Document:

<PAGE>

                                                                     Exhibit 4.1

                    [Form of Stock Certificate - Front Side]

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<S>                                                                             <C>
NUMBER                                                       TOWER                                                           SHARES
TG                                                           GROUP, INC.

THIS CERTIFICATE IS TRANSFERABLE                                                                                  CUSIP 891777 10 4
     IN NEW YORK, N.Y.                                    TOWER GROUP, INC.                     SEE REVERSE FOR CERTAIN DEFINITIONS
                                        INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

This is to Certify that

is the owner of

                     FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF $.01 EACH OF
Tower Group, Inc. (hereinafter called the "Corporation"), transferable on the books of the Corporation by the holder hereof in
person or by duly authorized attorney, upon surrender of this certificate properly endorsed. This certificate and the shares
represented hereby are issued and shall be held subject to all of the provisions of the Certificate of Incorporation of the
Corporation and all amendments thereto, to all of which the holder of this certificate assents by his or her acceptance hereof.
            This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
            WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
        Dated:

TOWER GROUP, INC.
    CORPORATE
      SEAL
      1996
    DELAWARE                                                       /s/ Steven G. Fauth                            /s/ Michael H. Lee

        X                         SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY         PRESIDENT AND CHIEF EXECUTIVE OFFICER

                                                     AMERICAN BANK NOTE COMPANY

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COUNTERSIGNED AND REGISTERED:
               THE BANK OF NEW YORK
                  NEW YORK, NY            TRANSFER AGENT
BY                                         AND REGISTRAR

                                    AUTHORIZED SIGNATURE

<PAGE>

                     [Form of Stock Certificate - Back Side]

                               TOWER GROUP, INC.

    THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OF THE DESIGNATION, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED SO
FAR AS THE SAME HAVE BEEN FIXED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO
DESIGNATE AND FIX THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF OTHER
SERIES. ANY SUCH REQUEST MAY BE MADE TO THE CORPORATION OR TO ITS TRANSFER
AGENT.

    The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

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<S>                                               <C>
    TEN COM - as tenants in common                UNIF GIFT MIN ACT- __________Custodian__________
    TEN ENT - as tenants by the entireties                            (Cust)             (Minor)
    JT TEN  - as joint tenants with right of                         under Uniform Gifts to Minors
              survivorship and not as tenants                        Act _________________________
              in common                                                          (State)
</TABLE>

    Additional abbreviations may also be used though not in the above list.

    For value received, ______________ hereby sell, assign and transfer unto

    NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATION IN EVERY PARTICULAR, WITHOUT
ALTERATION OF ENLARGEMENT OR ANY CHANGE WHATEVER.

PLEASE INSERT SOCIAL SECURITY OR OTHER
   IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
|                                     |
|                                     |
________________________________________________________________________________

________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
________________________________________________________________________________

________________________________________________________________________________

__________________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________________

________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, _________________________

                                ________________________________________________

Signature Guaranteed: __________________________________________________________
                      THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
                      GUARANTOR INSTITUTION (BANKS STOCKBROKERS, SAVINGS AND
                      LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
                      APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
                      TO S.E.C. RULE 17Ad-15.

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.<PAGE>

                                                                    Exhibit 10.7

                                TOWER GROUP, INC.
                     2004 LONG TERM EQUITY COMPENSATION PLAN

                                 August 26, 2004

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Contents
-------------------------------------------------------------------------------------------------------------------

                                                                                                              PAGE

Article 1.     Establishment, Objectives, and Duration............................................................1

Article 2.     Definitions........................................................................................1

Article 3.     Administration.....................................................................................5

Article 4.     Shares Subject to the Plan; Individual Limits; and Anti-Dilution Adjustment........................5

Article 5.     Eligibility and Participation......................................................................6

Article 6.     Options............................................................................................7

Article 7.     Stock Appreciation Rights..........................................................................8

Article 8.     Restricted Stock..................................................................................10

Article 9.     Restricted Stock Units and Performance Shares.....................................................11

Article 10.    Other Awards......................................................................................13

Article 11.    Performance Measures..............................................................................13

Article 12.    Beneficiary Designation...........................................................................13

Article 13.    Deferrals.........................................................................................14

Article 14.    Rights of Participants............................................................................14

Article 15.    Change in Control.................................................................................14

Article 16.    Amendment, Modification, and Termination..........................................................15

Article 17.    Withholding.......................................................................................15

Article 18.    Indemnification...................................................................................16

Article 19.    Successors........................................................................................16

Article 20.    Legal Construction................................................................................16
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<PAGE>

                                TOWER GROUP, INC.
                     2004 LONG TERM EQUITY COMPENSATION PLAN

ARTICLE 1.        ESTABLISHMENT, OBJECTIVES, AND DURATION

         1.1. ESTABLISHMENT OF THE PLAN. Tower Group, Inc., a Delaware
corporation (the "Company"), hereby establishes an incentive compensation plan
to be known as the "Tower Group, Inc. 2004 Long Term Equity Compensation Plan"
(the "Plan"), as set forth in this document and individual Award Agreements
setting forth certain terms and conditions applicable to Awards. The Plan
permits the granting of Nonqualified Stock Options, Incentive Stock Options,
Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Shares and other awards.

