EXHIBIT 10.1
ENSTAR GROUP LIMITED
DEFERRED COMPENSATION AND ORDINARY SHARE PLAN
FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSE
     The purposes of the Enstar Group Limited Deferred Compensation and Ordinary
Share Plan for Non-Employee Directors (the “Plan”) are to enable Enstar Group
Limited (“the Company”) to attract and retain qualified persons to serve as
Non-Employee Directors, to solidify the common interests of its Non-Employee
Directors and shareholders by enhancing the equity interests of Non-Employee
Directors in the Company, and to encourage the highest level of Non-Employee
Director performance by providing such Non-Employee Directors with a proprietary
interest in the Company’s performance by permitting Non-Employee Directors to
receive all or a portion of their Retainer and Meeting Fees in the form of
Ordinary Shares and to defer all or a portion of their Retainer and Meeting Fees
in the form of Share Units.
ARTICLE II
EFFECTIVE DATE
     The Plan shall be effective as of June 5, 2007.
ARTICLE III
DEFINITIONS
     Whenever used in the Plan, the following terms shall have the respective
meanings set forth below:
     3.1 “Account” means, with respect to each Participant, the Participant’s
separate individual bookkeeping account established and maintained by the
Company for the exclusive purpose of accounting for the Participant’s Share
Units hereunder.
     3.2 “Beneficiary” means, with respect to each Participant, the recipient or
recipients designated by the Participant who are, upon the Participant’s death,
entitled in accordance with the Plan’s terms to receive the benefits to be paid
with respect to the Participant.
     3.3 “Board” means the Board of Directors of the Company.
     3.4 “Change in Control” means, with respect to the Company:

  (a)   the acquisition by any person, entity or “group” required to file a
Schedule 13D or Schedule 14D-1 under the Exchange Act (excluding, for this
purpose, the Company, its subsidiaries, any employee benefit plan of the Company
or its subsidiaries which acquire ownership of voting securities

 

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      of the Company) of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 50% or more of either the then outstanding Ordinary
Shares or the combined voting power of the Company’s then outstanding voting
securities entitled to vote generally in the election of directors;

  (b)   the election or appointment to the Board, or resignation of or removal
from the Board, of directors with the result that the individuals who as of the
date hereof constituted the Board (the “Incumbent Board”) no longer constitute
at least a majority of the Board, provided that any person who becomes a
director subsequent to the date hereof whose appointment, election, or
nomination for election by the Company’s shareholders, was approved by a vote of
at least a majority of the Incumbent Board (other than an appointment, election
or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company) shall be, for purposes of this Plan,
considered as though such person were a member of the Incumbent Board; or

  (c)   approval by the shareholders of the Company of:

  (i)   a reorganization, merger or consolidation by reason of which persons who
were the shareholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power of the reorganized, merged or consolidated Company’s then
outstanding voting securities entitled to vote generally in the election of
directors, or     (ii)   a liquidation or dissolution of the Company or the
sale, transfer, lease or other disposition of all or substantially all of the
assets of the Company (whether such assets are held directly or indirectly); and
such transaction is consummated.

     Notwithstanding the foregoing, an event shall not constitute a Change in
Control unless such event constitutes a “change in control event” as defined in
final regulation issued by the Internal Revenue Service under Code Section 409A.
     3.5 “Code” means the United States Internal Revenue Code of 1986, as
amended, including any regulations promulgated by the Internal Revenue Service
with respect to the provisions of the Code, and any successor thereto.
     3.6 “Committee” means any committee of the Board.
     3.7 “Ordinary Shares” means the ordinary shares of the Company, par value
$1.00 per share.

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     3.8 “Company” means Enstar Group Limited (formerly known as Castlewood
Holdings Limited), a Bermuda corporation, and any successor thereto.
     3.9 “Director” means an individual who is a member of the Board.
     3.10 “Exchange Act” means the United States Securities Exchange Act of
1934, as amended.
     3.11 “Market Value” means the following, arrived at by a good faith
determination of the Board:

  (a)   The closing price of the Ordinary Shares on a registered securities
exchange or an over-the-counter market on the applicable date; or     (b)   Such
other method of determining fair market value that complies with Code
Section 409A and that is adopted by the Board.

