Document:

exv10w1

Exhibit 10.1

May 12, 2008

Lawrence E. Daurelle

c/o Reliance Standard Life Insurance Company

2001 Market Street, Suite 1500

Philadelphia, Pennsylvania 19103-7303

			
	Re:	 	Amendment and Consolidation of Prior Stock Option Award 
Agreements

Dear Larry:

     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 May
7, 2008, the terms and conditions of the options (collectively, the “Options”) to purchase (a) up
to 225,000 shares of Delphi’s Class A Common Stock (the “Stock”) at the price of $27.8733 per share
(the “First Options”) granted to you on April 22, 2004 and (b) up to 75,000 shares of the Stock at
the price of $31.10 per share (the “Second Options”) granted to you on December 28, 2005, each
pursuant to the Company’s 2003 Employee Long-Term Incentive and Share Award Plan, as amended (the
“Plan”), as described in the Award Agreements dated May 19, 2004, and January 4, 2006
(collectively, the “Prior Award Agreements”), respectively have, pursuant to Section 9(d) of the
Plan and subject to your consent thereto, been amended and restated in accordance with the terms
hereof. The share amounts and exercise prices reflected in the preceding sentence reflect
adjustments previously made pursuant to the Plan to take into account the effect of the Company’s
3-for-2 stock split effected in June 2006. Capitalized terms used but not defined herein shall
have the respective meanings set forth in the Plan.

     As previously confirmed in the letter to you dated February 28, 2007, 112,500 of the First
Options have previously become exercisable (such Options, the “Vested First Options”). The
remainder of the First Options (the “Unvested First Options”) and the Second Options (together with
the Unvested First Options, the “Unvested Options”), will become exercisable, in accordance with

 

 

Lawrence E. Daurelle

May 12, 2008

Page 2

the procedures set forth herein, in their entirety if the aggregate Pre-Tax Operating Income,
as defined in Exhibit A hereto (“Pre-Tax Operating Income”), of Reliance Standard Life Insurance
Company of Texas and its consolidated subsidiaries (collectively, “the RSL Companies”) for the
period consisting of Delphi’s 2004, 2005, 2006, 2007 and 2008 fiscal years (the “Performance
Period”) is at least $646,159,683.

     Alternatively, if the RSL Companies’ aggregate Pre-Tax Operating Income for such period does
not reach $646,159,683, but is greater than $559,927,799, a reduced number of the Unvested Options
shall become exercisable in accordance with such procedures, to be determined by interpolating
between zero and 112,500 (in the case of the Unvested First Options) and zero and 75,000 (in the
case of the Second Options), in both cases in relation to the point at which the Pre-Tax Operating
Income amount falls in the range between $559,927,799 and $646,159,683.

     In addition, if prior to December 31, 2008, your employment with Delphi’s subsidiary, Reliance
Standard Life Insurance Company (“RSL”), terminates due to death or Disability or is terminated by
RSL without Cause or by you for Good Reason, then, notwithstanding any provisions hereof or of the
Plan to the contrary, with respect to the Unvested Options, such Unvested Options will become
exercisable at such time, if any, as would have been the case pursuant to the two preceding
paragraphs if not for such termination; provided, however, that the number of
Unvested Options that becomes exercisable will, in each case, be reduced by a percentage equal to
the applicable percentage of the Performance Period during which you were not employed by RSL by
reason of such termination. For purposes of this paragraph, the following definitions shall apply:

     “Disability” shall mean 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 during a period of 180 days during a period of 365 consecutive
calendar days.

     “Cause” shall mean (i) conviction of a felony or other crime involving fraud, dishonesty or
moral turpitude, (ii) fraud or intentional misrepresentation, embezzlement, misappropriation

 

 

Lawrence E. Daurelle

May 12, 2008

Page 3

or conversion of assets or opportunities of Delphi or any Subsidiary thereof, or any unauthorized
disclosure of confidential information or trade secrets of Delphi or any Subsidiary thereof (a
“Breach of Confidentiality”), or (iii) gross neglect of duties of your office specified by the
Board of Directors of RSL.

     “Good Reason” shall mean with respect to the Unvested Options, (i) reduction of your base
salary for any fiscal year to less than 100 percent of the rate of base salary in effect for you as
in effect on the respective dates of grant thereof; or (ii) the failure of RSL to continue in
effect any retirement, life insurance, medical insurance or disability plan in which you were
participating on the respective dates of grant thereof, except, as to any such plan, where RSL
provides you with a plan that provides substantially comparable benefits or where the
discontinuation of such plan applies generally with respect to the employees of RSL (or, in the
case of a plan furnished only to a specified group of RSL employees, with respect to such group).