         The Plan shall become effective August 26, 2004 (the "Effective Date"),
subject to shareholder approval, and shall remain in effect as provided in
Section 1.3 herein.

         1.2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's shareholders.

         The Plan is further intended to provide flexibility to the Company in
its ability to motivate, attract, and retain the services of Participants who
make or are expected to make significant contributions to the Company's success
and to allow Participants to share in the success of the Company.

         1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Board to amend or terminate the Plan in accordance with the
provisions of Article 16 herein, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Incentive Stock Option be granted under the Plan on or after the tenth
anniversary of the Effective Date.

ARTICLE 2.        DEFINITIONS

         The following terms, when capitalized, shall have the meanings set
forth below:

         2.1. "AWARD" means, individually or collectively, Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Shares and other awards granted under the
Plan.

         2.2. "AWARD AGREEMENT" means an agreement entered into by the Company
and a Participant setting forth the terms and provisions applicable to an Award.

         2.3. "BOARD" means the Board of Directors of the Company.

<PAGE>

         2.4. "CHANGE IN CONTROL" means the occurrence of any of the following
events:

                  (A) any Person (other than the Company, any trustee or other
                      fiduciary holding securities under an employee benefit
                      plan of the Company, or any corporation owned directly or
                      indirectly by the stockholders of the Company in
                      substantially the same proportion as the ownership of
                      stock of the Company) that is not on the Effective Date
                      the "beneficial owner" (as defined in Rule 13d-3 under the
                      Exchange Act), directly or indirectly, of securities of
                      the Company representing more than 20% of the combined
                      voting power of the Company's then outstanding securities
                      becomes after the Effective Date the beneficial owner,
                      directly or indirectly, of securities of the Company
                      representing more than 20% of the combined voting power of
                      the Company's then outstanding securities;

                  (B) individuals who, as of the Effective Date, constitute the
                      Board (the "Incumbent Board") cease for any reason to
                      constitute at least a majority of the Board of the
                      Company, provided that any person becoming a director
                      subsequent to the date hereof whose election, or
                      nomination for election by the Company's stockholders, was
                      approved by a vote of at least a majority of the directors
                      then comprising the Incumbent Board (other than an
                      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 definition, considered as though such person were a
                      member of the Incumbent Board;

                  (C) consummation of a merger, consolidation, reorganization,
                      share exchange or similar transaction (a "Transaction") of
                      the Company with any other entity, other than (i) a
                      Transaction that would result in the voting securities of
                      the Company outstanding immediately prior thereto directly
                      or indirectly continuing to represent (either by remaining
                      outstanding or by being converted into voting securities
                      of the surviving entity or a parent company) more than 80%
                      of the combined voting power of the voting securities of
                      the Company or such surviving entity or parent company
                      outstanding immediately after such Transaction or (ii) a
                      Transaction effected to implement a recapitalization of
                      the Company (or similar transaction) in which no Person
                      acquires more than 20% of the combined voting power of the
                      Company's then outstanding securities;

                  (D) the sale, transfer or other disposition (in one
                      transaction or a series of related transactions) of more
                      than 50% of the operating assets of the Company; or

                  (E) the approval by the shareholders of a plan or proposal for
                      the liquidation or dissolution of the Company.

                                       2
<PAGE>

         Notwithstanding anything to the contrary contained herein, an initial
public offering of the Company's Shares shall not constitute a Change in Control
for purposes of this Plan.

         2.5. "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.

         2.6. "COMMITTEE" means the Committee, as specified in Section 3.1
herein, appointed by the Board to administer the Plan.

         2.7. "COMPANY" means Tower Group, Inc., a Delaware corporation, and any
successor thereto as provided in Article 19 herein.

         2.8. "CONSULTANT" means any consultant or advisor to the Company or a
Subsidiary.

         2.9. "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company or a Subsidiary.

         2.10. "DIVIDEND EQUIVALENT" means, with respect to Shares subject to an
Award, a right to be paid an amount equal to the dividends declared on an equal
number of outstanding Shares.

         2.11. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 herein.

         2.12. "EMPLOYEE" means any employee of the Company or a Subsidiary.

         2.13. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.

         2.14. "EXERCISE PRICE" means the price at which a Share may be
purchased by a Participant pursuant to an Option.

