exv10w1



 





EXHIBIT 10.1




August 10, 2007




Robert M. Smith, Jr.

c/o Delphi Capital Management, Inc.

590 Madison Avenue, 30th Floor

New York, New York 10022




Amendment and Consolidation of Prior Restricted Share Unit Award Agreements




Dear Bob:




          This letter will serve as notice that, by action of the Compensation Committee (the
“Committee”) of the Board of Directors of Delphi Financial Group, Inc. (the “Company”) taken on
August 2, 2007, the terms and conditions of the awards made to you on February 11, 2004 and
February 9, 2005 of 11,598 and 10,185 (each on a split-adjusted basis) Restricted Share Units,
respectively (collectively, the “Units”), pursuant to the Company’s 2003 Employee Long-Term
Incentive and Share Award Plan (the “Plan”), as described in the Award Agreements dated May 7,
2004, as previously amended, and February 14, 2005 (collectively, the “Prior Award Agreements”),
have, pursuant to Section 9(d) of the Plan, been amended and restated in accordance with the terms
hereof. The Units granted in February 2004 are referred to below as the “2004 Units” and the Units
granted in February 2005 are referred to below as the “2005 Units.”




          In connection with such amendments and restatements, this letter will serve to consolidate and
replace the Prior Award Agreements in their entirety with respect to the terms of the Units, which,
as so amended and restated, are as follows (with all capitalized terms used but not defined below
having the meanings set forth in the Plan):




          The 2004 Units entitle you to receive 11,598 shares of the Company’s Class A Common Stock (the
“Stock”) upon the earliest of (a) your death or Disability (as defined below), (b) the expiration
of any such Delay Period (as such term is defined below) as may be required by the penultimate
paragraph of this letter following your “separation from service” (which term, as used herein,
shall have the definition contained in Treas. Reg. § 1.409A-1(h)) with the Company (i) by reason of
your Occupational Disability (as defined below) that does not also qualify as a Disability or
normal retirement in accordance with the policies set by the Company’s Board of Directors (the
“Board”), (ii) by the Company other than for Cause (as defined below), (iii) by you for Good Reason
(as defined below), or (iv) for any reason following a Change of Ownership of the Company, (c) an
event or condition that constitutes both a Change of Ownership of the Company and a “change in
control event” (which term, as used herein, shall have the definition contained in Treas. Reg.
1.409A-3(i)(5)(i)) with respect to the Company, and (d) with
respect to the Applicable Vested






 









 





Robert M. Smith, Jr.

August 10, 2007

Page 2


Percentage of such number of shares of the Stock
only, upon the expiration of such Delay Period as may be required by the penultimate paragraph of
this letter following your “separation from service” with the Company for any reason. The
“Applicable Vested Percentage,” with respect to the 2004 Units, is equal to one-third (33 1/3%),
with such percentage to increase by an additional 33 1/3% on each of February 11, 2008 and February
11, 2009.




          The 2005 Units entitle you to receive 10,185 shares of the Stock upon the earliest of (a) your
death or Disability, (b) the expiration of such Delay Period as may be required by the penultimate
paragraph of this letter following your “separation from service” with the Company (i) by reason of
your Occupational Disability that does not also qualify as a Disability or normal retirement in
accordance with the policies set by the Board, (ii) by the Company other than for Cause, (iii) by
you for Good Reason, or (iv) for any reason following a Change of Ownership of the Company, (c) an
event or condition that constitutes both a Change of Ownership of the Company and a “change in
control event” with respect to the Company, and (d) with respect to the Applicable Vested
Percentage of such number of shares of the Stock only, the expiration of such Delay Period as may
be required by the penultimate paragraph of this letter following
your “separation from service” with the Company for any reason. The “Applicable Vested Percentage,” with
respect to the 2005 Units, shall be equal to zero until February 9, 2008, on which date such
percentage shall be increased to thirty-three and one third percent (33 1/3%), with such percentage
to be increased by an additional 33 1/3% on each of February 9, 2009 and February 9, 2010.




          However, if your employment with the Company terminates other than (a) by the Company not for
Cause or by you for Good Reason, (b) due to your death, Disability, Occupational Disability, or
normal retirement in accordance with the policies set by the Board, or (c) for any reason following
a Change of Ownership of the Company, the Units will, except as to the respective Applicable Vested
Percentages thereof then in effect, be forfeited to the Company. In addition, notwithstanding
anything set forth above or otherwise in this letter, if your employment is terminated by the Company
for Cause, the Units will be forfeited to the Company.




          For purposes of the foregoing, with respect to each of the Units:




          “Cause” means (a) conviction of a felony or other crime involving fraud, dishonesty or moral
turpitude, (b) fraud with respect to the business of the Company, or (c) gross neglect of duties of
your office specified in writing by the Board. For purposes hereof, you shall not be deemed to
have been terminated for Cause until the later to occur of (i) the 30th day after notice of
termination is given to you and (ii) the delivery to you of a copy of a resolution duly adopted by
the affirmative vote of not less than a majority of the members of the Board at a meeting called
and held for that purpose, and at which you together with your counsel were given an opportunity to
be heard, finding that you were guilty of conduct described in this definition of “Cause”, and
specifying the particulars thereof in detail.




 









 







Robert M. Smith, Jr.