     Unvested Options which do not become exercisable pursuant to the preceding provisions of this
Award Agreement shall expire and terminate in their entirety without becoming exercisable.

     For purposes of application of the foregoing provisions relating to the exercisability of the
Unvested Options, the following procedures shall apply:

     Each determination of Pre-Tax Operating Income shall be made by Delphi, based upon a statement
of operations of the RSL Companies for the applicable period conforming to the provisions of
Exhibit A hereto and in form and substance reasonably acceptable to Delphi.

     Delphi shall notify you in writing, within 65 days following the close of the Performance
Period, of its determination as to the level of aggregate Pre-Tax Operating Income achieved and,
based on such determination, the extent to which the Unvested Options have become exercisable
pursuant to the second (or, if applicable, third) paragraph of this Award Agreement. Unvested
Options having become exercisable, as

 

 

Lawrence E. Daurelle

May 12, 2008

Page 4

described in such notice, shall for all purposes of the Plan be exercisable immediately as of the
date of such notice.

     The Vested First Options, as well as the Unvested First Options that become exercisable as
provided herein, will, if not sooner exercised or terminated pursuant to the provisions hereof,
terminate at the close of business on April 22, 2014 (in the case of all of the First Options) and
December 28, 2015 (in the case of the Second Options). The Options are in all respects subject to
each of the terms and conditions of the Plan, a copy of which is attached hereto as Exhibit B,
except as otherwise provided herein and except that: (i) the provisions of Sections 5(b)(iii),
(iv), (vi) and (viii) of the Plan will not limit your ability to exercise, following a termination
of your employment by RSL or for the other reasons set forth therein, Options having become
exercisable as of the date of such termination or that become exercisable thereafter pursuant to
the third paragraph of this Award Agreement; provided, however, that the Options will terminate in
their entirety upon the occurrence of a Breach of Confidentiality on your part occurring subsequent
to such termination of employment; (ii) for purposes of Section 5(b)(v) of the Plan, your discharge
for cause shall result in the termination of Options that are exercisable at the time of such
discharge only where the Committee determines that the discharge was based on an event of the type
described in clause (ii) of the definition of “Cause” above; and (iii) notwithstanding the
provisions of Section 5(b)(ix) of the Plan, the exercise price for the Options may be paid by your
directing that Delphi withhold from the Option shares a number of shares having a market value, at
the time of exercise, equal to such exercise price, so long as such payment method will not, in
Delphi’s judgment, result in adverse accounting consequences for Delphi; and (iv) the provisions of
Section 8(a) of the Plan shall not apply to the Options.

     In addition, if RSL terminates your employment without Cause or if you terminate your
employment for Good Reason (as such term is defined above) subsequent to the occurrence of a Change
of Ownership, and all or a portion of the Unvested Options remain outstanding as of the date (the
“Termination Date”) of such termination (whether such Options are then exercisable for shares of
Delphi or another company, cash or

 

 

Lawrence E. Daurelle

May 12, 2008

Page 5

other property), the remaining Unvested Options shall become exercisable in their entirety. For
purposes of this paragraph:

     “Change of Ownership” shall mean, in addition to the events specified in the definition of
such term contained in the Plan, the occurrence of any transaction pursuant to which Delphi ceases
to own, directly or indirectly, a majority of the total voting power of the voting securities of
RSL.

     “Performance Condition” shall mean the attainment by the RSL Companies, for the period
commencing on January 1, 2004 through and including the full calendar quarter most recently having
been completed as of the Termination Date, of aggregate Pre-Tax Operating Income in an amount
representing a compound average annualized growth rate of at least eleven percent (11%), as
compared with the 2003 base amount of $80,998,000. For example, as to a Termination Date occurring
on July 12, 2008, the Performance Condition would relate to the period from January 1, 2004 through
June 30, 2008, and would require that aggregate Pre-Tax Operating Income for such period equal at
least $491,684,629.