     3.12 “Non-Employee Director” means a Director who is not an officer or
employee of the Company or any of its subsidiaries.
     3.13 “Participant” means any Non-Employee Director who has made an election
to receive all or a portion of such Non-Employee Director’s Retainer and Meeting
Fees in the form of Ordinary Shares and/or to defer payment of all or a portion
of such Retainer and Meeting Fees in the form of Share Units.
     3.14 “Retainer and Meeting Fees” means the retainer and meeting fees
payable to Non-Employee Directors for service on the Board and attendance at
Board and Committee meetings, as such retainer and meetings fees shall be
established from time-to-time by the Board, but excluding any reimbursement
received by Non-Employee Directors for expenses incurred in performance of
service as a Director.
     3.15 “Share Unit” means a measure of value, expressed as Ordinary Shares,
credited to a Participant under this Plan who has elected hereunder to receive
all or a portion of such Participant’s Retainer and Meeting Fees in the form of
Ordinary Shares and has elected hereunder to defer receipt of such Ordinary
Shares in accordance with the provisions hereof. No certificates shall be issued
with respect to such Share Units, but the Company shall maintain an Account in
the name of the Participant to which the Share Units shall be credited.
     3.16 “Termination” means retirement from the Board or termination of
service as a Director for any other reason; provided, however, that no
Termination shall be deemed to have occurred unless such retirement or
termination from service constitutes a “separation from service” with the
meaning of Code Section 409A(a)(2)(A)(i).

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ARTICLE IV
ELECTION TO RECEIVE ORDINARY SHARES FOR RETAINER AND
MEETING FEES AND TO DEFER
RETAINER AND MEETING FEES IN SHARE UNITS
     4.1 Election. On or before December 31 of any Company fiscal year, a
Non-Employee Director may elect to: (a) receive all or a specified portion of
his or her Retainer and Meeting Fees for the following fiscal year in the form
of Ordinary Shares; and (b) defer payment with respect to all or a portion of
his or her Retainer and Meeting Fees for the following fiscal year in the form
of Share Units which shall be payable only upon the Non-Employee Director’s
Termination. All such elections shall be made upon the form of election
prescribed by the Company for such purpose and shall be effective upon receipt
by the Company of such election form duly executed by the Participant.
     For the 2007 calendar year, a Non-Employee Director may choose to received
Ordinary Shares under the Plan only with respect to Retainer and Meeting Fees
payable on or after June 30, 2007 and may elect to defer payment with respect to
Retainer and Meeting Fees payable for services rendered on or after June 30,
2007, by filing an election to so participate on or before June 30, 2007. A
Non-Employee Director elected to fill a vacancy on the Company’s Board and who
was not a Non-Employee Director on the preceding December 31, or whose term of
office as a Non-Employee Director did not begin until after that date, may file
an election to participate in the Plan and commence deferral of receipt of
Retainer and Meeting Fees payable to such Non-Employee Director during the
thirty (30)-day period following the date on which such Non-Employee Director
joined the Board as a Non-Employee Director, if so permitted by Code
Section 409A. Such election shall only apply to Retainer and Meeting Fees earned
after the date on which such election is filed.
     4.2 Revocation or Modification of Election. An effective election made
pursuant to Section 4.1 may not be revoked or modified with respect to the
Retainer and Meeting Fees payable for a fiscal year or portion of a fiscal year
for which such election is effective. An effective election may be revoked or
modified for any subsequent fiscal year by the filing of an election on or
before December 31 of the preceding fiscal year for which such revocation or
modification is to be effective. No such revocation or modification shall affect
the deferral of receipt of Retainer and Meeting Fees previously deferred
hereunder.
     4.3 Ordinary Share Election. When a Participant elects pursuant to
Section 4.1 to receive all or a portion of the Participant’s Retainer and
Meeting Fees in the form of Ordinary Shares, the number of whole shares to be
distributed to the Participant, with any fractional shares to be paid in cash,
as of the date the Retainer and Meeting Fee would otherwise have been payable to
the Participant, shall be equal to the dollar amount of the Retainer and Meeting
Fee which otherwise would have been payable to the Participant divided by the
Market Value on such date.
     4.4 Deferred Retainer Election; Share Units. When a Participant elects
pursuant to Section 4.1 to defer all or a portion of the Participant’s Retainer
and Meeting Fees in Share Units, the number of whole and fractional Share Units,
computed to three decimal places, to be