         2.15. "FAIR MARKET VALUE" means the average of the high and low sale
prices of a Share as reported in the consolidated transaction reporting system,
or, if there was no such sale on the relevant date, then on the last previous
day on which a sale was reported.

         2.16. "FREESTANDING SAR" means an SAR that is granted independently of
any Options, as described in Article 7 herein.

         2.17. "INCENTIVE STOCK OPTION" or "ISO" means an Option that is
intended to meet the requirements of Code Section 422.

         2.18. "NAMED EXECUTIVE OFFICER" means a Participant who is one of the
group of "covered employees," as defined in the regulations promulgated under
Code Section 162(m).

         2.19. "NONQUALIFIED STOCK OPTION" or "NQSO" means an Option to purchase
Shares granted under Article 6 herein and that is not intended to meet the
requirements of Code Section 422.

                                       3
<PAGE>

         2.20. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.

         2.21. "PARTICIPANT" means a current or former Employee, Director or
Consultant who has outstanding an Award granted under the Plan.

         2.22. "PERFORMANCE-BASED EXCEPTION" means the performance-based
exception from the tax deductibility limitations of Code Section 162(m).

         2.23. "PERFORMANCE PERIOD" means the period during which a performance
goal must be met.

         2.24. "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 9 herein.

         2.25. "PERIOD OF RESTRICTION" means the period during which Restricted
Stock or Restricted Share Units are subject to a substantial risk of forfeiture
(based on the passage of time, the achievement of performance measures, or upon
the occurrence of other events as determined by the Committee, at its
discretion), as provided in Articles 8 and 9 herein.

         2.26. "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.

         2.27. "RESTRICTED STOCK" means an Award granted to a Participant, as
described in Article 8 herein.

         2.28. "RESTRICTED STOCK UNIT" means an Award granted to a Participant,
as described in Article 9 herein.

         2.29. "SHARE" means a share of common stock of the Company, par value
$0.01 per share, subject to adjustment pursuant to Section 4.3 herein.

         2.30. "STOCK APPRECIATION RIGHT" or "SAR" means an Award granted to a
Participant, either alone or in connection with a related Option, as described
in Article 7 herein.

         2.31. "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the chain owns stock possessing
fifty percent or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

         2.32. "TANDEM SAR" means an SAR that is granted in connection with a
related Option, as described in Article 7 herein.

         2.33. "TEN PERCENT SHAREHOLDER" means, with respect to an ISO, a
Participant who, at the time the ISO is granted, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any parent corporation (as that term is defined in Code
Section 424(e)) or Subsidiary.

                                       4
<PAGE>

ARTICLE 3.        ADMINISTRATION

         3.1. THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or such other committee (the "Committee") as the Board
shall select consisting solely of two or more members of the Board. The members
of the Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.

         3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Company's Certificate of Incorporation or Bylaws (as the same may be amended
and/or restated from time to time), and subject to the provisions herein, the
Committee shall have full power to select the Employees, Directors and
Consultants who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan; construe and interpret the Plan and any Award Agreement or other
agreement or instrument entered into under the Plan; establish, amend, or waive
rules and regulations for the Plan's administration; and (subject to the
provisions of Sections 16.3 herein) amend the terms and conditions of any
outstanding Award. Further, the Committee shall make all other determinations
which may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authority as identified herein.

         3.3. DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its Subsidiaries, its shareholders, Directors, Employees,
Consultants and their estates and beneficiaries.

ARTICLE 4.        SHARES SUBJECT TO THE PLAN; INDIVIDUAL LIMITS; AND
                  ANTI-DILUTION ADJUSTMENT

         4.1. SHARES AVAILABLE FOR GRANTS.

                  (A) Subject to adjustment as provided in Section 4.3 herein,
                      the maximum number of Shares that may be delivered
                      pursuant to Awards under the Plan shall be 1,162,723. This
                      maximum number of Shares includes Shares that were
                      available for awards under the Tower Group, Inc. 2001
                      Stock Award Plan, but which were not (and may no longer
                      be) made subject to awards under such plans.

                  (B) Subject to adjustment as provided in Section 4.3 herein,
                      the aggregate number of Shares that may be delivered
                      pursuant to Awards of Restricted Stock, Restricted Stock
                      Units, Performance Shares and other awards may be granted
                      under the Plan may not exceed 872,042 Shares.

                  (C) If an Award is not settled in Shares or is forfeited,
                      expires or is canceled without delivery of Shares, the
                      Shares subject to such Award shall again be available for
                      delivery under the Plan. Shares granted pursuant to the
                      Plan may be authorized but unissued Shares, treasury
                      Shares or Shares purchased on the open market.