     Finally, in accordance with Section 6(d) of the Plan, this will confirm that you may, upon
written notice to Delphi, transfer the Options, for or without consideration, to members of your
immediate family (as defined below), to a partnership or limited liability company in which one or
more of your immediate family members are the only partners or members, or to a trust or trusts
established for your exclusive benefit or the exclusive benefit of one or more members of your
immediate family. Any Options held by the transferee will continue to be subject to the same terms
and conditions that were applicable to the Options immediately prior to the transfer, except that
the Options will be transferable by the transferee only by will or the laws of descent and
distribution. For purposes hereof, “immediate family” means your children, grandchildren, and
spouse. You are further advised that, under existing rules of the Securities and Exchange
Commission, any Form S-8 registration statement filed by Delphi relating to the Plan will not cover
the exercise of Options transferred for consideration, and therefore, such exercise would be
required to be covered by an effective registration statement under the Securities Act of

 

 

Lawrence E. Daurelle

May 12, 2008

Page 6

1933, as amended (the “1933 Act”), or otherwise be exempt from registration under the 1933 Act, and
shares of Stock acquired on such exercise would constitute “restricted securities” within the
meaning of Rule 144 under the 1933 Act. No assurance can be given that, under such circumstances,
registration under the 1933 Act with respect to such exercise or such shares can or will be
effected or that an exemption from such registration will be available.

     If you are in agreement with the amended and restated terms and conditions of the Options set
forth above, which shall supersede the provisions of the Prior Award Agreements in their entirety,
please confirm such agreement and acceptance by executing and dating both counterparts of this
Award Agreement and returning one fully executed counterpart to me. The other counterpart should
be retained for your files.

Very truly yours,

/s/
Chad W.
Coulter 
Chad W. Coulter

Senior Vice President, Secretary

     and General Counsel

	 	 	 	 	 
	Agreed:
	 	 	 	 
	 
	 
	 	Date: May 13, 2008	 	 
	/s/ Lawrence E. Daurelle 

Lawrence E. Daurelle

	 	 
	 	 

 

 

Exhibit A

to

Stock Option Award Agreement

General

     Capitalized terms used but not defined herein shall have the meanings given to them in the
Stock Option Award Agreement to which this Exhibit A is attached (the “Award Agreement”). For
purposes of the Award Agreement, “Pre-Tax Operating Income” shall mean the operating income of the
RSL Companies, excluding realized investment gains and losses, net of interest expense and before
extraordinary gain or loss and federal income tax expense, all as determined in accordance with
Generally Accepted Accounting Principles, as in effect from time to time (“GAAP”), subject to the
Special Adjustments for which this Exhibit A provides.

Special Adjustments

Adjustment events: Each of the following shall constitute an Adjustment Event for
purposes of the Award Agreement:

     (A) the receipt by Delphi Financial Group, Inc. (“DFG”) from the RSL Companies of
stockholder dividends exceeding (i) $16,300,000 in the aggregate during the period
consisting of Delphi’s 2004, 2005 and 2006 fiscal years or (ii) $27,200,000 in the aggregate
during the period consisting of the 2004, 2005, 2006, 2007 and 2008 fiscal years (the
“Performance Period”);

     (B) the making by DFG of capital and/or surplus contributions to any of the RSL
Companies at any time during the Performance Period, regardless of the form of such
contribution, which, taken together with any previous such contributions during the
Performance Period, exceed $10,000,000 in the aggregate;

     (C) the acquisition by DFG, directly or indirectly, of a company or a division or
business unit thereof by merger, consolidation, purchase of equity interests or assets or
any other similar transaction, the business activities of which are substantially related to
any of the business activities then conducted (or intended to be conducted subsequent to
such acquisition) by the RSL

 

 

Companies.

Upon the occurrence of an Adjustment Event, DFG executive management, in consultation with
the Chief Executive Officer of the RSL Companies, may recommend to the Committee any
amendments or modifications to the conditions to vesting of the Options relating to the
financial performance of the RSL Companies, as set forth in the second paragraph of the
Award Agreement (the “Vesting Provisions”), which DFG executive management believes in good
faith to be necessary or appropriate to take into account the effect of such Adjustment
Event, including but not limited to the adjustment of one or more of the Pre-Tax Operating
Income thresholds set forth therein. It is anticipated that such adjustments will consist
of reductions (in the case of an Adjustment Event described in clause (A) above) and
increases (in the case of an Adjustment Event described in clause (B) above) in such
thresholds, respectively, by applying an appropriate interest factor to the relevant amounts
paid as dividends or contributed to capital, as the case may be.