August 10, 2007

Page 3



          “Good Reason” means your voluntary termination of employment within 120 days after the
occurrence without your express written consent of any of the following events, provided that you
give notice to the Company at least 30 days in advance requesting that the situation be remedied,
and the situation remains unremedied upon expiration of such 30-day period: (i) your removal from,
or any failure to reelect you to, the position of Executive Vice President of the Company, except
in connection with your termination for Cause, Occupational Disability, or Disability or
termination by you other than for Good Reason; (ii) considering the Units separately for purposes
of this clause according to the respective dates on which they were awarded, (a) reduction in your
rate of base salary for any fiscal year to less than 100 percent of the rate in effect on the date
that such Units were awarded or (b) failure of the Company to continue in effect any retirement,
life insurance, medical insurance or disability plan in which you were participating on the date
that such Units were awarded, unless the Company provides you with a plan or plans that provide
substantially comparable benefits; (iii) a Change of Ownership; or (iv) any purported termination
by the Company of your employment for Cause that is not effected in compliance with the definition
of “Cause” above.




          “Occupational Disability” means an illness, injury, accident or condition of either a physical
or psychological nature as a result of which you are unable to perform substantially the duties and
responsibilities of your position for 180 days during a period of 365 consecutive calendar days.




          You will be deemed to have a “Disability” if you (i) are unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, or (ii) are, by reason of any medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not less than 3 months under
an accident and health plan covering employees of the Company.




          In the event that a dividend is paid or property is distributed (including, without
limitation, shares of Stock) with respect to a share of the Stock while a Unit is outstanding, you
will receive with respect to each Unit then outstanding: (a) in the case of a cash dividend, or a
distribution of property other than stock, dividend equivalents in cash or such property which
shall be paid within the calendar month in which the dividend or distribution is paid; and (b) in
the case of a stock dividend, a number of additional Units equal to the number of whole or fractional shares
of Stock that would have been paid if the Units had been Stock outstanding on the date of
distribution.




          In the event of a stock split (other than where effected pursuant to a stock dividend) or
combination of shares, recapitalization or other change in the Company’s capitalization, or other
distribution to common stockholders other than normal cash dividends, the Committee will make any
appropriate adjustments to the number and kind of shares of stock or securities to which the Units
relate. The Committee may also make appropriate adjustments to take
into account mergers,

 









 





Robert M. Smith, Jr.

August 10, 2007

Page 4


consolidations, acquisitions, dispositions or similar corporate transactions if it is determined by
the Committee that adjustments are appropriate to preserve (but not enhance) the value of the
Units.




          In the event it shall be determined by the Company’s independent auditors that any payment or
distribution made, or benefit provided (including, without limitation, the acceleration of any
payment, distribution or benefit and the acceleration of vesting of any of the Units), by the
Company to or for your benefit (whether paid or payable or distributed or distributable pursuant to
the terms hereof or otherwise, but determined without regard to any additional payments required
pursuant hereto) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”) (or any similar excise tax) or any interest
or penalties are incurred by you with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”),
then you shall be entitled to receive an additional payment (a “Gross-Up Payment”), to be made no
later than the end of the calendar year in which you make payment of the Excise Tax (notice of
which payment shall be provided by you to the Company), in an amount such that after payment by you
of all taxes (including any Excise Tax, income tax or payroll tax) imposed upon the Gross-Up
Payment and any interest or penalties imposed with respect to such taxes, you retain from the Gross-Up Payment an amount equal to the Excise Tax
imposed upon the Payments.




          The Units are subject to the terms and conditions of the Plan and may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of prior to the time, if any, that you
become entitled to receive shares of Stock as provided herein other than by will or the laws of
descent and distribution.




          It is intended that the Units and this letter will comply with Section 409A of the Code and
any regulations and guidelines issued thereunder, to the extent subject thereto, and this letter
shall be interpreted on a basis consistent with such intent. Notwithstanding any provision to the
contrary in this letter, if you are, on the date of your “separation from service”, a “specified
employee” within the meaning of that term under Treas. Reg. Section 1.409A-1(i), then with regard
to any distribution of Stock provided for in clauses (b) or (d) of the third or fourth paragraphs
of this letter, such distribution shall not be made prior to the earlier of (i) the expiration of
the six (6)-month period measured from the date of your “separation from service”, or (ii) the date
of your death (the “Delay Period”). Upon the expiration of the Delay Period, all distributions
delayed pursuant to this paragraph shall be made to you in a single lump sum. The Company shall
not have any obligation to indemnify or otherwise protect you from any obligation to pay any taxes
pursuant to Section 409A of the Code.




          Please confirm your consent to and acceptance of the amended and restated terms and conditions
of the Units set forth above, which shall supersede the provisions of the Prior Award Agreements in
their entirety, by signing and dating both counterparts of this letter and returning one to me.
The other counterpart may be retained for your files.



 









 





Robert M. Smith, Jr.

August 10, 2007

Page 5







	 	 	 	 	 
	 

	 	Very truly yours,
	 	 
	 
	 	 	 	 
	 

	 	/s/ Chad W. Coulter	 	 
	 
	 	 	 	 
	 

	 	Chad W. Coulter
	 	 
	 

	 	Senior Vice President, Secretary and
	 	 
	 

	 	General Counsel	 	 







Agreed to and accepted:




	 	 	 	 	 
	/s/ Robert M. Smith, Jr.

	Date:  	August 16, 2007	 	 
	 

Robert M. Smith, Jr.