                                       5
<PAGE>

         4.2. INDIVIDUAL LIMITS. Subject to adjustment as provided in Section
4.3 herein, the following rules shall apply with respect to Awards and any
related dividends or Dividend Equivalents intended to qualify for the
Performance-Based Exception:

                  (A) OPTIONS: The maximum aggregate number of Shares with
                      respect to which Options may be granted in any one fiscal
                      year to any one Participant shall be 500,000.

                  (B) SARS: The maximum aggregate number of Shares with respect
                      to which Stock Appreciation Rights may be granted in any
                      one fiscal year to any one Participant shall be
                      500,000.

                  (C) RESTRICTED STOCK: The maximum aggregate number of Shares
                      of Restricted Stock that may be granted in any one fiscal
                      year to any one Participant shall be 250,000.

                  (D) RESTRICTED STOCK UNITS. The maximum aggregate number of
                      Restricted Stock Units that may be granted in any one
                      fiscal year to any one Participant shall be 250,000.

                  (E) PERFORMANCE SHARES: The maximum aggregate number of
                      Performance Shares that may be granted in any one fiscal
                      year to any one Participant shall be 250,000.

                  (F) OTHER AWARDS. The maximum number of Shares that may be
                      awarded in any one year to any one Participant pursuant to
                      an Award under Article 10 shall be 250,000 Shares and
                      the maximum cash Award that may be awarded in any one year
                      to any one Participant pursuant to an Award under Article
                      10 shall be $5,000,000.

                  (G) DIVIDENDS AND DIVIDEND EQUIVALENTS: The maximum dividend
                      or Dividend Equivalents that may be paid in any one fiscal
                      year to any one Participant shall be $300,000.

         4.3. ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, liquidation, stock dividend,
split-up, spin-off, stock split, reverse stock split, share combination, share
exchange or other change in the corporate structure of the Company affecting the
Shares, such adjustment shall be made in the number and kind of Shares that may
be delivered under the Plan, the individual limits set forth in Section 4.2
herein, and in the number and kind of and/or price of Shares subject to
outstanding Awards, as may be determined to be appropriate and equitable by the
Committee, in its sole discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of Shares subject to an Award shall always be
rounded down to a whole number.

ARTICLE 5.        ELIGIBILITY AND PARTICIPATION

         5.1. ELIGIBILITY. Persons eligible to participate in the Plan include
all Employees, Directors and Consultants.

                                       6
<PAGE>

         5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees, Directors
and Consultants, those to whom Awards shall be granted and shall determine the
nature and amount of each Award.

ARTICLE 6.        OPTIONS

         6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time, as shall be determined by the Committee.

         6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Exercise Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO or an NQSO.

         6.3. EXERCISE PRICE. The Exercise Price for each grant of an Option
under the Plan shall be at least equal to one hundred percent (100%) of the Fair
Market Value of a Share on the date the Option is granted. The Exercise Price of
an ISO granted to a Ten Percent Shareholder shall be at least equal to one
hundred and ten percent (110%) of the Fair Market Value of a Share on the date
the ISO is granted.

         6.4. DURATION OF OPTIONS. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than the tenth
(10th) anniversary date of its grant and no ISO granted to a Ten Percent
Shareholder shall be exercisable later than the fifth (5th) anniversary date of
its grant.

         6.5. EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
set forth in the Award Agreement and as the Committee shall in each instance
approve, which need not be the same for each grant or for each Participant.
Options which are intended to be ISOs shall be subject to the $100,000 annual
vesting limitation set forth in Code Section 422(d).

         6.6. PAYMENT. Options granted under this Article 6 shall be exercised
by the delivery of a written notice of exercise to the Company, setting forth
the number of Shares with respect to which the Option is to be exercised,
accompanied by provisions for full payment for the Shares.

         The Exercise Price of an Option shall be payable as follows, in each
case subject to such restrictions as the Committee may impose: (a) in cash or
its equivalent, (b) by tendering, or attesting to the ownership of, previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Exercise Price (provided that the Shares, other than Shares
purchased by the Participant on the open market, which are tendered must have
been held by the Participant for at least six (6) months prior to their tender
to satisfy the Exercise Price), (c) by broker-assisted cashless exercise, (d) by
any other method approved by the Committee or (e) by a combination of (a), (b),
(c) and/or (d). The Committee may limit any method of payment, other than that
specified under (a), for administrative convenience, to comply with applicable
law, or for any other reason.

                                       7
<PAGE>

         Subject to any governing rules or regulations, as soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver or cause to be delivered Shares in an appropriate amount
based upon the number of Shares purchased under the Option(s).

         6.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.