Upon receipt of any such recommendation, the Committee shall determine in its sole
discretion whether to amend or modify the Vesting Provisions based on the relevant
Adjustment Event, and the terms and conditions of any such amendment or modification. Any
such amendment or modification shall be communicated in writing to, and shall be final and
binding on, each holder of Stock options whose terms contain goals relating to Pre-Tax
Operating Income for the Performance Period (collectively, the “RSL Optionholders”). For
the purpose of avoidance of doubt, no such amendment or modification shall be deemed to have
materially and adversely affected the rights of any RSL Optionholder under the Options for
any purpose of Section 9(d) of the Plan.

Employee option expenses: SFAS 123 expenses attributable to options granted to RSL
employees on or after January 1, 2004 (other than the options granted to the RSL
Optionholders) shall be included as items of expense.

Arbitration

Delphi shall provide each RSL Optionholder with a detailed written calculation supporting
Delphi’s determination as to

 

 

whether the applicable goal has been achieved (each, a “Delphi Determination”) and, where
such calculation indicates such goal having been achieved, confirming the number of Options
having become exercisable as a result thereof, within ninety (90) days after the completion
of the Performance Period. If a majority of the RSL Optionholders shall disagree with any
Delphi Determination, the RSL Optionholders shall give written notice of such disagreement
to Delphi within ten (10) business days after receipt of such Delphi Determination. If
within twenty (20) business days after Delphi’s receipt of the notice of disagreement from
the RSL Optionholders referenced in the immediately preceding sentence, Delphi and the RSL
Optionholders are unable to agree with regard to any Delphi Determination, the disagreement
may be submitted to arbitration by either Delphi or the RSL Optionholders, which arbitration
determination shall be final and binding on the parties. The party instituting the
arbitration procedures shall give written notice to the other party of its desire to
arbitrate and such notice shall specify the name and address of the person designated to act
as an arbitrator on its behalf. Within twenty (20) business days after the service of this
notice, the other party shall notify the first party of the appointment of its arbitrator
within the twenty (20) business day period specified above, then the appointment of the
second arbitrator shall be made in the same manner as hereinafter provided for the
appointment of a third arbitrator in a case where the two appointed arbitrators are unable
to agree upon a third arbitrator. The two arbitrators so chosen shall meet within 10
business days after the second arbitrator is appointed and shall select the third arbitrator
by mutual agreement. If the two arbitrators shall fail to appoint a third arbitrator within
10 business days after the second arbitrator is appointed, then the third arbitrator shall
be appointed by the American Arbitration Association (“AAA”), or any organization
successor thereto, in accordance with its prevailing rules. Each arbitrator chosen or
appointed pursuant to the foregoing provisions shall be an active or retired officer of an
insurance or reinsurance company and shall be a disinterested person.

The arbitrators shall review the provisions of this Exhibit A and the Award Agreement, as
well as any other documents or materials supplied by either party supporting such party’s
position. The arbitrators shall render their

 

 

decision with regard to the disputed Delphi Determination upon the concurrence of at least
two of their number not later than thirty (30) business days after the appointment of the
third arbitrator. The decision of the arbitrators shall be in writing and counterpart
copies shall be delivered to each of Delphi and the RSL Optionholders. In rendering their
decision, the arbitrators shall have no power to modify any of the provisions of the Award
Agreement or this Exhibit A. All arbitration proceedings shall occur in Philadelphia,
Pennsylvania. Judgment may be entered on the award of the arbitrators and may be enforced
in accordance with the laws of the Commonwealth of Pennsylvania.

Immediately upon a party hereto giving written notice of its desire to arbitrate hereunder,
Delphi agrees upon request to provide the RSL Optionholders with access to the books and
records of the RSL Companies which reasonably relate to the Delphi Determinations
(including, without limitation, examination rights and the right to make abstracts or copies
from such books and records) during the normal business hours of RSL.