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credited to the Participant’s Account, on the date the deferred Retainer and
Meeting Fee would otherwise have been payable to the Participant, shall be equal
to the dollar amount of the deferred Retainer and Meeting Fee which otherwise
would have been payable to the Participant divided by the Market Value on such
date.
ARTICLE V
DIVIDENDS AND ADJUSTMENTS
     5.1 Dividends. To the extent the Company shall declare and pay any cash
dividends on the Ordinary Shares, the Account of a Participant shall be credited
with an additional number of whole and fractional Share Units, computed to three
decimal places, equal to the product of the dividend per share then payable,
multiplied by the number of Share Units then credited to such Account, divided
by the Market Value on the dividend payment date.
     5.2 Adjustments. The number of Share Units credited to a Participant’s
Account pursuant to Article IV and the number of Ordinary Shares available for
issuance hereunder pursuant to Article VI shall be appropriately adjusted for
any change in the Ordinary Shares by reason of any merger, reclassification,
consolidation, recapitalization, share dividend, share split or any similar
change affecting the Ordinary Shares.
ARTICLE VI
ISSUANCE OF ORDINARY SHARES
     6.1 Number Of Shares. The maximum number of Ordinary Shares available for
issuance hereunder shall be 100,000 shares, subject to adjustment as set forth
in Article V.
     6.2 Securities Compliance; Restricted Securities. Any Ordinary Shares
issued hereunder shall constitute “restricted securities” under applicable
securities laws and shall not be transferable by the recipient thereof except
pursuant to a registration statement filed under the Securities Act of 1933, as
amended, or in accordance with an exemption from such registration requirements.
Certificates evidencing Ordinary Shares issued hereunder shall bear a legend
reflecting such transfer restrictions and such other matters as the Board shall
deem necessary and appropriate to ensure compliance with applicable securities
laws.
ARTICLE VII
PAYMENT OF SHARE UNITS
     7.1 Manner of Payment Upon Termination. All Share Units held in a
Participant’s Account shall be paid to the Participant as a lump sum
distribution within thirty (30) days after the Participant’s Termination.
Payment with respect to Share Units shall be effected through the issuance by
the Company to the Participant of an equivalent number of whole Ordinary Shares,
with any fractional share paid in cash.
     7.2 Manner of Payment Upon Death. If a Participant dies while Share Units
are held in the Participant’s Account, such Share Units will be paid to the
Beneficiary or the Participant’s estate, as the case may be, within ninety
(90) days from the date of the Participant’s

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death. Payment with respect to such Share Units shall be effected through the
issuance by the Company to the Beneficiary or the Participant’s estate, as the
case may be, of an equivalent number of whole Ordinary Shares, with any
fractional share paid in cash.
     7.3 Payments Upon Change in Control. Notwithstanding any provision of this
Plan to the contrary, if a Change in Control of the Company occurs, Share Units
held in a Participant’s Account will be paid in a lump sum distribution within
fifteen (15) days after such Change in Control. Payment with respect to such
Share Units shall be effected through the issuance by the Company to the
Participant of an equivalent number of whole Ordinary Shares, with any
fractional share paid in cash. In addition, the Company shall reimburse a
Participant for the legal fees and expenses incurred if the Participant is
required to seek to obtain or enforce any right to distribution. Notwithstanding
any provisions of this Plan to the contrary, the provisions of this Section 7.3
may not be amended by an amendment effected within three years following a
Change in Control.
     7.4 No Acceleration of Payment. Notwithstanding any provision hereof to the
contrary, the acceleration of payment of Share Units is prohibited unless
expressly permitted under Code Section 409A.
ARTICLE VIII
BENEFICIARY DESIGNATION
     Each Participant shall be entitled to designate a Beneficiary or
Beneficiaries (which may be an entity other than a natural person) who,
following the Participant’s death, will be entitled to receive any payments to
be made under this Plan. At any time, and from time to time, any designation may
be changed or canceled by the Participant without the consent of any
Beneficiary. Any designation, change, or cancellation must be by written notice
filed with the Company and shall not be effective until received by the Company.
Payment shall be made in accordance with the last unrevoked written designation
of Beneficiary that has been signed by the Participant and delivered by the
Participant to the Company prior to the Participant’s death. If the Participant
designates more than one Beneficiary, any payments under this Plan to the
Beneficiaries shall be made in equal shares unless the Participant has
designated otherwise, in which case the payments shall be made in the
proportions designated by the Participant. If no Beneficiary has been named by
the Participant or if all Beneficiaries predecease the Participant, payment
shall be made to the Participant’s estate.
ARTICLE IX
TRANSFERABILITY RESTRICTIONS
     The Plan shall not in any manner be liable for, or subject to, the debts
and liabilities of any Participant or Beneficiary. No payee may assign any
payment due such party under the Plan. No benefits at any time payable under the
Plan shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, attachment, garnishment, levy, execution, or other legal or
equitable process, or encumbrance of any kind.