         6.8. DIVIDEND EQUIVALENTS. At the discretion of the Committee, an Award
of Options may provide the Participant with the right to receive Dividend
Equivalents, which may be paid currently or credited to an account for the
Participant, and may be settled in cash and/or Shares, as determined by the
Committee in its sole discretion, subject in each case to such terms and
conditions as the Committee shall establish. Without limiting the generality of
the preceding sentence, if it is intended that an Award of Options and/or the
Dividend Equivalents comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of Dividend Equivalents awarded with respect to such Options, such that
the Options and/or Dividend Equivalents maintain eligibility for the
Performance-Based Exception.

         6.9. TERMINATION OF EMPLOYMENT OR SERVICE. Each Participant's Option
Award Agreement shall set forth the extent to which the Participant shall have
the right to exercise the Option following termination of the Participant's
employment or, if the Participant is a Director or Consultant, service with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options, and may
reflect distinctions based on the reasons for termination of employment or
service.

         6.10. NONTRANSFERABILITY OF OPTIONS.

                  (A) INCENTIVE STOCK OPTIONS. ISOs may not be sold,
                      transferred, pledged, assigned, or otherwise alienated or
                      hypothecated, other than by will or by the laws of descent
                      and distribution, and shall be exercisable during a
                      Participant's lifetime only by such Participant.

                  (B) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided
                      in a Participant's Award Agreement, NQSOs may not be sold,
                      transferred, pledged, assigned, or otherwise alienated or
                      hypothecated, other than by will or by the laws of descent
                      and distribution, and shall be exercisable during a
                      Participant's lifetime only by such Participant.

ARTICLE 7.        STOCK APPRECIATION RIGHTS

         7.1. GRANT OF SARS. Subject to the terms and provisions of the Plan,
SARs may be granted to Participants at any time and from time to time as shall
be determined by the Committee. The Committee may grant Freestanding SARs,
Tandem SARs, or any combination of these forms of SAR.

                                       8
<PAGE>

         The Committee shall have complete discretion in determining the number
of SARs granted to each Participant (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs.

         The grant price of a Freestanding SAR shall equal the Fair Market Value
of a Share on the date of grant of the SAR. The grant price of a Tandem SAR
shall equal the Exercise Price of the related Option.

         7.2. EXERCISE OF TANDEM SARS. A Tandem SAR may be exercised only with
respect to the Shares for which its related Option is then exercisable. To the
extent exercisable, Tandem SARs may be exercised for all or part of the Shares
subject to the related Option. The exercise of all or part of a Tandem SAR shall
result in the forfeiture of the right to purchase a number of Shares under the
related Option equal to the number of Shares with respect to which the SAR is
exercised. Conversely, upon exercise of all or part of an Option with respect to
which a Tandem SAR has been granted, an equivalent portion of the Tandem SAR
shall similarly be forfeited.

         Notwithstanding any other provision of the Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Exercise Price of the underlying
ISO and the Fair Market Value of the Shares subject to the underlying ISO at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only
when the Fair Market Value of the Shares subject to the ISO exceeds the Exercise
Price of the ISO.

         7.3. EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them and sets forth in the Award Agreement.

         7.4. AWARD AGREEMENT. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.

         7.5. TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.

         7.6. PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from the Company in an amount determined by
multiplying:

                  (A) the difference between the Fair Market Value of a Share on
                      the date of exercise over the grant price; by

                  (B) the number of Shares with respect to which the SAR is
                      exercised.

                                       9
<PAGE>

         At the discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in some combination thereof.

         7.7. DIVIDEND EQUIVALENTS. At the discretion of the Committee, an Award
of SARs may provide the Participant with the right to receive Dividend
Equivalents, which may be paid currently or credited to an account for the
Participant, and may be settled in cash and/or Shares, as determined by the
Committee in its sole discretion, subject in each case to such terms and
conditions as the Committee shall establish. Without limiting the generality of
the preceding sentence, if it is intended that an Award of SARs and/or the
Dividend Equivalents comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of Dividend Equivalents awarded with respect to such SARs, such that the
SARs and/or Dividend Equivalents maintain eligibility for the Performance-Based
Exception. 7.8. TERMINATION OF EMPLOYMENT OR SERVICE. Each SAR Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the SAR following termination of the Participant's employment or, if
the Participant is a Director or Consultant, service with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, need not be uniform among all SARs, and may reflect distinctions
based on the reasons for termination of employment or service.

         7.9. NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, SARs may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution, and shall be exercisable during a
Participant's lifetime only by such Participant.

ARTICLE 8.        RESTRICTED STOCK

         8.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of
the Plan, Restricted Stock may be granted to Participants in such amounts as the
Committee shall determine.

         8.2. AWARD AGREEMENT. Each Restricted Stock grant shall be evidenced by
an Award Agreement that shall specify the Period(s) of Restriction, the number
of Shares of Restricted Stock granted, and such other provisions as the
Committee shall determine.