Each party shall pay the fees and expenses of the original arbitrator that it appointed (or
in the case of the second party, the arbitrator appointed on its behalf if it should fail to
appoint its own arbitrator). The fees and expenses of the third arbitrator and all other
expenses of the arbitrators shall be borne by Delphi, on one hand, and the RSL
Optionholders, on the other hand, equally. Each party shall bear the expense of its own
counsel and the preparation and presentation of proof or supportive documentation.exv10w2

Exhibit 10.2

May 12, 2008

Thomas W. Burghart

c/o Reliance Standard Life Insurance Company

2001 Market Street, Suite 1500

Philadelphia, Pennsylvania 19103-7303

			
	Re:	 	Amendment and Consolidation of Prior Stock Option Award Agreements

Dear Tom:

     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 May
7, 2008, the terms and conditions of the options (collectively, the “Options”) to purchase (a) up
to 225,000 shares of Delphi’s Class A Common Stock (the “Stock”) at the price of $27.8733 per share
(the “First Options”) granted to you on April 22, 2004 pursuant to the Company’s 2003 Employee
Long-Term Incentive and Share Award Plan, as amended (the “2003 Plan”), and (b) up to 75,000 shares
of the Stock at the price of $31.10 per share (the “Second Options”) granted to you on December 28,
2005, pursuant to the Company’s Second Amended and Restated Employee Stock Option Plan, as amended
(the “Restated Plan” and, together with the 2003 Plan, the “Plans”), as described in the Award
Agreements dated May 19, 2004, and January 4, 2006 (collectively, the “Prior Award Agreements”),
respectively have, pursuant to Section 9(d) of the 2003 Plan and Section 5(n) of the Restated Plan,
subject to your consent thereto, been amended and restated in accordance with the terms hereof.
The share amounts and exercise prices reflected in the preceding sentence reflect adjustments
previously made pursuant to the Plans to take into account the effect of the Company’s 3-for-2
stock split effected in June 2006. Capitalized terms used but not defined herein shall have the
respective meanings set forth in the 2003 Plan (in relation to the First Options) and the Restated
Plan (in relation to the Second Options), and all references herein to specific provisions of the
Plans shall relate to (and only to) the Options having been granted under the referenced Plan.

 

 

     As previously confirmed in the letter to you dated February 28, 2007, 112,500 of the First
Options have previously become exercisable (such Options, the “Vested First Options”). The
remainder of the First Options (the “Unvested First Options”) and the Second Options (together with
the Unvested First Options, the “Unvested Options”), will become exercisable, in accordance with
the procedures set forth herein, in their entirety if the aggregate Pre-Tax Operating Income, as
defined in Exhibit A hereto (“Pre-Tax Operating Income”), of Reliance Standard Life Insurance
Company of Texas and its consolidated subsidiaries (collectively, “the RSL Companies”) for the
period consisting of Delphi’s 2004, 2005, 2006, 2007 and 2008 fiscal years (the “Performance
Period”) is at least $646,159,683.

     Alternatively, if the RSL Companies’ aggregate Pre-Tax Operating Income for such period does
not reach $646,159,683, but is greater than $559,927,799, a reduced number of the Unvested Options
shall become exercisable in accordance with such procedures, to be determined by interpolating
between zero and 112,500 (in the case of the Unvested First Options) and zero and 75,000 (in the
case of the Second Options), in both cases in relation to the point at which the Pre-Tax Operating
Income amount falls in the range between $559,927,799 and $646,159,683.

     In addition, if prior to December 31, 2008, your employment with Delphi’s subsidiary, Reliance
Standard Life Insurance Company (“RSL”), terminates due to death or Disability or is terminated by
RSL without Cause or by you for Good Reason, then, notwithstanding any provisions hereof or of the
Plans to the contrary, with respect to the Unvested Options, such Unvested Options will become
exercisable at such time, if any, as would have been the case pursuant to the two preceding
paragraphs if not for such termination; provided, however, that the number of
Unvested Options that becomes exercisable will, in each case, be reduced by a percentage equal to
the applicable percentage of the Performance Period during which you were not employed by RSL by
reason of such termination. For purposes of this paragraph, the following definitions shall apply:

     “Disability” shall mean 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 during a period of 180 days during a period of 365 consecutive
calendar days.

     “Cause” shall mean (i) conviction of a felony or other

 

 

crime involving fraud, dishonesty or moral turpitude, (ii) fraud or intentional
misrepresentation, embezzlement, misappropriation or conversion of assets or opportunities of
Delphi or any Subsidiary thereof, or any unauthorized disclosure of confidential information or
trade secrets of Delphi or any Subsidiary thereof (a “Breach of Confidentiality”), or (iii) gross
neglect of duties of your office specified by the Board of Directors of RSL.