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ARTICLE X
FUNDING POLICY
     The Company’s obligations under the Plan shall be totally unfunded so that
the Company is under merely a contractual duty to make payments when due under
the Plan. The promise to pay shall not be represented by notes and shall not be
secured in any way.
ARTICLE XI
ADMINISTRATION
     The Plan shall be administered by the Board. The Board shall have authority
to interpret the Plan, and to prescribe, amend and rescind rules and regulations
relating to the administration of the Plan, and all such interpretations, rules
and regulations shall be conclusive and binding on all Participants. The Board
may employ agents, attorneys, accountants, or other persons and allocate or
delegate to them powers, rights, and duties, all as the Board may consider
necessary or advisable to properly carry out the administration of the Plan.
ARTICLE XII
AMENDMENT AND TERMINATION
     Subject to the limitations on amendments set forth in Section 7.3, the
Company, by resolution duly adopted by the Board, shall have the right,
authority and power to alter, amend, modify, revoke, or terminate the Plan;
provided however, that shareholder approval shall be required for any amendment
for which shareholder approval is required under the rules of the exchange or
market on which the Ordinary Shares are listed and traded. No alteration,
amendment, modification, revocation or termination of the Plan shall adversely
affect the rights of any Participant with respect to any Share Units held in
such Participant’s Account, unless the Participant shall consent thereto in
writing. Distribution of Share Units held in Participant’s Account may be
distributed upon a termination of the Plan at the discretion of the Board,
provided that such distribution satisfies the requirements of Code Section 409A.
ARTICLE XIII
MISCELLANEOUS
     13.1 No Right to Continue as a Director. Nothing in this Plan shall be
construed as conferring upon a Participant any right to continue as a member of
the Board.
     13.2 No Interest as a Shareholder. Share Units do not give a Participant
any rights whatsoever with respect to Ordinary Shares until such time and to
such extent that payment of Share Units is made in Ordinary Shares upon the
Participant’s Termination.
     13.3 No Right to Corporate Assets. Nothing in this Plan shall be construed
as giving the Participant, the Participant’s designated Beneficiaries or any
other person any equity or interest of any kind in the assets of the Company or
any subsidiary or creating a trust of any kind or a fiduciary relationship of
any kind between the Company or any subsidiary and any person. As to any claim
for payments due under the provisions of the Plan, a Participant, Beneficiary
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any other persons having a claim for payments shall be general unsecured
creditors of the Company.
     13.4 Code Section 409A Compliance. The Plan is intended to be administered
in a manner consistent with the requirements, where applicable, of Code
Section 409A. Where reasonably possible and practicable, the Plan shall be
administered in a manner to avoid the imposition on Non-Employee Directors of
immediate tax recognition and additional taxes under Code Section 409A.
Notwithstanding the foregoing, neither the Company nor the Board shall have any
liability to any person in the event that Code Section 409A applies under the
Plan in a manner that results in adverse tax consequences to the Non-Employee
Director or his or her Beneficiaries.
     13.5 No Limit on Further Corporate Action. Nothing contained in the Plan
shall be construed so as to prevent the Company from taking any corporate action
which is deemed by the Company to be appropriate or in its best interest.
     13.6 Governing Law. The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the laws of Bermuda
(without reference to principles of conflicts of laws) shall govern the
operation of, and the rights of Participants under, the Plan.
     13.7 Headings. The headings of articles, sections, subsections, paragraphs
or other parts of the Plan are for convenience of reference only and do not
define, limit, construe, or otherwise affect its contents.

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