         8.3. OTHER RESTRICTIONS. The Committee shall impose such other
conditions and/or restrictions on any Shares of Restricted Stock granted
pursuant to the Plan as it may deem advisable including, without limitation, a
requirement that Participants pay a stipulated purchase price for each Share of
Restricted Stock, restrictions based upon the achievement of specific
performance goals, time-based restrictions on vesting following the attainment
of the performance goals, time-based restrictions, and/or restrictions under
applicable laws or under the requirements of any stock exchange or market upon
which such Shares are listed or traded, or holding requirements or sale
restrictions placed on the Shares by the Company upon vesting of such Restricted
Stock.

                                       10
<PAGE>

         8.4. REMOVAL OF RESTRICTIONS. Restricted Stock shall become freely
transferable by the Participant after the last day of the Period of Restriction
applicable thereto. Once Restricted Stock is released from the restrictions, the
Participant shall be entitled to receive a certificate.

         8.5. VOTING RIGHTS. Unless otherwise determined by the Committee and
set forth in a Participant's Award Agreement, to the extent permitted or
required by law, as determined by the Committee, Participants holding Shares of
Restricted Stock granted hereunder may be granted the right to exercise full
voting rights with respect to those Shares during the Period of Restriction.

         8.6. DIVIDENDS AND OTHER DISTRIBUTIONS. Except as otherwise provided in
a Participant's Award Agreement, during the Period of Restriction, Participants
holding Shares of Restricted Stock shall receive all regular cash dividends paid
with respect to all Shares while they are so held, and all other distributions
paid with respect to such Restricted Stock shall be credited to Participants
subject to the same restrictions on transferability and forfeitability as the
Restricted Stock with respect to which they were paid and shall be paid at such
time following full vesting as are paid the Shares of Restricted Stock with
respect to which such distributions were made. Without limiting the generality
of the preceding sentence, if it is intended that an Award of Restricted Stock
and/or dividends comply with the requirements of the Performance-Based
Exception, the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Restricted Stock, such that
the Restricted Stock and/or the dividends maintain eligibility for the
Performance-Based Exception.

         8.7. TERMINATION OF EMPLOYMENT OR SERVICE. Each Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unvested Restricted Stock following termination of the Participant's employment
or, if the Participant is a Director or Consultant, service with the Company and
its Subsidiaries. Such provisions shall be determined in the sole discretion of
the Committee, need not be uniform among all Awards of Restricted Stock, and may
reflect distinctions based on the reasons for termination of employment or
service.

         8.8. NONTRANSFERABILITY OF RESTRICTED STOCK. Except as otherwise
determined by the Committee, during the applicable Period of Restriction, a
Participant's rights with respect to the Restricted Stock granted under the Plan
shall be available during the Participant's lifetime only to such Participant,
and Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated other than by will or by the laws of descent
and distribution.

ARTICLE 9.        RESTRICTED STOCK UNITS AND PERFORMANCE SHARES

         9.1. GRANT OF RESTRICTED STOCK UNITS/PERFORMANCE SHARES. Subject to the
terms and provisions of the Plan, Restricted Stock Units and Performance Shares
may be granted to Participants in such amounts and upon such terms, and at any
time and from time to time, as shall be determined by the Committee and as shall
be set forth in the Award Agreement.

         9.2. AWARD AGREEMENT. Each grant of Restricted Stock Units or
Performance Shares shall be evidenced by an Award Agreement that shall specify
the applicable Period(s) of Restriction or Performance Period(s) (as the case
may be), the number of Restricted Stock Units or Performance Shares granted, and
such other provisions as the Committee shall determine. The initial value of a
Restricted Stock Unit or Performance Share shall equal the Fair Market Value of
a Share on the date of grant.

                                       11
<PAGE>

         9.3. FORM AND TIMING OF PAYMENT.

                  (A) Except as otherwise provided in a Participant's Award
                      Agreement, payment of Restricted Stock Units shall be made
                      after the last day of the Period of Restriction applicable
                      thereto. The Committee, in its sole discretion, may pay
                      Restricted Stock Units in cash or in Shares (or in a
                      combination thereof) that have an aggregate Fair Market
                      Value equal to the value of the earned Restricted Stock
                      Units.

                  (B) Except as otherwise provided in a Participant's Award
                      Agreement, after the applicable Performance Period has
                      ended, the holder of Performance Shares shall be entitled
                      to receive payout on the number of Performance Shares
                      earned over the Performance Period, to be determined as a
                      function of the extent to which the corresponding
                      performance measures have been achieved. The Committee, in
                      its sole discretion, may pay Performance Shares in cash or
                      in Shares (or in a combination thereof) that have an
                      aggregate Fair Market Value equal to the value of the
                      earned Performance Shares.

         9.4. VOTING RIGHTS. A Participant shall have no voting rights with
respect to any Restricted Stock Units or Performance Shares granted hereunder.