     “Good Reason” shall mean with respect to the Unvested Options, (i) reduction of your base
salary for any fiscal year to less than 100 percent of the rate of base salary in effect for you as
in effect on the respective dates of grant thereof; or (ii) the failure of RSL to continue in
effect any retirement, life insurance, medical insurance or disability plan in which you were
participating on the respective dates of grant thereof, except, as to any such plan, where RSL
provides you with a plan that provides substantially comparable benefits or where the
discontinuation of such plan applies generally with respect to the employees of RSL (or, in the
case of a plan furnished only to a specified group of RSL employees, with respect to such group).

     Unvested Options which do not become exercisable pursuant to the preceding provisions of this
Award Agreement shall expire and terminate in their entirety without becoming exercisable.

     For purposes of application of the foregoing provisions relating to the exercisability of the
Unvested Options, the following procedures shall apply:

     Each determination of Pre-Tax Operating Income shall be made by Delphi, based upon a statement
of operations of the RSL Companies for the applicable period conforming to the provisions of
Exhibit A hereto and in form and substance reasonably acceptable to Delphi.

     Delphi shall notify you in writing, within 65 days following the close of the Performance
Period, of its determination as to the level of aggregate Pre-Tax Operating Income achieved and,
based on such determination, the extent to which the Unvested Options have become exercisable
pursuant to the second (or, if applicable, third) paragraph of this Award Agreement. Unvested
Options having become exercisable, as described in such notice, shall for all purposes of the 2003
Plan (in the case of the First Options) and the Restated Plan

 

 

(in the case of the Second Options) be exercisable immediately as of the date of such notice.

     The Vested First Options, as well as the Unvested First Options that become exercisable as
provided herein, will, if not sooner exercised or terminated pursuant to the provisions hereof,
terminate at the close of business on April 22, 2014 (in the case of all of the First Options) and
December 28, 2015 (in the case of the Second Options). The Options are in all respects subject to
each of the terms and conditions of the respective Plans under which they were granted, except as
otherwise provided herein and except that: (i) the provisions of Sections 5(b)(iii), (iv), (vi) and
(viii) of the 2003 Plan and Sections 5(f), 5(g), 5(i) and 5(k) of the Restated Plan will not limit
your ability to exercise, following a termination of your employment by RSL or for the other
reasons set forth therein, Options having become exercisable as of the date of such termination or
that become exercisable thereafter pursuant to the third paragraph of this Award Agreement;
provided, however, that the Options will terminate in their entirety upon the occurrence of a
Breach of Confidentiality on your part occurring subsequent to such termination of employment; (ii)
for purposes of Section 5(b)(v) of the 2003 Plan and Section 5(h) of the Restated Plan, your
discharge for cause shall result in the termination of Options that are exercisable at the time of
such discharge only where the Committee determines that the discharge was based on an event of the
type described in clause (ii) of the definition of “Cause” above; and (iii) notwithstanding the
provisions of Section 5(b)(ix) of the 2003 Plan and Section 5(d) of the Restated Plan, the exercise
price for the Options may be paid by your directing that Delphi withhold from the Option shares a
number of shares having a market value, at the time of exercise, equal to such exercise price, so
long as such payment method will not, in Delphi’s judgment, result in adverse accounting
consequences for Delphi; and (iv) the provisions of Section 8(a) of the 2003 Plan and Section
5(e)(iii) of the Restated Plan shall not apply to the Options.

     In addition, if RSL terminates your employment without Cause or if you terminate your
employment for Good Reason (as such term is defined above) subsequent to the occurrence of a Change
of Ownership, and all or a portion of the Unvested Options remain outstanding as of the date (the
“Termination Date”) of such termination (whether such Options are then exercisable for shares of
Delphi or another company, cash or other property), the remaining Unvested Options shall become

 

 

exercisable in their entirety. For purposes of this paragraph:

     “Change of Ownership” shall mean, in addition to the events specified in the definition of
such term contained in the Plans, the occurrence of any transaction pursuant to which Delphi ceases
to own, directly or indirectly, a majority of the total voting power of the voting securities of
RSL.

     “Performance Condition” shall mean the attainment by the RSL Companies, for the period
commencing on January 1, 2004 through and including the full calendar quarter most recently having
been completed as of the Termination Date, of aggregate Pre-Tax Operating Income in an amount
representing a compound average annualized growth rate of at least eleven percent (11%), as
compared with the 2003 base amount of $80,998,000. For example, as to a Termination Date occurring
on July 12, 2008, the Performance Condition would relate to the period from January 1, 2004 through
June 30, 2008, and would require that aggregate Pre-Tax Operating Income for such period equal at
least $491,684,629.

