manner and to the extent that it deems appropriate and
equitable and consistent with the terms of this Plan, cause an adjustment to be
made in (i) the maximum number and kind of shares available for issuance
pursuant to Section 3(a) hereof and (ii) the Share Units allocated to
Participants’ Share Unit Accounts in accordance with Section 6(e) hereof.
4. Administration
The Plan shall be administered by the Board. The Board shall have

 

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full and final authority to administer the Plan, including the discretionary
authority to interpret and construe all provisions of the Plan, to resolve all
questions of fact arising under the Plan, and to adopt and amend such rules and
regulations for administering the Plan as it may deem necessary or appropriate.
Decisions of the Board shall be final and binding on all parties. The Board may
delegate administrative responsibilities under the Plan to appropriate officers
or employees of the Company. All expenses of the Plan shall be borne by the
Company.
5. Restricted Share Awards
Each Participant on the date the Plan is adopted (the “Grant Date”), shall
receive an award of Restricted Stock equal to that number of whole shares of
Common Stock (rounded up to the next whole share) as could be acquired with
$40,000, based upon the Fair Market Value of Common Stock. Awards of Restricted
Stock shall be subject to the terms of the Plan and otherwise evidenced by an
award agreement.
(a) Each grant of Restricted Stock shall be issued for no consideration but
shall be forfeited to the Company if such Participant resigns from the Board
prior to the first Annual Meeting next following the Grant Date (other than
(i) in connection with a change of control, as such term is defined in the
applicable award agreement, or (ii) in connection with a mutually agreed upon
resignation, in which case the Board may accelerate vesting of all or a portion
of the Restricted Stock in its sole discretion). In addition, Restricted Stock
shall not be sold, assigned, pledged or transferred to any person until the
third anniversary of the Grant Date; provided that the Restricted Stock shall
automatically cease to be subject to the foregoing restrictions on sale,
assignment, pledge or transfer upon the Participant’s death or a change in
control (as such term is defined in the applicable award agreement) prior to
such first Annual Meeting or, subsequent to such first Annual Meeting, upon the
date the Participant ceases to be a director for any reason.
(b) The Participant to whom Restricted Stock are issued will have the customary
rights of a shareholder with respect to such Restricted Stock, including the
right to vote the Restricted Stock and to receive cash dividends paid thereon.
Prior to the date the Restricted Stock ceases to be subject to the restrictions
on sale, assignment, pledge or transfer in Section 5(a), dividends paid on such
Common Stock in the form of additional Common Stock or as securities or other
non-cash property shall be subject to the same risk of forfeiture and other
restrictions as the underlying Common Stock with respect to which the dividend
was paid.
(c) Any Restricted Stock issued under the Plan may be evidenced in such manner
as the Board in its sole discretion shall deem appropriate, including, without
limitation, book-entry registration or by the issuance of a stock certificate or
certificates. In the event any stock certificate is issued in respect of
Restricted Stock, such certificate shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock.

 

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6. Crediting of Share Units
(a) Mandatory Conversions
Effective as of each Conversion Date occurring while the Plan is in effect,
50 percent of the aggregate dollar amount of a Participant’s Director Fees
otherwise payable on such Conversion Date shall be converted into a Share Unit
Award pursuant to Section 6© hereof.
(b) Voluntary Conversions
Effective as of each Conversion Date occurring while the Plan is in effect, a
Participant may elect to convert all or any portion of his Director Fees
otherwise payable on such Conversion Date (in addition to those required to be
converted under Section 6(a) hereof) into a Share Unit Award pursuant to
Section 6© hereof. Each Voluntary Conversion shall be made on the basis of a
Participant’s written election stating the amount of such Director Fees in
excess of those required to be converted under Section 6(a) hereof which shall
be converted to a Share Unit Award. Each such election shall be made in the form
required by the Board, shall be delivered to the Company no later than the
December 31 of the calendar year immediately preceding the calendar year in
which such Directors Fees would otherwise be payable; provided, however, that in
the year the Plan is adopted, such election shall be delivered to the Company no
later than the close of business on the date the Plan is adopted and in the case
of a member of the Board who first becomes a Participant during a year, the
election for such year must be made no later than the close of business on the
date on which the Participant is elected to the Board.
(c) Share Unit Awards
On each Conversion Date, a Participant shall receive a Share Unit Award in
respect of his Mandatory Conversion and any Voluntary Conversion applicable to
the Directors Fees which would otherwise be payable to the Participant on such
Conversion Date. Such Share Unit Award shall equal the number of the Share Units
determined by dividing (A) the aggregate dollar amount of the Participant’s
Director Fees that are to be converted into a Share Unit Award, including the
Mandatory Conversion and any Voluntary Conversion, by (B) the Fair Market Value
of the Common Stock on the applicable Conversion Date.
(d) Dividend Equivalents
As of any date that cash dividends are paid with respect to the Common Stock
from time to time, each Participant’s Share Unit Account shall be credited with
an additional number of Share Units determined by dividing (A) the aggregate
dollar amount of the cash dividends that would have been paid on the Share Units
credited to the Participant’s Share Unit Account as of the record date for such
dividend had such Share Units been actual Common Stock by (B) the Fair Market
Value of the Common Stock on the dividend payment date.
7. Distributions of Share Unit Awards
(a) Valuation and Payment of Units
Subject to Section 8 hereof, a Participant shall be entitled to a benefit under
the Plan with respect to each Share Unit Award upon the Realization Date for
such Share Unit Award. Such benefit shall be equal to the amount determined by
multiplying (A) the number of Share Units credited to the Participant’s Share
Unit Account in respect of the Share Unit Award for which the Realization Date
has occurred and (B) the Fair Market