         9.5. DIVIDEND EQUIVALENTS. At the discretion of the Committee, an Award
of Restricted Stock Units or Performance Shares may provide the Participant with
the right to receive Dividend Equivalents, which may be paid currently or
credited to an account for the Participant, and may be settled in cash and/or
Shares, as determined by the Committee in its sole discretion, subject in each
case to such terms and conditions as the Committee shall establish. Without
limiting the generality of the preceding sentence, if it is intended that an
Award of Restricted Stock Units/Performance Shares and/or the Dividend
Equivalents comply with the requirements of the Performance-Based Exception, the
Committee may apply any restrictions it deems appropriate to the payment of
Dividend Equivalents awarded with respect to such Restricted Stock
Units/Performance Shares, such that the Restricted Stock Units/Performance
Shares and/or Dividend Equivalents maintain eligibility for the
Performance-Based Exception.

         9.6. TERMINATION OF EMPLOYMENT OR SERVICE. Each Award Agreement shall
set forth the extent to which the Participant shall have the right to receive a
payout respecting an Award of Restricted Stock Units or Performance Shares
following termination of the Participant's employment or, if the Participant is
a Director or Consultant, service with the Company and its Subsidiaries. Such
provisions shall be determined in the sole discretion of the Committee, need not
be uniform among all Restricted Stock Units or Performance Shares, and may
reflect distinctions based on the reasons for termination of employment or
service.

                                       12
<PAGE>

         9.7. NONTRANSFERABILITY. Except as otherwise provided in a
Participant's Award Agreement, Restricted Stock Units and Performance Shares may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.

ARTICLE 10.       OTHER AWARDS

         10.1. GRANT. The Committee shall have the right to grant other Awards
which may include, without limitation, the grant of deferred Shares, Shares or
cash based on attainment of performance or other goals established by the
Committee, or Shares in lieu of cash under other Company incentive or bonus
programs.

         10.2. PAYMENT OF OTHER AWARDS. Payment under or settlement of any such
Awards shall be made in such manner and at such times as the Committee may
determine.

         10.3. TERMINATION OF EMPLOYMENT OR SERVICE. The Committee shall
determine the extent to which the Participant shall have the right to receive
amounts under Awards granted under this Article 10 following termination of the
Participant's employment or, if the Participant is a Director or Consultant,
service with the Company and its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, such provisions may be
included in an agreement entered into with each Participant, need not be uniform
among all other Awards, and may reflect distinctions based on the reasons for
termination of employment or service.

         10.4. NONTRANSFERABILITY. Except as otherwise provided in a
Participant's Award Agreement, Awards granted under this Article 10 may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution.

ARTICLE 11.       PERFORMANCE MEASURES

         Unless and until the Company proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 11, the performance goals to be used for Awards and any related
dividends or Dividend Equivalents that are designed to qualify for the
Performance-Based Exception shall be chosen from among the following performance
measure(s): earnings per share, economic value added, market share (actual or
targeted growth), net income (before or after taxes), operating income, adjusted
net income after capital charge, return on assets (actual or targeted growth),
return on capital (actual or targeted growth), return on equity (actual or
targeted growth), return on investment (actual or targeted growth), premiums
written or earned (gross, net or direct), revenue (actual or targeted growth),
loss ratio (gross or net), expense ratio (gross or net), combined ratio (gross
or net), share price, stock price growth, or total shareholder return. Awards
and any related dividends or Dividend Equivalents that are not designed to
qualify for the Performance-Based Exception may be based on these or such other
performance measures as the Committee may determine.

ARTICLE 12.       BENEFICIARY DESIGNATION

         Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Committee, and will be effective only when filed by the
Participant in writing during the Participant's lifetime with the Committee. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.

                                       13
<PAGE>

ARTICLE 13.       DEFERRALS

         If permitted by the Committee, a Participant may defer receipt of
amounts that would otherwise be provided to such Participant with respect to an
Award. If permitted, such deferral (and the required deferral election) shall be
made in accordance with, and shall be subject to, the terms and conditions of
the applicable nonqualified deferred compensation plan under which such deferral
is made and such other terms and conditions as the Committee may prescribe.

ARTICLE 14.       RIGHTS OF PARTICIPANTS

         14.1. CONTINUED SERVICE. Nothing in the Plan shall:

                  (A) interfere with or limit in any way the right of the
                      Company or a Subsidiary to terminate any Participant's
                      employment or service at any time,

                  (B) confer upon any Participant any right to continue in the
                      employ or service of the Company or any of its
                      Subsidiaries, nor

                  (C) confer on any Director any right to continue to serve on
                      the Board of Directors of the Company or any of its
                      Subsidiaries.

         14.2. PARTICIPATION. No Employee, Director or Consultant shall have the
right to be selected to receive an Award under the Plan, or, having been so
selected, to be selected to receive future Awards.