     Finally, in accordance with Section 6(d) of the 2003 Plan and Section 5(e)(i) of the Restated
Plan, this will confirm that you may, upon written notice to Delphi, transfer the Options, for or
without consideration, to members of your immediate family (as defined below), to a partnership or
limited liability company in which one or more of your immediate family members are the only
partners or members, or to a trust or trusts established for your exclusive benefit or the
exclusive benefit of one or more members of your immediate family. Any Options held by the
transferee will continue to be subject to the same terms and conditions that were applicable to the
Options immediately prior to the transfer, except that the Options will be transferable by the
transferee only by will or the laws of descent and distribution. For purposes hereof, “immediate
family” means your children, grandchildren, and spouse. You are further advised that, under
existing rules of the Securities and Exchange Commission, any Form S-8 registration statement filed
by Delphi relating to the Plan will not cover the exercise of Options transferred for
consideration, and therefore, such exercise would be required to be covered by an effective
registration statement under the Securities Act of 1933, as amended (the “1933 Act”), or otherwise
be exempt from registration under the 1933 Act, and shares of Stock acquired on such exercise would
constitute “restricted securities” within the meaning of Rule 144 under the 1933 Act. No assurance
can be

 

 

given that, under such circumstances, registration under the 1933 Act with respect to such
exercise or such shares can or will be effected or that an exemption from such registration will be
available.

     If you are in agreement with the amended and restated terms and conditions of the Options set
forth above, which shall supersede the provisions of the Prior Award Agreements in their entirety,
please confirm such agreement and acceptance by executing and dating both counterparts of this
Award Agreement and returning one fully executed counterpart to me. The other counterpart should
be retained for your files.

Very truly yours,

/s/
Chad W. Coulter 
Chad W. Coulter

Senior Vice President, Secretary

     and General Counsel

Agreed:

	 	 	 
	/s/ Thomas W. Burghart                                                    

	 	Date:  March 13, 2008
	Thomas W. Burghart
	 	 
	 
	 	 

 

 

Exhibit A

to

Stock Option Award Agreement

General

     Capitalized terms used but not defined herein shall have the meanings given to them in the
Stock Option Award Agreement to which this Exhibit A is attached (the “Award Agreement”). For
purposes of the Award Agreement, “Pre-Tax Operating Income” shall mean the operating income of the
RSL Companies, excluding realized investment gains and losses, net of interest expense and before
extraordinary gain or loss and federal income tax expense, all as determined in accordance with
Generally Accepted Accounting Principles, as in effect from time to time (“GAAP”), subject to the
Special Adjustments for which this Exhibit A provides.

Special Adjustments

Adjustment events: Each of the following shall constitute an Adjustment Event for
purposes of the Award Agreement:

     (A) the receipt by Delphi Financial Group, Inc. (“DFG”) from the RSL Companies of
stockholder dividends exceeding (i) $16,300,000 in the aggregate during the period
consisting of Delphi’s 2004, 2005 and 2006 fiscal years or (ii) $27,200,000 in the aggregate
during the period consisting of the 2004, 2005, 2006, 2007 and 2008 fiscal years (the
“Performance Period”);

     (B) the making by DFG of capital and/or surplus contributions to any of the RSL
Companies at any time during the Performance Period, regardless of the form of such
contribution, which, taken together with any previous such contributions during the
Performance Period, exceed $10,000,000 in the aggregate;

     (C) the acquisition by DFG, directly or indirectly, of a company or a division or
business unit thereof by merger, consolidation, purchase of equity interests or assets or
any other similar transaction, the business activities of which are substantially related to
any of the business activities then conducted (or intended to be conducted subsequent to
such acquisition) by the RSL

 

 

Companies.

Upon the occurrence of an Adjustment Event, DFG executive management, in consultation with
the Chief Executive Officer of the RSL Companies, may recommend to the Committee any
amendments or modifications to the conditions to vesting of the Options relating to the
financial performance of the RSL Companies, as set forth in the second paragraph of the
Award Agreement (the “Vesting Provisions”), which DFG executive management believes in good
faith to be necessary or appropriate to take into account the effect of such Adjustment
Event, including but not limited to the adjustment of one or more of the Pre-Tax Operating
Income thresholds set forth therein. It is anticipated that such adjustments will consist
of reductions (in the case of an Adjustment Event described in clause (A) above) and
increases (in the case of an Adjustment Event described in clause (B) above) in such
thresholds, respectively, by applying an appropriate interest factor to the relevant amounts
paid as dividends or contributed to capital, as the case may be.