 

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Value of the Common Stock on the Realization Date. Each such amount shall be
paid within 30 days after the applicable Realization Date in Common Stock.
(b) Payment of Additional Dividends
Subject to Section 8 hereof, if, pursuant to Section 6(d) hereof, additional
Share Units are required to be credited to a Participant’s Share Unit Account in
respect of Share Units that were held in the Participant’s Share Unit Account as
of the record date for cash dividends paid on the Common Stock that are paid
after the payment to the Participant of a benefit in respect of such Share
Units, the Company shall pay to the Participant a cash amount in respect of such
dividends equal to the dollar amount of such dividends. Such amount shall be
paid to the Participant within 30 days after the dividend payment date.
8. Forfeiture of Share Unit Awards
Each Participant’s Share Unit Account hereunder shall be nonforfeitable, except
that a Participant shall forfeit all rights to all benefits hereunder in respect
of Mandatory Conversions, Voluntary Conversions and Share Units credited to the
Participant’s Share Unit Account if the Participant’s status as a director of
the Company is terminated for “Cause,” as determined by the Board in its sole
discretion.
9. Certain Adjustments
If there shall occur any recapitalization, reclassification, share dividend,
share split, reverse share split, or other distribution with respect to the
Common Stock, or other change in corporate structure affecting the Common Stock,
the Board may, in the manner and to the extent that it deems appropriate and
equitable to the Participants and consistent with the terms of this Plan, cause
an adjustment to be made to the number and kind of shares that may be issued
under the Plan and to the Participants’ Restricted Stock and Share Unit
Accounts. It is intended that in making such adjustments to Share Unit Accounts,
the Board will seek to treat each Participant as if he were a shareholder of the
Common Stock of the number of Share Units credited to his Share Unit Account
(but without duplication of any benefits that may be provided under
Section 6(d)hereof). Except as is expressly provided in this Section,
Participants shall have no rights as a result of any such change in the Common
Stock or other event.
10. Beneficiaries
Any payment required to be made to a Participant hereunder that cannot be made
to the Participant because of his death shall be made to the Participant’s
beneficiary or beneficiaries, subject to applicable law. Each Participant shall
have the right to designate in writing from time to time a beneficiary or
beneficiaries by filing a written notice of such designation with the Board. In
the event a beneficiary designated by the Participant does not survive the
Participant and no successor beneficiary is selected, or in the event no valid
designation has been made, such Participant’s beneficiary shall be such
Participant’s estate.
11. Unfunded Status
The Plan shall be unfunded, and Mandatory Conversions, Voluntary Conversions,
Share Units credited to each Participant’s Share Unit Account and all benefits
payable to Participants under the Plan represent merely unfunded, unsecured
promises of the Company to pay a sum of money to the Participant in the future.
12. Transfers Prohibited

 

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No transfer (other than pursuant to Section 10 hereof) by a Participant of any
right to any payment hereunder, whether voluntary or involuntary, by operation
of law or otherwise, and whether by means of alienation by anticipation, sale,
transfer, assignment, bankruptcy, pledge, attachment, charge, or encumbrance of
any kind, shall vest the transferee with any interest or right, and any attempt
to so alienate, sell, transfer, assign, pledge, attach, charge, or otherwise
encumber any such amount, whether presently or thereafter payable, shall be void
and of no force or effect.
13. Limitation of Rights
Except as provided in Section 5 hereof, nothing contained in the Plan shall
confer upon any Participant any right as a shareholder of the Company. In
addition, nothing contained herein shall be deemed to create any obligation on
the part of the Board to nominate any director for re-election by the Company’s
shareholders or to limit the rights of the shareholders to remove any director.
14. Termination and Amendment
The Plan may be terminated at any time by the Board. The Plan may be amended by
the Board from time to time in any respect; provided, however, that no such
termination or amendment may reduce the number or the value of Share Units
theretofore credited or creditable to a Participant’s Share Unit Account or
materially and adversely affect any rights or obligations with respect to any
Restricted Stock award made pursuant to Section 5 hereof without the affected
Participant’s prior written consent.
15. Choice of Law
The Plan and all rights hereunder shall be subject to and interpreted in
accordance with the laws of the State of Delaware without giving effect to
principles of conflict of laws.