ARTICLE 15.       CHANGE IN CONTROL.

         Except as otherwise provided in a Participant's Award Agreement, upon
the occurrence of a Change in Control:

                  (A) any and all outstanding Options and SARs granted hereunder
                      shall become immediately exercisable;

                  (B) any Period of Restriction or other restriction imposed on
                      any Restricted Stock, Restricted Stock Unit or other Award
                      shall lapse; and

                  (C) any and all Performance Shares and other Awards (if
                      performance-based) shall be deemed earned at the target
                      level (or if no target level is specified, the maximum
                      level) with respect to all open Performance Periods.

                                       14
<PAGE>

         Unless a Participant's Award Agreement expressly provides otherwise, if
a Participant's employment or, if the Participant is a Director or Consultant,
service with the Company and its Subsidiaries is terminated following a Change
in Control, any of the Participant's Options or SARs that were outstanding on
the date of the Change in Control and that were vested as of the date of
termination of employment or service shall remain exercisable for a period
ending not before the earlier of the first anniversary of the termination of the
Participant's employment or service or the expiration of the stated term of the
Award.

ARTICLE 16.       AMENDMENT, MODIFICATION, AND TERMINATION

         16.1. AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any
time and from time to time, alter, amend, suspend or terminate the Plan in whole
or in part; provided, however, that no amendment which requires shareholder
approval in order for the Plan to comply with any applicable stock exchange
listing standards or any rule promulgated by the United States Securities and
Exchange Commission shall be effective unless such amendment shall be approved
by the requisite vote of shareholders of the Company entitled to vote thereon.

         16.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.3 herein) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan. With respect to any Awards
intended to comply with the Performance-Based Exception, any such exception
shall be specified when the performance goals are established.

         16.3. AWARDS PREVIOUSLY GRANTED. No termination, amendment or
modification of the Plan or of any Award shall adversely affect in any material
way any Award previously granted under the Plan without the written consent of
the Participant holding such Award, unless such termination, modification or
amendment is required by applicable law and except as otherwise provided herein.

         16.4. COMPLIANCE WITH THE PERFORMANCE-BASED EXCEPTION. If changes are
made to Code Section 162(m) or regulations promulgated thereunder to permit
greater flexibility with respect to any Award or Awards available under the
Plan, the Committee may, subject to this Article 16, make any adjustments to the
Plan and/or Award Agreements it deems appropriate.

ARTICLE 17.       WITHHOLDING

         17.1. TAX WITHHOLDING. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of the Plan.

         17.2. USE OF SHARES TO SATISFY WITHHOLDING OBLIGATION. With respect to
withholding required upon the exercise of Options or SARs, upon the vesting of
Restricted Stock, Restricted Stock Units or Performance Shares, or upon any
other taxable event arising as a result of Awards granted hereunder,
Participants may elect that the withholding requirement be satisfied, in whole
or in part, by having the Company withhold, or by tendering to the Company,
Shares having a Fair Market Value equal to the minimum statutory withholding
(based on minimum applicable withholding rates for federal, state and local tax
purposes, including payroll taxes) that could be imposed on the transaction. Any
such elections by a Participant shall be irrevocable, made in writing and signed
by the Participant.

                                       15
<PAGE>

ARTICLE 18.       INDEMNIFICATION

         Each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by the Company to the fullest
extent permitted by Delaware law against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of any judgment in any such
action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf.
The foregoing right of indemnification is subject to the person having been
successful in the legal proceedings or having acted in good faith and what is
reasonably believed to be a lawful manner in the Company's best interests. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Certificate of Incorporation or Bylaws (as the same may be amended and/or
restated from time to time), as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.

ARTICLE 19.       SUCCESSORS

         All obligations of the Company under the Plan and with respect to
Awards shall be binding on any successor to the Company, whether the existence
of such successor is the result of a direct or indirect purchase, merger,
consolidation, or other event, or a sale or disposition of all or substantially
all of the business and/or assets of the Company.

ARTICLE 20.       LEGAL CONSTRUCTION

         20.1. GENDER, NUMBER AND REFERENCES. Except where otherwise indicated
by the context, any masculine term used herein also shall include the feminine;
the plural shall include the singular and the singular shall include the plural.
Any reference in the Plan to an act or code or to any section thereof or rule or
regulation thereunder shall be deemed to refer to such act, code, section, rule
or regulation, as may be amended from time to time, or to any successor act,
code, section, rule or regulation.

         20.2. SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

                                       16
<PAGE>

         20.3. REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

         20.4. GOVERNING LAW. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the state of New York, without giving effect to any
conflicts or choice of law rule or principle that might otherwise refer
construction of the Plan and/or any agreements under the Plan to the substantive
law of another jurisdiction.

                                       17

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