Upon receipt of any such recommendation, the Committee shall determine in its sole
discretion whether to amend or modify the Vesting Provisions based on the relevant
Adjustment Event, and the terms and conditions of any such amendment or modification. Any
such amendment or modification shall be communicated in writing to, and shall be final and
binding on, each holder of Stock options whose terms contain goals relating to Pre-Tax
Operating Income for the Performance Period (collectively, the “RSL Optionholders”). For
the purpose of avoidance of doubt, no such amendment or modification shall be deemed to have
materially and adversely affected the rights of any RSL Optionholder under the Options for
any purpose of Section 9(d) of the Plan.

Employee option expenses: SFAS 123 expenses attributable to options granted to RSL
employees on or after January 1, 2004 (other than the options granted to the RSL
Optionholders) shall be included as items of expense.

Arbitration

Delphi shall provide each RSL Optionholder with a detailed written calculation supporting
Delphi’s determination as to

 

 

whether the applicable goal has been achieved (each, a “Delphi Determination”) and, where
such calculation indicates such goal having been achieved, confirming the number of Options
having become exercisable as a result thereof, within ninety (90) days after the completion
of the Performance Period. If a majority of the RSL Optionholders shall disagree with any
Delphi Determination, the RSL Optionholders shall give written notice of such disagreement
to Delphi within ten (10) business days after receipt of such Delphi Determination. If
within twenty (20) business days after Delphi’s receipt of the notice of disagreement from
the RSL Optionholders referenced in the immediately preceding sentence, Delphi and the RSL
Optionholders are unable to agree with regard to any Delphi Determination, the disagreement
may be submitted to arbitration by either Delphi or the RSL Optionholders, which arbitration
determination shall be final and binding on the parties. The party instituting the
arbitration procedures shall give written notice to the other party of its desire to
arbitrate and such notice shall specify the name and address of the person designated to act
as an arbitrator on its behalf. Within twenty (20) business days after the service of this
notice, the other party shall notify the first party of the appointment of its arbitrator
within the twenty (20) business day period specified above, then the appointment of the
second arbitrator shall be made in the same manner as hereinafter provided for the
appointment of a third arbitrator in a case where the two appointed arbitrators are unable
to agree upon a third arbitrator. The two arbitrators so chosen shall meet within 10
business days after the second arbitrator is appointed and shall select the third arbitrator
by mutual agreement. If the two arbitrators shall fail to appoint a third arbitrator within
10 business days after the second arbitrator is appointed, then the third arbitrator shall
be appointed by the American Arbitration Association (“AAA”), or any organization
successor thereto, in accordance with its prevailing rules. Each arbitrator chosen or
appointed pursuant to the foregoing provisions shall be an active or retired officer of an
insurance or reinsurance company and shall be a disinterested person.

The arbitrators shall review the provisions of this Exhibit A and the Award Agreement, as
well as any other documents or materials supplied by either party supporting such party’s
position. The arbitrators shall render their

 

 

decision with regard to the disputed Delphi Determination upon the concurrence of at least
two of their number not later than thirty (30) business days after the appointment of the
third arbitrator. The decision of the arbitrators shall be in writing and counterpart
copies shall be delivered to each of Delphi and the RSL Optionholders. In rendering their
decision, the arbitrators shall have no power to modify any of the provisions of the Award
Agreement or this Exhibit A. All arbitration proceedings shall occur in Philadelphia,
Pennsylvania. Judgment may be entered on the award of the arbitrators and may be enforced
in accordance with the laws of the Commonwealth of Pennsylvania.

Immediately upon a party hereto giving written notice of its desire to arbitrate hereunder,
Delphi agrees upon request to provide the RSL Optionholders with access to the books and
records of the RSL Companies which reasonably relate to the Delphi Determinations
(including, without limitation, examination rights and the right to make abstracts or copies
from such books and records) during the normal business hours of RSL.

Each party shall pay the fees and expenses of the original arbitrator that it appointed (or
in the case of the second party, the arbitrator appointed on its behalf if it should fail to
appoint its own arbitrator). The fees and expenses of the third arbitrator and all other
expenses of the arbitrators shall be borne by Delphi, on one hand, and the RSL
Optionholders, on the other hand, equally. Each party shall bear the expense of its own
counsel and the preparation and presentation of proof or supportive documentation.

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